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DATE: January 30, 2017
TO: Invited Parties – CPA Firms
FROM: Sherry M. Frisbee
Manager Finance & Accounting
SUBJECT: Professional Auditing Services
NU is soliciting proposals from qualified firms of certified public accountants to audit NU's financial
statements for the fiscal year ending June 30, 2017, with the option of auditing future fiscal years
based on yearly negotiations. Enclosed for your consideration is a Request for Proposal (RFP).
To be considered for this engagement, your firm must meet the qualifications and satisfy the
requirements set forth in the RFP.
Mail Delivery: Overnight Delivery:
NU NU
Sherry Frisbee Sherry Frisbee
Manager Finance & Accounting Manager Finance & Accounting
P.O. Box 519 170 Cope Blvd.
Newport, TN 37822 - 0519 Newport, TN 37821
Completed proposals must be received by 2:00 pm, local time, on February 20, 2017.
All questions and correspondence may be directed to Sherry Frisbee in writing at the above address,
via email at [email protected] or by calling 423-625-2845.
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NU
REQUEST FOR PROPOSALS
FOR
PROFESSIONAL AUDITING SERVICES
January 30, 2017
NU
PO Box 519
Newport, TN 37822-0519
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NU
REQUEST FOR PROPOSALS
TABLE OF CONTENTS
Page
I. INTRODUCTION 6
A. General Information
B. Background Information
II. NATURE OF SERVICES REQUIRED 7
A. Auditing Standards to be followed
B. Deliverables
C. Special Considerations
D. Working Paper Retention and Access to Working
Papers
III. TIME REQUIREMENTS 8
A. Proposal Calendar
B. Notification and Contract Dates
C. Schedule for the 2017 Fiscal Year Audit
IV. ASSISTANCE TO BE PROVIDED TO THE AUDITOR AND REPORT 9
PREPARATION
A. Finance Division
B. Statements and Schedules to be prepared by the Staff of NU
C. Work Area, Telephone, Photocopying and Wireless Internet
D. Annual Report Preparation
V. PROPOSAL REQUIREMENTS 10
A. Transmittal Letter
B. Sample Contract
C. Non-Collusion Affidavit
D. Technical Qualifications
E. Price, Terms and Conditions
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VI. EVALUATION PROCEDURES 13
A. Evaluation
B. Evaluation Criteria
C. Final Selection
D. Right to Reject Proposals
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APPENDICES
A. List of Key Personnel, Office Locations and Telephone Numbers 15
B. Sample Audit Contract 16
C. Prior Year Annual Report 20
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NU
REQUEST FOR PROPOSALS
I. INTRODUCTION
A. General Information
NU is soliciting the services of qualified firms of certified public accountants to audit
its financial statements for the fiscal year ending June 30, 2017, with the option of
auditing future fiscal years based on yearly negotiations. These audits are to be
performed in accordance with the provisions contained in this request for proposals.
There is no expressed or implied obligation for NU to reimburse responding firms for
any expenses incurred in preparing proposals in response to this request, all such
costs and expenses to be at the sole cost of the respective proposers.
B. Background Information
NU is a component unit of the City of Newport, Tennessee, with an independent
board whose electric system, water system, and wastewater systems are in the
exclusive control and direction of NU’s seven-member governing board. NU’s audit
and financial statements are prepared separately from those of the City of Newport
for its general government operation. NU's fiscal year begins on July 1 and ends on
June 30. At the end of December 2016, NU was providing electric service to 21,898
customers in a 450-square-mile area in Cocke County, TN and parts of surrounding
counties.
At December 31, 2017, NU was providing water services to10,756 customers.
At December 31, 2017, NU was providing wastewater services to 4,412 customers.
NU had a total yearly payroll for FY 2016 of $6,266,391.00; at December 31, 2017
there were 99 employees.
NU is organized into three operating systems - Electric Distribution, NU Water and
NU Wastewater. The accounting and financial reporting functions of NU are
centralized.
II. NATURE OF SERVICES REQUIRED
A. Auditing Standards to Be Followed
To meet the requirements of this request for proposals, the audit shall be performed
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in accordance with: auditing standards generally accepted in the United States as set
forth by the American Institute of Certified Public Accountants and the standards
applicable to financial audits contained in Government Auditing Standards issued by
the Comptroller General of the United States.
B. Deliverables
NU desires the auditor to express an opinion on the fair presentation of its basic
financial statements in conformity with accounting principles generally accepted in
the United States.
NU also desires the auditor to express an opinion on the fair presentation, in relation
to the basic financial statements as a whole, on its Supplemental Financial Report
including the supplemental schedules, compliance, and internal controls which could
have a direct and material effect on the determination of financial statements
amounts. The auditor will also be responsible for issuing a report on NU’s internal
control over financial reporting and compliance with certain provisions of laws,
regulations, contracts, and grants. The auditor will be responsible for sending this
information to NU and to the Tennessee Department of Revenue’s Municipal Audit
Division.
Prior to and during the audit, the auditor will be required to inform NU personnel of
any significant issues, disclosures, or footnotes, which will be required to regarding
the financial statements.
The auditor will be required to review the Annual Report for reasonableness in
relation to the financial statements.
Auditors will be required to make an immediate report of all irregularities and illegal
acts of which they become aware to the appropriate level of responsibility.
Auditors will be required to assure themselves that NU's Board is informed of each of
the following:
1. The auditor's responsibility under generally accepted auditing standards
2. Significant accounting policies
3. Management judgments and accounting estimates
4. Significant audit adjustments
5. Other information in documents containing audited financial statements
6. Disagreements with management
7. Management consultation with other accountants
8. Major issues discussed with management prior to retention
9. Difficulties encountered in performing the audit
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C. Special Considerations
1. NU is a component unit of the City of Newport, Tennessee, with an
independent board. NU reports its financial condition and operations
separately from those of the City of Newport general government. NU has an
Electric System, Water System and Wastewater System. The financial
condition and financial results of NU will be presented within two financial
reports. The financial condition and financial results of the Electric System
will be one report. The financial condition and financial results of the Water
& Wastewater System will be combined in one financial report.
D. Working Paper Retention and Access to Working Papers
All working papers and reports must be retained, at the auditor's expense, for a
minimum of three (3) years, or such longer time as may be required by federal or
state law with respect to the financial statements of municipal electric distribution
systems and telecommunication providers, unless the firm is notified in writing by
NU of the need to extend the retention period. The auditor will be required to make
working papers available, upon request, to NU and auditors of entities of which NU
is a component unit.
In addition, the firm will be required to respond to the reasonable inquiries of
successor auditors and allow successor auditors to review working papers relating to
matters of continuing accounting significance.
III. TIME REQUIREMENTS
A. Proposal Calendar
The following is a list of key dates up to and including the date proposals are due
to be submitted:
Request for proposal issued 01/30/2017
Due date for proposals (2pm local time) 02/20/2017
B. Notification and Contract Dates
Evaluation of Vendor Proposals Completed 02/28/2017
Selected firm notified First week in March 2017
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C. Schedule for the 2017 Fiscal Year Audit (A similar time schedule will be
developed for audits of future fiscal years if NU exercises its option for additional
audits).
Preliminary Work May/June
FY 2017 Financial Statements Ready 7/15/2017
for Detail Testing
Fieldwork and Draft Report Completed October 15th, 2017
Print Ready Copy Completed October 30th, 2017
Auditor’s Report Presented to the Board December 2017
IV. ASSISTANCE TO BE PROVIDED TO THE AUDITOR AND REPORT PREPARATION
A. Accounting and Finance Department
Accounting will make audit workpapers and reports available to the auditors. All
bank accounts will be audited internally and these audit reports will be available to
the auditors.
The staff will be available during regular business hours for any required assistance,
including preparation of workpapers, schedules, variance analysis, explanations,
preparation of confirmation letters, copying, and other assistance or audit tests
requested by the auditor.
B. Statements and Schedules to be prepared by the Staff of NU.
Accounting will prepare complete draft financial statements, supplemental
information. (Internal Only)
C. Work Area, Telephones, Photocopying and wireless internet.
NU at no cost to the auditor will, provide the auditor with reasonable workspace,
desks and chairs. The auditor similarly will also be provided with access to our
NISC computer network, telephone lines, local calling (but not the cost of long
distance or other tariffs), and photocopying facilities.
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D. Editing and printing of the Annual Audit Report shall be the responsibility of the
independent auditor.
V. PROPOSAL REQUIREMENTS
The following material is to be received by 2 pm, local time, on February 20, 2017, for a
proposing firm to be considered. Additional information may be included if desired.
A. Transmittal Letter
A signed letter of transmittal briefly stating the proposer's understanding of the work
to be done, the commitment to perform the work within the time period, a statement
why the firm believes itself to be best qualified to perform the engagement, a
statement that the proposal is a firm and irrevocable offer for FY 2017, and a
certification that the person signing the proposal is entitled to represent the firm,
empowered to submit the bid, and authorized to sign a contract with NU.
B. Sample of Contract
A sample of the audit firm’s proposed standard contract. Proposers should
understand that as a Tennessee municipal entity NU will not be able to agree to many
contractual provisions of the type customary in the private sector with a notable
example being NU’s lack of authority to enter into indemnity contract provisions
except for its sole negligence and then only to the extent of its liability under the
Tennessee Governmental Tort Liability Act.
C. Non-Collusion Affidavit
By submitting its proposal, the proposer certifies that:
The prices in its proposal have been arrived at independently, without consultation,
communications, or agreement for the purpose of restricting competition as to any
matter relating such prices with any other proposer or with any competitor;
Unless otherwise required by law, the prices which have been quoted in this proposal
have not been knowingly disclosed by the proposer prior to the due date for
proposals, directly or indirectly, to any other proposer or to any competitor; and
No attempt has been made or will be made by the proposer to induce any other
person or firm to submit a proposal or to take or refrain from taking any action for the
purpose of restricting competition.
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D. Technical Qualifications
1. Independence
The firm should provide an affirmative statement that it is independent of
NU. This statement should list and describe any professional or business
relationships with NU during the past five years.
2. License to Practice in Tennessee
An affirmative statement should be included that the firm and all assigned
key professional staff are properly registered/licensed to practice in
Tennessee.
3. Firm Qualifications and Experience
The proposer should state the size of the firm, the size of the firm's audit
staff, the location of the office from which the work on this engagement is to
be performed and the number, diversity, and experience of the professional
staff to be employed in this engagement.
The proposer should also state the firm’s experience with auditing: the
electric utility industry, the water and wastewater industry, municipal audits
in Tennessee, municipal bond related issues, and GASB 34 related issues.
Provide detailed information regarding the qualifications, experience and
training, including relevant continuing professional education of the firm's
professional personnel to be assigned to the engagement and the quality of the
firm's management support personnel to be available for technical
consultation
The firm should also provide information on the results of the latest peer
review of the office that does the work. In addition, the firm shall provide
information on the circumstances and status of any disciplinary action taken
or pending against the firm during the past three years with state regulatory
bodies or professional organizations.
4. Specific Audit Approach
The proposal should set forth in detail an explanation of the audit approach
and methodology to be followed. Included should be the approach, which
will be used to: gain and document an understanding of NU's internal control
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structure; identify applicable laws and regulations; determine the extent of
sampling; determine the level of compliance testing to be performed.
5. If the firm provides consulting services (whether directly or through
subsidiaries, affiliates, or other entities in which it has controlling interest) in
addition to audit services, please include information as to relative percentage
of gross revenue it receives from the respective audit and consulting services,
and a general statement of the firm’s intended future reliance on revenues
from consulting services.
6. Professional Liability Insurance
Proposers should identify its insurer for professional liability with the policy
limits of such coverage and expiration date. The successful proposer will be
required to provide evidence of such insurance as part of its contract with
NU.
E. Price, Terms and Conditions
1. Price
The proposal should contain all pricing information relative to performing the
audit engagement as described in this request for proposal. The total all-
inclusive maximum price is to contain all direct and indirect costs including
all out-of-pocket (e.g., travel, lodging and subsistence) expenses for firm
personnel. However, the indirect costs should be identified.
The proposal should indicate firm pricing for 1, 2, and 3 years.
NU will not be responsible for expenses incurred in preparing and submitting
the proposal. Such costs should not be included in the proposal.
2. Additional Professional Services
If it should become necessary for NU to request the auditor to render any
additional services to either supplement the services requested in this RFP or
to perform additional work as a result of the specific recommendations
included in any report issued on this engagement, then such additional work
shall be performed only if set forth in an addendum to the contract between
NU and the firm.
Also, include firm pricing for any required Single Audit Procedure that
occurs from time to time, i.e., CDBG and ARC Grants.
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3. Manner of Payment
Progress payments will be made on the basis of percentage of work
completed during the course of the engagement. The last ten percent (10%)
payment will be made after delivery of the firm's final reports.
VI. EVALUATION PROCEDURES
During the evaluation process NU reserves the right, where it may serve NU's best interest, to request
additional information or clarifications from proposers, or to allow corrections of errors or
omissions. A proposer may be disqualified from further consideration upon failure to timely respond
to NU with the requested information. At the discretion of NU, firms submitting proposals may be
requested to make oral presentations as part of the evaluation process.
A. Evaluation
Proposals submitted will be evaluated by Sherry Frisbee, Manager of Finance and
Accounting; but the final decision for selection of the successful proposer will be
made by NU’s governing board.
B. Evaluation Criteria
The following represent the principal selection criteria, which will be considered
during the evaluation process.
1. Mandatory Elements
a. The audit firm is independent and licensed to practice in
Tennessee.
b. The firm has no conflict of interest with regard to any other work it
performs for others and the work it performs for NU.
c. The firm adheres to the instructions in this request for proposal on
preparing and submitting the proposal.
d. The firm provides information on results of peer reviews and any
state or professional organization review of its audits for the last
three years.
2. Expertise and Experience
a. The firm's past experience and performance on comparable
electric, water and wastewater utility and municipal electric
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engagements.
b. The quality of the firm's professional personnel to be assigned to
the engagement and the quality of the firm's management support
personnel to be available for technical consultation.
c. Adequacy of proposed staffing for the engagement.
d. Results of latest peer reviews and status of any disciplinary action.
2. Audit Approach
a. Audit Methodology.
b. Scope of audit work.
c. Gaining an understanding of NU’s internal control structure.
d. Determining laws and regulations that will be subject to audit tests.
e. Sampling techniques and analytical procedures.
4. Price:
Cost will be a consideration but not the primary factor in the selection of
an audit firm.
C. Final Selection
NU management will select a firm based upon the completion of the evaluation, and
recommend that selection to the NU governing board. It is anticipated that a firm will
be selected by February 28, 2017. After the selected firm is notified it will submit a
sample (proposed) contract for NU’s consideration. NU reserves the right to negotiate
the exact terms of the contract and both parties agree to negotiate in good faith to
reach a mutual agreement. It is anticipated that a contract will be executed between
both parties by April, 2017, but NU is not obligated to execute a contract with any of
the proposers.
D. Right to Reject Proposals
Submission of a proposal indicates acceptance by the firm of the conditions and
scope of work contained in this request for proposal unless clearly and specifically
noted in the proposal submitted and confirmed in the contract between NU and the
firm selected.
NU is an equal opportunity employer and has strong diversity among its employees.
As such NU strives to do business with minority suppliers and considers diversity in
its selection process of professional service providers.
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NU reserves the right to refuse any or all proposals and to provide to each
participating proposer their award status only, without further explanation of
evaluation.
APPENDIX A
LIST OF KEY PERSONNEL, OFFICE LOCATIONS AND TELEPHONE NUMBER
Name & Title Location of Office Telephone
Glenn Ray
General Manager
170 Cope Blvd.
Newport, TN
(423) 625 -2821
Jimmy Robertson
Electric Department Manager
1419 W Hwy 25-70
Newport, TN
(423) 625 - 2809
Chris Archer
Interim Wastewater Department Mgr.
465 Lisega Blvd.
Newport, TN
(423) 625- 2847
Linten Atkins
Water Department Mgr.
170 Cope Blvd.
Newport, TN
(423) 625 - 2819
Sherry Frisbee
Manager Finance & Acct.
Donna Cureton
Purchasing Agent
Carmen Lichty
Customer Relations & Manager
170 Cope Blvd
Newport, TN
170 Cope Blvd
Newport, TN
170 Cope Blvd
Newport, TN
(423) 625 – 2845
(423) 625-2843
(423) 625-2822
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APPENDIX B
SAMPLE AUDITOR CONTRACT
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APPENDIX C
PRIOR YEAR ANNUAL REPORT
ANNUAL REPORT FOR 6/30/16