ÿþP roposal T o S erve

Proposal to Serve
Erie 1 BOCES and
Participating School Districts
As Independent Auditors
Freed Maxick & Battaglia, CPAs, PC
One Evans Street
Batavia, NY 14020
Contact Information:
Kathryn M. Barrett, CPA
Director
585-344-1967
[email protected]
May 9, 2011
May 9, 2011
Mr. Tom Schiener
Purchasing Manager
Erie 1 BOCES
355 Harlem Road
West Seneca, New York 14224
Dear Mr. Schiener:
Thank you for the opportunity to submit our proposal to serve as independent auditors for the Erie 1 BOCES and
participating districts (the “Districts”). Freed Maxick & Battaglia, CPAs PC greatly appreciates the opportunity to be
considered for appointment.
We know that the selection of a public accounting firm is an important decision and realize that the differences
between firms are often difficult to discern. We believe that the information presented in this proposal demonstrates
the important distinctions concerning our ability to serve the Districts including:
Understanding of the current economic environment: We understand the intense financial pressures school
districts are currently facing and the financial hardships unfunded mandates and budget cuts have created. As a
result, and in the interest of developing a long-term relationship with the Districts, we have developed fees that
reflect a commitment to the continuing success of the districts operations.
Experience in your industry: Freed Maxick & Battaglia is dedicated to serving school districts and the
compliance issues they face. We are experienced with school district operations in New York and have the
resources of a dedicated Governmental Practice, which is exclusively committed to serving school districts and
other governmental entities. Our experiences as external and internal auditors of over 36 school districts in
Western New York provides us with insight of best practices for school district business operations and financial
planning. Our membership and active participation on the New York State Society of CPAs committee on Public
School Accounting over the past 17 years has provided us unique access to the professionals from the office of
the State Comptroller and the State Education Department and an invaluable forum to discuss issues and
challenges affecting school districts.
Proactive and quality service: As your auditors, you can count on us to be business partners with you while
maintaining our independence. We will bring proactive ideas to you and be ready to provide advice in all types of
situations. You will benefit from the strong director involvement and the consistent team working with you. We
strongly encourage you to call our references in order to better understand how the benefits you will receive will
go beyond the words on the pages of this proposal and become a relationship based on trust and expertise.
Communication: Our preference is to be your advisor throughout the year, not just during the audit. Offering
insights and feedback as you progress through your business plan for the year, we not only ensure that we are
knowledgeable about changes in your business and can identify areas to improve your organization’s operations
and financial position, but it also helps to eliminate unwanted surprises during the audit. We believe strongly that
we are more valuable to you when we are able to communicate with you early and often on the decisions that
affect your financial success.
Resources: Freed Maxick & Battaglia is the largest professional services firm in Upstate New York with three
offices and over 240 personnel. Additionally, Freed Maxick & Battaglia has the distinction of operating within an
Alternative Practice Structure. This structure enables Freed Maxick & Battaglia, a licensed CPA firm, and RSM
McGladrey, Inc., a global business services company, to work together to serve the business needs of
organizations nationwide. When necessary, we can draw on any and all of these resources to address the
specific needs of Districts, offering creative solutions from a national point of view.
A “Best Place to Work”: Freed Maxick & Battaglia won the extra-large company category for the 2009 and
2010 “Best Places to Work” awards in Western New York. We highly value our staff and takes great pride in our
ability to attract and retain qualified professionals. Our staff turnover rate of 13% is well below the national
average of 20%+ and significantly enhances our ability to maintain continuity on engagement staffing.
We are confident that you will find our Firm is best suited to serve the Districts. We have the expertise you desire,
coupled with the people and capabilities that will serve your needs with an eye on national best practices and a
personalized service approach.
Thank you for the opportunity to develop a professional relationship with the Districts. Please do not hesitate to
contact me with any questions or concerns.
Sincerely,
Freed Maxick & Battaglia, CPAs, PC
Kathryn M. Barrett, CPA
Director
585-344-1967
[email protected]
Table of Contents
OUR UNDERSTANDING OF YOUR NEEDS ................................................................................................................1
REQUESTED SERVICES ................................................................................................................................................1
AUDIT SCOPE ..............................................................................................................................................................1
FIRM QUALIFICATIONS & EXPERIENCE ...................................................................................................................2
OUR LEADING GOVERNMENTAL SERVICE PRACTICE ......................................................................................................3
NY STATE SOCIETY OF CPAS COMMITTEE ON PUBLIC SCHOOL ACCOUNTING ................................................................3
EXAMPLES OF OUR COMMITMENT TO GOVERNMENTAL ENTITIES ...................................................................................4
PROFESSIONAL STANDARDS IN GOVERNMENTAL ACCOUNTING ......................................................................................4
LICENSE TO PRACTICE IN NY STATE .............................................................................................................................5
PEER REVIEW ..............................................................................................................................................................5
RESULTS OF FEDERAL AND STATE DESK REVIEWS ........................................................................................................5
INDEPENDENCE............................................................................................................................................................5
SIMILAR ENGAGEMENTS WITH OTHER SCHOOL DISTRICTS ...............................................................................6
PARTNER, SUPERVISORY & STAFF QUALIFICATIONS AND EXPERIENCE .........................................................7
QUALIFICATIONS ..........................................................................................................................................................7
APPROACH TO CHANGES IN ENGAGEMENT TEAM ..........................................................................................................8
CONTINUING PROFESSIONAL EDUCATION .....................................................................................................................8
SPECIFIC AUDIT APPROACH .....................................................................................................................................9
OUR APPROACH TO TECHNOLOGY.................................................................................................................................9
OUR AUDIT METHODOLOGY ........................................................................................................................................10
AUDIT APPROACH ......................................................................................................................................................10
1. PLANNING ..............................................................................................................................................................10
2. UNDERSTANDING INTERNAL CONTROLS ..................................................................................................................11
3. PRELIMINARY EVALUATION OF INTERNAL CONTROLS ...............................................................................................11
4. TESTS OF CONTROLS AND COMPLIANCE .................................................................................................................11
5. SUBSTANTIVE AUDIT PROCEDURES ........................................................................................................................12
6. FINANCIAL REPORTING AND PRESENTATION ............................................................................................................12
7. CONTINUOUS COMMUNICATION ..............................................................................................................................12
IDENTIFICATION OF ANTICIPATED AUDIT PROBLEMS ........................................................................................13
ANTICIPATED HOURS BY STAFF LEVEL ........................................................................................................................14
PEER REVIEW LETTER .............................................................................................................................................15
Exhibits
Required Forms .................................................................................................................................................Section I
Page 1
Our understanding of your needs
Freed Maxick & Battaglia is proud to present Erie 1 BOCES and participating districts (the “Districts”) with this
proposal to provide professional services. Our team is dedicated and understands the unique issues and concerns of
school districts. At Freed Maxick & Battaglia we believe our clients deserve to have the right answers, in a timely
manner, so they can implement solutions for their business. We are confident that our firm will serve you with service
and expertise that is second to none.
Requested Services
In response to your request, we are proposing to perform an independent audit of the financial statements.
In addition, you are seeking a Firm with the ability to provide services outside of traditional financial statement
auditing. We have the depth and experience to provide additional services at your request including:
Review of internal audit findings and assistance in implementing corrective action
Program compliance audit services including auditing a specified element as requested
Fraud investigative services
Review of budget and long term planning
Fund balance planning and management advice
Evaluation of incurred but not reported liabilities
Performance of special agreed-upon procedures
Consulting services in so far as do not impair independence
Our Firm has been providing services to the Upstate New York market for over 50 years and has been listed as a
Top 100 CPA firm in the country for the past five years as a result of a continued pattern of growth. Our firm is of a
sufficient size to provide stability throughout the auditing engagement and we commit to providing all of the services
as requested in the request for proposal.
Audit Scope
The independent audit of Districts’ year-end financial statements will be conducted 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 and the provisions of the Single Audit Act of 1984, including the Single
Audit Act Amendments of 1996 and OMB Circular A-133, Audits of States, Local Governments and Not-for-Profit
Organizations. Additionally, we will audit the Schedule of Expenditures of Federal Awards and Extraclassroom
Activity Fund.
Page 2
Firm Qualifications & Experience
Freed Maxick & Battaglia is one of the largest providers of professional services in Upstate New York with over 240
professional and administrative staff. As a stand-alone professional services firm we are listed in the Public
Accounting Report’s annually updated list of the 100 largest accounting firms in the United States. We have offices
in Rochester, Batavia & Buffalo.
Freed Maxick & Battaglia operates as follows:
Service Area
Accounting & Auditing
Tax and Consulting
Asset Based Lending
Total
# of
Professionals
58
79
24
161
# of
Directors
15
13
2
30
Freed Maxick & Battaglia, CPAs, PC is affiliated with RSM McGladrey and has the distinction of operating as an
Alternative Practice Structure. This structure enables Freed Maxick & Battaglia, a licensed CPA firm, and RSM
McGladrey, Inc., a business services company, to work together to serve the business needs of mid-sized companies
nationwide. It is the common goal of Freed Maxick & Battaglia and RSM McGladrey, Inc. to provide financial
services to help our mutual clients increase shareholder value. With over 425 offices in 75 countries around the
world, RSM McGladrey, Inc. can provide us with resources on national and international issues. Together, with RSM
McGladrey Inc., we are the 5th largest provider of accounting, tax planning and business consulting services
nationwide, with revenues exceeding $1.4 billion.
In addition, we are a member of the Leading Edge Alliance, which is a consortium of leading accounting firms across
the United States. With member firms ranging in size from $15M to $150M U.S., the combined revenues of the
Alliance total over $2 billion with over 4,000 staff.
Firm Philosophy
If one word could describe our Firm’s philosophy, it would be “involved.” Our organizational structure ensures that
directors are accessible and directly involved in each engagement. This philosophy fosters an environment of trust
and keeps us informed of the important issues affecting our clients. Freed Maxick & Battaglia is also committed to
deliver on a specific promise. Our Firm’s tagline is “Take it To the Max. “Take it to the Max” represents what we call
“the attitude of excellence,” which we strive toward every day. You can be assured that we will live up to our promise
of delivering the highest quality professional services tailored to your needs.
Page 3
Our Leading Governmental Service Practice
Our Firm is dedicated to serving school districts via our Governmental Practice. It is comprised of 24 professionals
who understand the unique environment that school districts operate in and the compliance issues they face. Our
Firm has been involved in serving governmental and not-for-profit entities for many years, serving as auditors and
consultants to a large number of governmental and not-for-profit entities in Western and Upstate New York.
We have decades of combined experience providing auditing and consulting services to in excess of 75
governmental entities of varying type and size, and with varying needs. We currently serve over 36 school districts in
Western New York, both as external and internal auditors, and are currently addressing the following areas with our
school district clients:






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New York State’s School Accountability Legislation (5 Point Plan)
Fund balance planning as an on-going concern in school district finances and budget planning
Long-term financial planning
Employee benefits and health insurance costs, including increasing retirement system contributions
Accounting implications of post-employment benefits
Financial and compliance implications of Federal Stimulus aid to school districts
Implementation of GASB Statement No. 54
We understand the economics, operations and trends in the industry and we devote significant time to training and
research activities related specifically to governmental entities. Our reputation is that we are very responsive and
proactive in the delivery of services of value to our clients and that we become an integral part of the school district’s
team of valued professionals.
Our governmental clients include: School Districts, BOCES, Cities, Counties, Public Utilities, Villages, Workers’
Compensation Insurance Plans, Towns and Municipal Consortiums.
NY State Society of CPAs Committee on Public School Accounting
The Committee on Public School Accounting is a statewide committee of certified public accountants that are at the
forefront of emerging accounting issues in the public school environment. Kathryn Barrett, a director in our Batavia
office, has been an active member of the Committee for ten years. Our presence on the Committee positions us in a
manner to be involved as issues related to our school district clients emerge.
Many times we are involved in planning for matters before other accounting firms are even aware of them. Another
benefit of serving on the Committee is the relationships that we have developed. These include other accounting
firms across the State, as well as individuals at the State Education Department and the New York State
Comptroller’s office. These relationships are invaluable and allow us to “pick-up the phone and call” should the need
arise.
The committee is currently working with the State Comptroller’s Office and the State Education Department in
interpreting the provisions of Government Accounting Standards Board (GASB) Statement No. 54 “Fund Balance
Reporting and Governmental Fund Type Definitions” has on school districts and BOCES in New York State and
disseminating this information.
Page 4
Examples of Our Commitment to Governmental Entities
Freed Maxick & Battaglia has allocated resources locally and nationally to support governmental service
professionals. For example:
Audit Committee Guide for Governmental Entities: This audit committee guide for state
& local governmental entities focuses on the charter, duties and best practices of
government audit committees. Freed Maxick & Battaglia, CPAs worked with the Erie County
Association of School Boards to direct districts to download our audit committee guide from
our website, www.freedmaxick.com.
Muse Newsletter: This monthly newsletter informs governmental and not-for-profit
organizations of changes in the regulatory environment that may impact their business
interest.
NY State Comptroller’s 5-Point Plan: Freed Maxick & Battaglia sent out regular updates in
the form of letters and advertisements, to school districts in WNY regarding the 5-Point Plan;
including this ad regarding the establishment of an Internal Audit Function.
School District Section on freedmaxick.com: Because of our seat on the NY State Society
of CPAs Committee on Public School Accounting, Freed Maxick & Battaglia has insight into
the School District Accountability Legislation that other firms may not have. That’s why we
were able to create a special section for school districts on our website, keeping school
districts informed of the legislation. We had lots to say!
Professional Standards in Governmental Accounting
The members of our governmental client service group are experienced in auditing in accordance with Government
Auditing Standards, the provisions of the Single Audit Act, OMB Circular A-133, Audits of States, Local Governments,
and Non-Profit. Successfully serving these entities requires that we possess significant knowledge of and
experience with governmental entities. We regularly correspond with representatives of our clients to keep them
informed of pertinent accounting and auditing developments.
Page 5
Regular attendees of Governmental Conferences & Seminars
We are an associate member of the Western Chapter of the New York State Association of School Board Officials
(NYSASBO) and our staff attends the workshops sponsored by that organization and the New York State
Comptrollers Office. Individuals in our Governmental Practice also attend conferences sponsored by the
Government Finance Officers Association, including their annual conference held in Albany and the annual Public
School Accounting Conference sponsored by the New York State Society of Certified Public Accountants. We feel
that this level of quality, expertise and resources puts us in a very unique position.
National, State & Local Organizations
Members of Governmental Professional Organizations: Members of our Governmental Group are actively involved in
the NY State Society of CPAs Committee on Public School Accounting, the NY State Association of School Business
Officials, the Government Finance Officers Association, the NY State Conference of Mayors and Municipal Officers
and Municipal Electric Utilities Association.
In addition we are a member of the AICPA’s Governmental Audit Quality center.
As a requirement of membership all members of our Governmental Service
Practice are required to attain continuing professional education requirements of
Government Audit Standard. This education is in addition to the required 24
hours required for A-133 and Yellow Book audits.
License to Practice in NY State
Freed Maxick & Battaglia, CPAs, PC and all key professional staff are properly licensed to practice as a certified
public accountant in New York State.
Peer Review
Freed Maxick & Battaglia has participated in the profession’s peer review program for over 15 years. The last review
resulted in the issuance of an unmodified report with no letter of comment, a performance level achieved by fewer
than 15% of the accounting firms throughout the United States. Governmental auditing is one of our largest practice
areas, as a result, several of our governmental assurance engagements are included each time we a subjected to
peer review. A copy of our most recent peer review can be found on page 15.
Results of Federal and State Desk Reviews
During the past three years, there have been no other desk/field audits or disciplinary actions taken against the firm.
Independence
Freed Maxick & Battaglia, CPAs, PC and its covered employees are independent with respect all School Districts
represented in the Monroe County School District Consortium, as that term is defined by Rule 101 of the Code of
Professional Ethics of the American Institute of Certified Public Accountants and the U.S. General Accounting
Office’s Government Auditing Standards (1994). As part of the proposal process, we have conducted a thorough
review of our independence from the Monroe County School District Consortium. Based on this review, we are
independent from Monroe County School District Consortium, BOCES and the New York State Department of
Education should you engage us as your external auditors.
Page 6
Similar Engagements with Other School Districts
Buffalo Board of Education (Buffalo City Schools)
Barb Smith
(716) 816-3767
Date: June 30, 2010 Hours: 615
Engagement Director: Kathryn Barrett
Scope of work: Audit of basic financial statements and A-133.
Procedures related to the issuance of serial bonds and agreed
upon procedures related to the Districts Contract for Excellence.
Batavia City School District
Scott Rozanski
(585) 343-2480
Date: June 30, 2010 Hours: 300
Engagement Director: Kathryn Barrett
Scope of work: Audit of basic financial statements and A-133.
Consulting on implementation of GASB Statement No. 34
regarding financial statement presentation and disclosures and
guidance on the MD&A.
Pembroke Central School District
Bill Lang
(585) 599-4525
Date: June 30, 2010 Hours: 230
Engagement Director: Kathryn Barrett
Scope of work: Audit of basic financial statements and A-133.
Consulting on implementation of GASB Statement No. 34
regarding financial statement presentation and disclosures and
guidance on the MD&A. Assistance with implementing GASB
Statement No. 54.
Attica Central School District
Steve Dziak
(585) 591-0400
Date: June 30, 2010 Hours: 235
Engagement Director: Kathryn Barrett
Scope of work: Audit of basic financial statements and A-133.
Consulting on implementation of GASB Statement No. 34
regarding financial statement presentation and disclosures and
guidance on the MD&A. Assistance with implementing GASB
Statement No. 54.
Holland Central School District
Dennis Johnson
(716) 537-8222
Date: June 30, 2010 Hours: 250
Engagement Director: Kathryn Barrett
Scope of work: Audit of basic financial statements and A-133.
Consulting on implementation of GASB Statement No. 34
regarding financial statement presentation and disclosures and
guidance on the MD&A. Consulting services regarding budgeting
and fund balance planning.
Our School District Client Base
External Audit Client Listing
Buffalo Board of Education*
(Buffalo City Schools)
Rochester City School District*
Batavia City School District*
Monroe #1 BOCES*
Attica CSD*
Holland CSD*
Le Roy CSD*
Notre Dame High School
Elba CSD*
Pembroke CSD*
York CSD*
Iroquois CSD*
Lyons CSD
Cleveland Hill CSD
Marcus Whitman CSD
Marion CSD
Mt. Morris CSD
Manlius Pebble Hill School
Spencerport CSD
Newark CSD
Penn Yan CSD
Cheektowaga-Maryvale CSD
Alexander CSD
Canandaigua City Schools
Genesee Valley BOCES
Ripley CSD
* Single Audit
Internal Audit Client Listing
Cheektowaga-Sloan CSD
Dansville CSD
Geneseo CSD
Lancaster CSD
Letchworth CSD
Williamsville CSD
Erie 1 BOCES
Page 7
Partner, Supervisory & Staff Qualifications and Experience
Freed Maxick & Battaglia believes that the right team members are the critical element to the success of an
engagement. Our goal is to assemble a team that will:
Conduct a high quality, “no surprises” audit
Collaborate with management early
Proactively share our knowledge of best industry practices
Maintain high standards for independence and objectivity.
Engagement Staffing
Staffing is a critical issue in the accounting industry today. Our firm takes great pride in its ability to attract and retain
qualified professionals. Our staff turnover rate of 13% is well below the national average of 20%+ and significantly
enhances our ability to maintain continuity on engagement staffing. As a result, your engagement team will allow for
multiple points of contact and provide for maximum staffing continuity should there be any changes in staffing for the
engagement.
Engagement Management Approach
We employ a hands-on approach beginning with director involvement. When you work with Freed Maxick &
Battaglia, your administration, staff and Finance and Audit Committee receive regular attention from our directors.
We believe in frequent, open communication with our most experienced professional gives our clients a distinct
advantage. We take a team approach that has extensive director and manager involvement in the day-to-day
operations of the audit. With a director-to-staff ratio of 1:5, you won’t just meet your engagement directors at the
initial planning meetings. Your directors are in contact with you on a regular basis to help meet your time frames,
and they will come to you with potential solutions, while providing sound business advice.
Qualifications
All individuals involved in government, A-133 and Yellow Book audits are required to obtain, at a minimum, 24 hours
of continuing education in this field every two years. This education includes programs sponsored by the AICPA, the
NYSSCPA, the Government Finance Officers Association, the Association of School Business Officials, and the New
York State Comptrollers Office, as well as in-house sessions on GASB and governmental GAAP updates on a
routine basis. Kathryn Barrett has presented on various subjects at sessions held by the Association of School
Business Officials, Four County School Boards Association and the New York State Society of Certified Public
Accountants.
Engagement Team
Kathryn Barrett will serve as the engagement’s overall director and relationship manager. Laura Landers will serve
as a technical director and concurring reviewer. Patrick Clancy will serve as the manager for the engagement and
senior and staff accountants will be assigned in such a way that will maximize staff continuity throughout the
engagement. Our core engagement team has extensive experience with School Districts and leverages that
knowledge into a smooth, no surprises audit. In the unlikely event there is a significant change in the composition of
your engagement team, we will inform you immediately and discuss the replacement with you.
Page 8
Engagement Leaders:
Kathryn M. Barrett, CPA: Kathryn is licensed to practice in NY State and has over 20 years
of public accounting experience in New York and New Jersey and has over 16 years of public
accounting experience related to governmental entities. She has been responsible for audits
of public school districts, BOCES, cities, towns, villages, self-funded health and workers’
compensation plans and municipal consortiums as well as, risk assessment and internal
audits of school districts. Kathryn will serve as the overall engagement director and will be
responsible for the oversight of the audit team.
Laura L. Landers, CPA, MPA: Laura will serve as the technical director and be responsible
for ascertaining that state, professional and regulatory standards have been complied with
throughout the engagement. Laura has over sixteen years of public accounting experience
almost solely related to providing audit and consulting services to governmental entities. She
is responsible as the lead auditor on a majority of the firm’s governmental A-133 and Yellow
Book audits.
Patrick Clancy, CPA, CFE: Patrick will serve as the audit manager and be responsible for
directly managing the fieldwork. Patrick has 10 years of public accounting experience almost
solely related to providing audit services to governmental entities, including governmental A133 and Yellow Book audits.
Approach to Changes in Engagement Team
Under current professional standards, there is no required rotation period for engagement staff for non-SEC clients.
We know it is very important that the engagement team who serves you one year return to the engagement in
subsequent years. Likewise, it is in our best interest to do everything in our power to maintain staff continuity on all
engagements, especially those requiring specialized industry knowledge, such as in the governmental services
industries. We are able to do this because of the depth of our resources.
Continuing Professional Education
We affirm that all key employees and staff assigned to the Districts’ have met or exceeded all continuing Professional
Education (CPE) requirements necessary to satisfy the standards of the United States General Accounting Office
(GAO) and New York State Education Department (SED). Transcripts can be provided upon request. Below is a
listing of the CPE the members of the Districts’ engagement team have attended.
●
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Governmental Audit Staff Training
GASB 34 Financial Statements for Municipalities
School District Audit Staff Training
OPEB, W/C & GASB 34
New York State Annual School District Internal
Audit conference
Annual Government GAAP Update
●
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NYS GFOA West Region Seminars
Internal Controls, Analytical Procedures & Fraud Risks
NYS ASB Fraud, internal Controls and Public Confidence
New York State Annual School District Conference
Annual Financial Management, Auditing and Accounting
Workshop
Annual Government Accounting and Auditing Conference
Page 9
Specific Audit Approach
Our engagement plan is to service the Districts’ with individuals actively and regularly involved in the audits of
governmental entities with experience in performing audits similar to yours in accordance with Circular A-133 and
Government Auditing Standards. We intend to staff each engagement with a mix of four to six of these individuals
from our Batavia and Buffalo offices who will be actively involved in the audit of the Districts’.
Our approach to the conduct of the audit requires that we obtain an in-depth understanding of Districts’. The audit is
tailored specifically to Districts’ needs and objectives. This “tailoring” requires knowledge of the goals, major
operating policies, regulatory environment and information requirements of the Districts’. Our audits are performed
in accordance with a risk-based approach, which is assessed at the entity level and at the account level. The scope
of substantive tests of account balances are determined based upon the interaction between the assessed risk and
our planned reliance on internal controls and calculated materiality levels. In addition, through the utilization of data
extraction software, we are able to flag financial information from your computerized accounting records to
maximize audit efficiency and error detection. This ensures that audit time is utilized most efficiently to render our
audit report on the financial statements as a whole. Our audits are performed in accordance with auditing standards
generally accepted in the United States of America and Governmental Auditing Standards.
Our approach to technology
Digital automation has changed the face of the audit industry. Today’s business environment demands instant
answers. To meet this challenge, our Firm developed a proprietary audit automation tool known as CaseWare. This
tool has streamlined our audit work and created efficiencies and convenience for both our clients and our teams,
while raising the standards for audit quality.
We utilize the CaseWare software for the financial statement audit which integrates Excel and Word documents. We
are able to import the school districts’ data into our software and utilize it to select transactions to test and prepare
the financial statements. This technology feeds into our paperless platform that is then used to create the financial
statements. This data sharing helps us to create greater efficiencies, streamline the review of the financial
statements and improve the accuracy and quality of the audit. Furthermore, with this system, the audit team can take
general ledger detail, load it into data extraction software and query the data to determine which major and/or
unusual transactions would be most impacting to the organization. This capability helps minimize the requests for
voluminous data extracts and reduces the burden on your team.
In this type of automated audit engagement, workpapers are created and stored in an electronic file. Program sheets
are integrated with the electronic working papers, and specific guidance and reporting information from the Firm is
inserted. The output becomes a clear and comprehensive engagement file that our auditors can access from any
location — nationwide, creating efficiencies and ensuring the highest quality of service.
Page 10
Our audit methodology
A point to re-emphasize is our use of a true topdown, risk-based approach that will not result in
additional and unnecessary testing procedures that
add cost, time and effort to both our team and
yours. We perform our audit to address risks, we
do not audit to create or manufacture risk to
substantiate our fee. In addition, our approach
entails frequent and timely communication.
Accordingly the Districts’ administration and the
Audit Committee will receive regular progress
reports throughout the engagement. Our Directors
and Managers will meet regularly to discuss status,
issues resolution and reporting deliverables to
ensure our mutual reporting deadlines are met. The
most important phase of any audit is the planning
phase. It is here that we develop a work plan for
each audit engagement. In addition, we gain an
understanding of the Districts’, its operations,
internal controls and its accounting information
system. By properly planning the engagement we
can try to address any potential problems or issues
ahead of time and resolve them before they
become too big, time consuming, or cause
engagement service delays.
Audit Approach
Under the umbrella of providing only the highest quality professional services, we strive to maximize the cost
effectiveness of our audit services. We achieve this goal through an audit approach centered on the following
seven key areas:
1.
2.
3.
4.
5.
6.
7.
Planning
Understanding Internal Controls
Preliminary Evaluation of Internal Controls
Tests of Controls and Compliance
Substantive Audit Procedures
Financial Reporting and Presentation
Continuous Communication
1. Planning
Freed Maxick & Battaglia’s audit approach focuses on reliability, service and efficiency. The key to each of these
elements is effective planning. The planning process includes meetings of the audit team with the School Business
Administrator of the Districts’, members of the audit committee and others to discuss engagement strategy, areas of
audit emphasis and concern, creating an inclusive list of tasks to be performed and a detailed timetable for
completion of each task and identifies the persons responsible for the performance of those tasks. Effective
planning eliminates "false starts" and "blind alleys," and allows each of us to complete our responsibilities in an
efficient manner.
Page 11
2. Understanding Internal Controls
Internal control is a process, affected by the Board of Education, Audit Committee, administration, and other
personnel designed to provide reasonable assurance of achieving objectives in the following categories:




Reliability of financial reporting;
Effectiveness and efficiency of operations;
Safeguarding assets against unauthorized acquisition, use or disposition (which may include controls relating to
financial reporting and operating objectives); and
Compliance with applicable laws and regulations.
The primary purpose of the accounting and administrative control system is to process transactions in compliance
with applicable laws, regulations and agreements. Accordingly, the focus of our efforts is to fully understand the flow
of transactions. This phase of our approach enables us to have the requisite understanding of the transaction flow
within all significant cycles in order to design efficient audit tests. We have developed standardized worksheets,
checklists, flow charts, and similar tools to aid us in obtaining an understanding of your internal controls. We confirm
our understanding of the system by "walking through" a transaction in each cycle from its origination, through the
accounting and administrative system, to the general ledger and ultimately as internally and externally reported.
Obtaining an understanding of the Districts’ internal control policies and procedures will include interviews of various
school district personnel as required under Statement on Auditing Standards (SAS) No. 99, Consideration of Fraud in
a Financial Statement Audit. SAS No. 99 requires auditors to identify accounting and operating functions within the
Districts’ where fraud risk factors are present and to design our audit to address any fraud risk factors identified.
3. Preliminary Evaluation of Internal Controls
The purpose of this evaluation is to make an early determination by cycle as to the potential for reliance on the
system of internal control. Our evaluation will consist of inquiries of appropriate entity personnel regarding the design
and/or application of relevant internal controls. In addition, a walkthrough of those policies and procedures will be
performed, which may consist of a corroborating inquiry, an observation or an inspection for verification of the
controls.
If the control environment, risk assessment, control activities, information and communication, and monitoring are
adequate to support reliance on those controls in order to reduce substantive tests of details and we determine that
reliance would be justified, we would perform tests of those controls to determine that they are functioning as
intended.
4. Tests of Controls and Compliance
Tests of controls are procedures performed by the engagement team and are directed toward obtaining evidence to
evaluate the effectiveness of the operation of internal control policies and procedures. Tests of compliance consist of
the evaluation of the Districts’ compliance with laws and regulations specific to school districts in New York State and
with the general and specific compliance requirements of its federally funded programs. Tests of controls may
include one or more of the following procedures:
Inquiries of appropriate entity personnel regarding the design and/or application of a relevant internal control
policies and procedures including the classes of transactions to which the policies and procedures apply, how it
is applied and by whom, and the disposition of exceptions detected by the policy or procedure.
Inspection of documents and/or reports evidencing the design and/or application of the relevant policies and
procedures by entity personnel.
Observation by the auditor of the performance of the relevant policy or procedure by entity personnel.
Reperformance of a sample of transactions by the auditor in order to support reliance on those controls.
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Tests of compliance consist of the following:
Determination of General Municipal and New York State laws and regulations material to the District’s financial
statements and testing compliance with such laws and regulations.
Inquiries of appropriate personnel to determine the general and specific requirements under federal funded
programs that the District is required to adhere to.
Selection of federally funded programs to be further tested based on risk factors. Transaction testing is based on
random sampling techniques over the selected federally funded programs. Sample sizes will be based on risk
factors identified during the planning phase of the audit and can vary based on the compliance requirements
being tested as well as how often those transactions occur.
5. Substantive Audit Procedures
At this point we would have developed a preliminary audit plan, gained a thorough understanding of the accounting
and administrative system, and evaluated and tested the system of internal control. Based upon the preceding work,
we would perform substantive audit procedures, analytical procedures and compliance tests specially tailored to the
Districts’. Some substantive audit procedures may be performed using data extraction software. The extent to which
data extraction software will be used will be determined during the planning phase of the audit.
In addition to substantive audit procedures, we will also analytically compare current year results to those of the prior
year and the current year budget. Inquiries will be made of management of significant deviations from the prior year
amounts and current year budget and we will audit the results to these inquiries.
6. Financial Reporting and Presentation
Freed Maxick & Battaglia’s policies and procedures as they relate to financial reporting and presentation are set forth
in the Firm's Governmental and Compliance Audit manuals. These manuals provide a comprehensive reference
source of financial reporting issues related to financial statements of applicable organizations as well as financial and
compliance audit related issues. We will conduct interviews with management to discuss the results of our audit
procedures and to review drafts of the financial statements and reports.
Our report on the financial statements will state that the financial statements are presented in accordance with
generally accepted accounting principles and that our audit was conducted in accordance with the auditing standards
generally accepted in the United States of America and Governmental Accounting Standards. If there are any
exceptions, they will be thoroughly discussed with management prior to us issuing our report.
7. Continuous Communication
The process of continuous communication includes the exchange of ideas and advice as changes are considered or
implemented within Districts’, the accounting profession, or by regulatory authorities. This process begins after our
audit is complete and continues throughout the year. We encourage our clients to discuss special concerns with us
as they arise so that timely and constructive advice may be rendered. We make a concerted effort to always be
informed about our clients’ “business health”. This is usually accomplished by:
Meeting with the management team and/or audit committee on a regular basis to review interim financial
budgets and operating results.
Providing timely information on important matters regarding newly issued accounting and tax regulations,
regulatory developments, and personnel management.
Assisting management in implementing elements of sound strategic planning.
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Audit Timeline
The following audit timeline is flexible and may be adjusted to mutually convenient dates.
Phase
APR
MAY
JUN
JUL
AUG
SEP
OCT
Entrance conference with
Administration and Audit Committee
Preliminary fieldwork
Audit fieldwork
Draft report of deliverables
Formal exit conference
Presentation to Board of Education
Final deliverables
Identification of Anticipated Audit Problems
At this time we do not foresee any audit problems. We will meet with the audit committee/management to review our
risk assessment. These meetings will also serve as a forum to address the audit process. Discussions may include
determining if revisions should be made to the process, or if the process should be expanded to address other areas
of concern to the Districts’. If circumstances are encountered that affect our ability to proceed according to the plan
outlined in the proposal, such as major scope changes, loss of key School District personnel, potential scope
changes due to New York State School District Accountability mandates, we will inform you promptly and work with
you to determine any changes in scope, timing or fees that may result from such circumstances. Additionally, the
execution of the audit, sample sizes, and timeline will vary based on the results of our risk assessment and areas to
be tested.
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Anticipated Hours by Staff Level
The Districts’ have a wide range of operating budgets and the anticipated hours will vary depending on the size of the
District. We have created four hours estimate tables that are based upon the sizes of the various districts.
Less than $27 Million Budget
Professional Level
Partner/Director
Manager
Supervisor
Staff
Total
Planning &
Preliminary
4-5
9-10
12-15
35
60-65
Year-End
Total
8-10
18-20
20-25
109-115
155-170
12-15
27-30
32-40
144-150
215-235
Year-End
Total
10-12
20-23
25-30
120-150
175-215
16-18
32-36
43-50
159-196
250-300
Year-End
Total
12
23
30
155-160
220-225
19
38
55
198-208
310-320
Year-End
Total
15
28
45
177
265
25
48
75
232
380
$28 - $49 Million Budget
Professional Level
Partner/Director
Manager
Supervisor
Staff
Total
Planning &
Preliminary
6
12-13
18-20
39-46
75-85
$50 - $79 Million Budget
Professional Level
Partner/Director
Manager
Supervisor
Staff
Total
Planning &
Preliminary
7
15
25
43-48
90-95
Greater than $80 million
Professional Level
Partner/Director
Manager
Supervisor
Staff
Total
Planning &
Preliminary
10
20
30
55
115
*The hours and fee may be less if the district is not required to have an audit in accordance with Circular A-133.
Page 15
Peer Review Letter
Page 16
Page 17
APPENDIX A
PROPOSER GUARANTEES
The Proposer certifies it can and will provide and make available, as a minimum, all services set
forth in Nature of Services Required.
II.
The Proposer has read Appendix and Contractual Requirements, and agrees that the
rights and prerogatives as detailed are retained by Erie 1 BOCES.
III.
The Proposer agrees to be bound by the contractual requirements delineated in Appendix.
Signature of Official:
_________________________________________________
Name (typed):
___Kathryn M. Barrett, CPA__________________________
Title:
____Director______________________________________
Firm:
___Freed Maxick & Battaglia, CPAs, PC _______________
Date:
___May 6, 2011____________________________________
1
APPENDIX B
PROPOSER WARRANTIES
Proposer warrants that it is willing and able to obtain an errors and omissions insurance policy
providing a prudent amount of coverage for the willful or negligent acts, or omissions of
any officers, employees or agents thereof.
I.
Proposer warrants that it will not delegate or subcontract its responsibilities under an
agreement without the prior written permission of Erie 1 BOCES.
II.
Proposer warrants that all information provided by it in connection with this proposal is
true and accurate.
Signature of Official:
_________________________________________________
Name (typed):
___Kathryn M. Barrett, CPA__________________________
Title:
____Director______________________________________
Firm:
___Freed Maxick & Battaglia, CPAs, PC _______________
Date:
___May 6, 2011____________________________________
2
APPENDIX C
SCHEDULE OF AUDIT QUOTATIONS
AS PROPOSED
FYE 6/30/2011
Audit of general purpose financial statements, and
All other services not separately listed below.
_(See Tables in Cost Proposal)________
Single Audit
_________
_________
TOTAL ALL-INCLUSIVE MAXIMUM PRICE
$_______
3
APPENDIX D
SCHEDULE OF FEES FOR ADDITIONAL SERVICES AND AUDITS
IF REQUESTED BY THE DISTRICT
HOURLY RATE
PARTNERS
__$250_________
MANAGERS
__$150_________
SUPERVISORY STAFF
__$105_________
STAFF
__$85 _________
OTHER (SPECIFY)
__N/A_________
4