Questions for Auditing Services RFP
1. Why is the Authority soliciting for proposals at this time?
Present three-year contract expired with the conclusion of the 2010 fiscal year audit 2. How long has the current firm been performing auditing services for the Authority?
2002 fiscal year audit thru the 2010 fiscal year audit
3. Has a management letter of comments been issued in the last three years? Can we obtain a copy?
No management letter of comments has been issued in the past three years
4. Is the Authority aware of how many weeks the current firm typically would be on site and how many staff are on site during those weeks?
DRPA Audit: Approximately 8 weeks on-site
PATCO audit - PATCO audit - Approximately 3 weeks on-site
5. How many adjustments did the current firm propose in 2010? What was the nature of the adjustments?
Approximately 25, including those related to the implementation of GASB 53. Adjustments were primarily non-material adjustments to correct mis-postings in addition to GASB 53 entries.
6. Typically when is the A-133 report issued? A-133 is due September 30.
7. Have there been prior findings in the A-133 reports related to compliance and/or internal control over financial reporting?
No
Yes, every year.
9. Have there been any reports prepared with respect to a review of the Authority’s IT system?
No.
10. Are there any significant economic risk areas management is currently concerned with? No.
11. Were there any disagreements with the current firm? No.
12. Were there any unusual transactions (such as sales of capital assets, etc.) entered into in the current year or that may occur prior to December 31, 2011?
Closure of Cruise Terminal
13. When are the books closed and ready for audit? The RFP states that the Audit Report should be dated no later than May 15th. The 2010 Audit report was dated June 28th and the 2009 report was dated June 24th, were there extenuating circumstances that caused the later report dates for the most recent years?
There has been in a change in how the annual report is released to the public. The newly created Audit Committee has responsibility for reviewing/approving the results of the annual audit and for the release of the audited financial statements. This will require the DRPA to close its books earlier than in past years and has resulted in a more aggressive schedule.
Books will now be closed towards the end of February and available for audit early in March.
14. Does the Authority prepare the Schedule of Federal Awards? Yes
16. What have been the audit fees for the last three years?
$138,550, $143,400 and $148,500 for the independent audit services for DRPA/PATCO 17. Has the current firm been engaged to perform any additional projects in the last year?
None in 2011. During 2010 DRPA engaged auditing firm for two bond issuances.
18. If a proposing firm is unable to obtain the services and documents of an MBE or WBE who they contacted, does that significantly count against that firm?
This is one of the evaluation criteria, so a submitting firm without a MBE or WBE firm may potentially be assigned a lower score by any of the individual evaluators.
19. From a clarification standpoint – is the requirement for a 7% MBE contract and the 3% noted for a WBE contractor to include both, or is one or the other acceptable?
There are two goals in the RFP, one each for MBE at 7% and WBE at 3%. 20. How many major federal or state programs do they expect in 2011?
There are a number of existing multi-year grants, and the DRPA selectively applies for FTA federal grants, primarily for its PATCO operation and transit security grants as noted in the 2010 Single Audit.
21. Can you describe how DRPA’s Internal Audit Department currently provides support to its external auditors pertaining to (1) the audits of the financial
statements discussed in the RFP and (2) the other reports further discussed in the RFP. Does Internal Audit budget hours pertaining to time spent in direct
assistance to the external audit firm? Does Internal Audit perform an annual risk assessment? Can you describe more details about the management and staffing of the Internal Audit Department?
Currently Internal Audit does not supply support or assistance to the external auditors. Internal Audit reviews the internal control document provided by the external auditors. IA provides comments on the internal control document.
IA has not performed a comprehensive risk assessment. IA performs risk assessments tailored to the specific audit matter under review.
The management and staffing of the IA department cannot be determined at this time. The IA department will transform into the Inspector General Office’s when the new IG is selected. The new IG will determine the staffing level and the focus of the new department.
22. The RFP is requesting a three year fee quote. Can you describe DRPA’s process for discussing fee changes should there be changes in scope (for example, changes in regulation, accounting policies, significant changes in DRPA’s business)?
If a change in scope occurs during contract performance, the DRPA will ask the Auditor to submit a proposal for the added or deducted effort. The DRPA and the Auditor will negotiate the value of the proposal and a change order will be issued reflecting the change in scope and the equitable adjustment in Contract price.
23. Are the pension plans part of this RFP process and who currently is the auditor for these plans?
No audit of the pension plans is required within the scope of this engagement.
24. What is the process for putting together the annual comprehensive financial report? Please describe the auditor’s involvement in assembling/printing the CAFR.
The notes to the financial statements are pulled together simultaneously with the finalization of the audited financials. The Authority pulls together the MD&A, Letter of Transmittal. The Statistical Section is prepared by the auditors and DRPA staff and reviewed by auditor. There is no involvement of the auditor in the assembling/printing of the CAFR as the Authority prints the CAFR in-house.
25. On page 10, #8, the DRPA “…requires that the auditing firm show evidence that they have the necessary staff available in order to complete all aspects of the engagement per the Time Requirement set forth in Section IV of the RFP.” What type of evidence of staffing should be provided as part of the proposal?
26. On page 8 of the RFP, you mention an audit report on the “statement of revenues and expenses of PATCO” – however, PATCO is not listed as a separate fund on page 13. How are the revenues and expenses of PATCO separately tracked within the general ledger system?
PATCO has its own proprietary accounting system, whereas the DRPA utilizes the Banner financial system. PATCO’s financials are consolidated into the DRPA’s financials under its General Fund
27. The RFP notes that the independent auditor is to provide independent observation and “test-counting” of the annual physical inventory of materials at PATCO. Please describe the timing of the “test-counting” and independent observation of the annual physical inventory of materials at PATCO described on page 10 of the RFP (#6). What are the location(s) of the annual physical inventory? How long does the inventory process typically take? Describe the Authority’s inventory count and pricing procedures.
A perpetual inventory is maintained with a report produced as requested at any time. Annual physical inventory is conducted at PATCO, in Lindenwold, NJ.
A complete inventory will probably cover a period of about three to four days.
28. Has a SAS 115 letter been issued and can we obtain a copy? Will the Authority provide copies of all deliverables from the prior year, including the single audit reports, PATCO’s National Transit Database (NTB) report and the auditor’s opinion letter regarding
compliance with the regulations of the New Jersey Department of Environmental Protection as it relates to underground storage? Page 10 item D7 - please provide us a copy of the opinion letter relating to the certification with regulations of N J Department of Environmental Protection.
No SAS 115 letter was issued. Regarding the NTD report, please access
http://www.ntdprogram.gov/ntdprogram/ for more information.
A
sample copy of an opinion letter related to environmental compliance has
been supplied.
29. Will there be an opportunity to meet with the Authority prior to submission of our proposal?
30. Have there been any findings, weaknesses or deficiencies noted by the current auditor? No.
31. The RFP notes that the Authority’s draft financial statements and footnotes must be converted by the auditor to GASB 34 format. Describe the Authority’s financial close process and the “conversion” process to GASB 34 format. Does the Authority also prepare the statistical section for the CAFR?
DRPA quarterly financials are not prepared in a GASB 45 format. Prior auditors used our adjusted 12/31 trial balances and then they created the GASB 45 financial
statements to be included in our CAFR. The process is as follows:
DRPA closes its books for all accruals and all posting, while keeping books opens for adjustments. DRPA issues draft financial statements.
Auditor provides DRPA with adjustments for posting to its trial balance categories, officially closing the books. Once adjusted trial balances are completed within the Banner financial system, the auditor uses the trial balances and converts these into GASB 34 presentation statements.
Yes, the statistical section is prepared by the Authority, however, in recent years, the numbers have been linked up with auditor’s schedules.
32. A) Have there been significant activities and/or operational changes since December 31, 2010? B) Have there been or are there expected to be any significant transactions or events in FY 2011 that may impact the audit scope?
a. Closure of Cruise Terminal Operation
Capital Plan budget is $150 million plus, so capital spending is up significantly
b. None thus far
33. What were the number, nature and amount of audit adjustments posted?
Roughly 25 entries, primarily non-material corrections of misposting and a number of new entries related to the implementation of GASB 53.
34. When does audit firm typically meet with the audit committee?
met with the auditors on two occasions, one being the exit conference. For the 2011 audit, we expect that these meetings will be coordinated through a new Inspector General (not yet named). Our expectation is that, at a minimum, the audit committee will want to meet with the successful auditing firm prior to the start of the audit, at certain times during process, and at the exit conference, prior to its approval of the audited financial statements.
35. What was the composition of the audit engagement team in the prior year and length of time to complete field work?
DRPA: Approximately 8 weeks of field work for DRPA. PATCO: Approximately 3 weeks of field work
36. Were there any problems or disagreements between the Authority and the current auditors?
None
37. Has there been any material fraud noted in the Authority over the past five years? If so, please provide a brief description thereof.
No
38. What service organizations are being used? (i.e., Management of EZ Pass Accounts, Actuaries, Payroll, Third Party Administrators for post-retirement benefits, etc.).
a. ACS for E-ZPass processing b. NJ ETC for E-ZPass collections
c. PRWT for toll collection – weekends, holidays, etc.
d. Scibal, existing third party administrator for workers compensation e. Two current insurance brokers
f. One actuarial firm will be reviewing GASB 45 liability g. Transit Ambassadors – PATCO
h. Cubic – PATCO Fare Collection
Swap exposure
GASB 45 – OPEB liability
40. Has PATCO been assessed as a service concession arrangement? Will GASB 60 be applicable?
No. No.
41. Does the Authority maintain detail supporting its capitalized infrastructure assets, and accumulated depreciation? Is interest incurred during the construction period measured and included in the capitalized cost? Does the Authority report any intangible assets?
Yes.
Interest is not included in the capitalized cost. No
42. Will the Authority continue to hire a consultant to determine the effectiveness of its hedges in accordance with GASB 53? Have any additional swaps been terminated since 12/31/2010
Yes.
No, however the Authority is exploring partial termination related to its 1999 Revenue Bonds.
43. How does the Authority estimate its self-insured claims?
Yes, Based on General Counsel’s Pending Litigation Report and Scibal reports.
45. The RFP notes that the auditing firm must have experience in the “compilation” of Official Statements. Provide a definition of “compilation” of Official Statements as used in the RFP.
For any bond deal, our auditor must review interim unaudited financial statements and supporting schedules which are included in the Official Statement of the issue.
Typically this is done by reviewing trial balances and statements of revenues and expenses for both DRPA and PATCO.
46. The RFP notes that the Authority is to “rely on the auditors to ensure full compliance with these standards and with any newly established requirements.” Describe the Authority’s procedures regarding compliance with the standards.
It is the Authority’s expectation that its retained audit firm will keep abreast of any and all pronouncements which will affect the audit.
47. Are there any planned or expected derivative instrument terminations in FY 2011? It is unlikely that any terminations will occur in 2011, given the significant negative market valuation.
48. The footnotes in the 2010 Annual Report (page 54) indicate that “The Authority plans to begin funding an outstanding portion of the liability in 2011.” Has this occurred to date? If so, was an OPEB trust established? If so, has/will the discount rate used changed as a result of the funding?
Funding has not commenced.
RFP to establish an OPEB trust is in progress and it is expected that establishment of the trust will occur by year’s end.
The discount rate may change as a result of an actuarial study, which will commence once an actuarial firm is identified through the RFP process which is in progress.
49. Does DRPA use specialists in determining a) the valuation of its swaps and swaptions under GASB 53, b) the hedge effectiveness of its interest rate swaps (cash flow hedges) under GASB 53? If so, what specialists are used? If not, what methodologies/processes does DRPA use to evaluate valuation and hedge effectiveness?
effectiveness testing has also been performed by PFM for the fiscal years 2009 and 2010, and, we expect PFM to provide this for the current year (2011).
50. What actuary does DRPA use in evaluating the ARC and liability for its Postemployment Healthcare Plan under GASB Statement No. 45?
A RFP for actuarial services is in progress. DRPA has had two different companies perform the actuarial studies over the past several years.
51. Are there any other specialists routinely used by DRPA related to financial statement amounts? If so, please describe.
None
52. Can you please provide a copy of the 12/31/10 Single Audit report? Yes.
53. Are 2011 federal expenditures expected to be consistent with those for the year ended December 31, 2010? If not, what changes are anticipated?
Yes
54. Who typically prepares the Schedule of Expenditures of Federal awards, and when is it available for audit?
Senior Accountant and the schedule is available in early March
55. What impact (if any) will our response to the audit RFP have on DRPA’s consideration of our firm for the Forensic Audit RFQ to which we responded earlier this year?
The Forensic Audit RFP has not issued.
56. At what location is the audit generally performed? DRPA: One Port Center in Camden, NJ
PATCO: headquarters in Lindenwold NJ.
We will provide our 2010 Audit Report.
58. Page 9, item D1 - Approximately how many hours of special assistance relating to the Certificate of Achievement program were provided in the past
There was not a significant amount of hours required. The auditor reviews the previous year’s comments from the GFOA and assists DRPA staff in formulating responses and/or in implementing changes.
59. Page 23 item C2 - The second paragraph refers to Section II pages 3 -5 relating to separate fee components. Pages 3 & 4 are missing from the RFP. Please provide these pages and clarify the separate components for which fees should be disclosed in the proposal.
Please refer to pages 7 through 11 of the RFP.
60. Page 28 item IX – Does this mean all work papers prepared in connection with the audit are required to be copied and provided to DRPA?
No
61. Is incumbent audit firm permitted to propose.(Question 1 by Clifton CPA) Yes
62. Is payroll prepared in house or is payroll service (which one) used. How many employees.
Payroll is prepared in-house at both DRPA and PATCO locations. Presently there are four positions (one recently retired), including the manager of the Payroll function. Payroll reports to Jim White, Director, Finance.
63. On page 5 of the rfp it calls for 1 master and 12 copies of the proposal for submission, but on page 17 it calls for 1 master and 8 copies (see 2.a.). Can you clarify which is required? I am assuming that it is the 1 master and 12 copies.
64. Can you provide an example of a comfort letter that has been required for previous bond issues?
Not available.
65. Do you have any objection to the audit firm performing planning and interim audit procedures before year end?
