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HomeMy WebLinkAboutAuditor,BKD,proposalReceiving a Quality Audit with Industry Insight from an Experienced Advisor Truckee Donner Public Utility District BKDLLP CPAs & Advisors September 12, 2011 Mr. Robert Mescher Administrative Services Manager & Treasurer Truckee Donner Public Utility District 11570 Donner Pass Road Truckee, CA 96161 Dear Mr. Mescher: Leadership Square South Tower 211 N. Robinson, Suite 600 Oklahoma City, OK 73102-9421 405.842.7977 Fax 405.600.9799 www.bkd.com By demonstrating sound financial practices and providing reliable, high -quality water and power services with a customer -service focus, Truckee Donner Public Utility District (TDPUD) is clearly committed to remaining accountable to the community you serve. However, with the heavily regulated nature of the utility industry and rising energy costs, maintaining a financially sound organization and remaining up to date with ever -changing regulations can be challenging. In addition, TDPUD recognizes there are critical decisions to be made regarding the quantity of power generation, while maintaining competitive prices. Therefore, it is important TDPUD works with a CPA and advisory firm with the expertise and resources to provide quality audit services, as well as proactive communication and sound advice to help keep you current in industry trends, accounting standards and regulations. We believe BKD, LLP is that firm. As a specialized industry, TDPUD's selection of a quality firm that can be trusted and that has expertise in working with public utility districts cannot be taken lightly. As a top 10 CPA and advisory firm, BKD is committed to providing you access to advisors who are responsive year-round to help with audit, compliance and other matters related to TDPUD's unique operations. BKD currently works with approximately 280 utility clients. Based on our industry experience, our professionals can deliver timely and efficient audit services, as well as industry insight regarding the issues you face. Your proposed engagement team is equipped with knowledge and specialized skills and is ready to share best practices, offer ideas and provide alternative approaches to help ease the audit process. We are committed to becoming the trusted advisor you seek. We believe our proposal will help you select our firm for efficient and objective services delivered by experienced professionals. We will call you soon to answer questions you may have about this proposal, or you may reach us by phone or email as provided below. Sincerely, Roger J. Watton, CPA Partner 402.473.7600 rwatton@bkd.com Chad M. Moore, CPA Senior Manager 405.842.7977 cmoore@bkd.com experience BKD Praxi ty�: MEMBER GLOBAL ALLIANCE OF INDEPENDENT FIRMS Table of Contents ExecutiveSummary........................................................... 1 Our Understanding of Issues TDPUD Faces .......................... 1 TDPUD's Desired Outcomes ................................................ 1 Solutions for TDPUD........................................................... 2 BKD Is the Right Choice ..................................................... 2 WhyChoose BKD................................................................ 3 BKDDelivers Value............................................................ 3 Response to Request for Proposal ..................................... 6 Firm's Qualifications........................................................... 6 Your Proposed Engagement Team ...................................... 8 References & Representative Clients ................................. 10 Appendix..........................................................................12 Service Description........................................................... 13 Areas of Emphasis............................................................ 16 BKDat a Glance............................................................... 17 BKD PRIDE Values........................................................... 18 Inside Public Accounting Report ........................................ 19 Our acceptance of this engagement is subject to completion of our normal client acceptance procedures. BKD Upon acceptance, the actual terms of our engagement will be documented in a separate letter to be signed by you and us. All information contained within this proposal is proprietary and confidential. © 2011 Experience insight with a Not -for - Profit & Government Group that works with approximately 1,400 clients and has professionals trained in the industry. Executive Summary Citizens of Truckee and the surrounding area count on Truckee Donner Public Utility District (TDPUD) to act as responsible stewards of their valuable resources. To further your mission of increasing sustainable, affordable water and electric power resources, strategic planning is important. Timely and accurate audited financial statements are imperative to maintaining confidence in the management of funds. For more than 85 years, BKD, LLP has been working to provide our clients cut a clear path through accounting regulations and make the most out of every dollar. Our Understanding of Issues TDPUD Faces Our work with approximately 1,400 government and not -for -profit clients across the country can provide TDPUD insight into issues similar entities face. We understand that as a publicly owned utility, you must use your limited resources wisely and cannot afford to miss potential cost -saving ideas. In addition, as you consider increasing the quantity of power generation, you do not want to risk losing your competitive rates. With so much at stake, you do not want to wonder whether your CPA and advisory firm has the utility expertise and knowledge of complex accounting issues and industry challenges to effectively address the issues you face. Working with inexperienced or inaccessible advisors could lead to untimely audit reports, missed opportunities or possible noncompliance with regulations that can ultimately affect the perception of your financial accountability. Without financial transparency, you could face public scrutiny and jeopardize your trusted reputation with those you serve. TDPUD's Desired Outcomes TDPUD wants accurate audit services from a nationally recognized CPA and advisory firm to help you maintain financial transparency. You also want: ♦ Timely and quality services delivered by a trusted team of advisors with significant government and utility experience ♦ Year-round communication and guidance regarding industry regulations and issues, including appropriate use of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 980, Regulated Operations. ♦ Suggestions to help you make the most of limited resources, with ideas aimed at stretching your dollar ♦ An experienced team of advisors on site Solutions for TDPUD TDPUD has requested information and a fee quote for a financial statement audit for years ending December 31, 2011, 2012 and 2013. Our experience and approach to the audit process is designed to deliver added value and timely advice. Your proposed engagement team knows public utility districts are unique entities that require an understanding of a number of accounting and reporting nuances. We have the expertise to help you navigate through the complex operating and compliance environments with which you are confronted. In addition, we believe open communication is crucial to a strong working relationship with TDPUD. BKD will communicate proactively with you on changes in standards, law and regulations and provide you with a flexible and efficient audit process. Our team will look beyond your numbers to bring proactive solutions to the challenges TDPUD faces. Please see the Service Description section of this proposal for a detailed explanation of our financial statement audit service approach. BKD Is the Right Choice We believe BKD is the right choice to provide TDPUD with audit services because, in addition to quality services, we can provide: ♦ Utility industry expertise ♦ Timely delivery of audit to help improve confidence in financial statements ♦ Assistance demonstrating financial accountability ♦ A serious focus on quality ♦ A fresh look from an experienced team ♦ Proactive planning and communication ♦ Unmatched client service After reviewing our proposal, we are confident you will find BKD is well qualified to provide professional services to TDPUD. Beyond providing these services, we believe you also will find BKD is the trusted advisor you can depend on to provide value for years to come. � I 1 ZI 280 Experience guidance with a top 10 firm that works with approximately 280 utility clients. Why Choose BKD BKD Delivers Value It is more important than ever to monitor expenditures and get exceptional value for your investments. However, informed consumers understand value is about more than just price. Value from a professional CPA and advisory firm is about the quality of the work and the merit of the advice. Expect BKD's work to be accurate and insightful. We stand behind it. Our Public Company Accounting Oversight Board (PCAOB) and peer reviews demonstrate the firm's record of excellence. As one of the 10 largest CPA firms in the country, we offer a network of national support and resources. BKD is large enough to help TDPUD meet your goals. At the same time, we pride ourselves on hard work and low overhead, which keeps our fees competitive. With our reputation, size, service and experience, you can consider us a good value. Utility Industry Expertise BKD provides approximately 280 utility companies with audit, financial reporting, tax, consulting and small business services. Approximately 100 advisors across the firm have utility experience and understand the challenges in the power and utility industries. We will provide professional expertise and support to help you stay abreast of the issues affecting the industry. Our dedication to your highly specialized industry is further demonstrated by our active involvement in a number of national and state municipal and utility organizations, including the American Public Power Association and National Rural Electric Cooperative Association. Timely Delivery of Audit to Help Improve Confidence in Financial Statements Performing your audit according to your timeline and providing timely drafts and audit reports are essential to your operations and among the expectations you have of your auditor. When these key items are delivered, confidence is established in the technical ability and professionalism of your service team. We are committed to a process that addresses issues quickly, evaluates the effects of new standards and establishes a plan to avoid unwanted surprises. Planning with a team approach that includes all applicable parties should allow for a successful transition and timely project completion. Responsive reliability is one of our client service standards and meeting your timeline is something you can expect from BKD. Assistance Demonstrating Financial Accountability Citizens of Truckee count on the management and the board of TDPUD to behave as stewards of their valuable resources. Utility districts have a fiduciary duty to be financially accountable to its constituents and the public. Timely and accurate audited financial statements are key to demonstrating your transparency and stewardship of funds. With BKD, you get a reputable, top 10 firm that is able to leverage best practices learned from working with other utilities to help increase efficiencies and identify areas that may require attention. A Serious Focus on Quality People often underestimate the value of a quality audit, but quality has never been more important than in today's environment. Recent nationally publicized audit failures, numerous fraud and abuse scandals and frequently changing auditing, accounting and financial reporting standards have resulted in a heightened level of scrutiny for public utility districts. Given this greater attention, you will benefit from a firm whose approach to service is designed to help keep you out of the media. BKD's commitment to audit quality means TDPUD is getting what they pay for —an audit performed by a firm with a track record of high quality as demonstrated by our peer review and PCAOB reports. We are proud of the findings from these reviews, which indicate our process works. A Fresh Look from an Experienced Team Our engagement team will work with you to identify areas you believe may warrant a fresh look. The key to a successful transition is proper planning and communication during the information -gathering process. We will get to know your financial team members as soon as possible with minimal disruption to your operations. As a result, potential issues are identified and resolved before they become critical business issues. Proactive Planning & Communication One of the first things you will notice about BKD is that our industry professionals are in communication with you or in your offices frequently. We pay careful attention to the challenges you face to offer timely, proactive advice resulting in a better client relationship. This knowledge sharing between your team and ours can be beneficial in determining effective and proactive solutions. In addition, to keep you informed about emerging issues in the accounting industry, we frequently provide special webinars, alerts, updates, seminars and articles. Recent topics include: ♦ Auditing at the Speed of Business ♦ Does Changing Your Institution's Fiscal Year -End Make Sense? ♦ Effects of U.S. Debt Downgrade 4 BKD "Heartland hired BKD, LLP after using a Big Four firm for many years. Heartland has experienced BKD's commitment to excellence first hand and our Board of Directors and staff are glad we transitioned to BKD. BKD's personnel have brought a level of utility experience, integrity and professional demeanor at standards we did not experience before. BKD responds to our questions in a timely manner and openly discusses accounting treatments to ensure the best course of action is taken and accounting standards met. Heartland looks forward to a continued successful relationship with BKD and highly recommends them to anyone in the utility industry. " Mike Malone Financial Operations Manager Heartland Consumers Power District Madison, South Dakota Unmatched Client Service You want trusted advisors who will deliver exceptional client service, focus on your needs and take the time to address your unique challenges. BKD understands. We take our commitment so seriously we have penned our five standards of unmatched client service and supporting guidelines in The BKD Experience: Unmatched Client Service, a book that sets the firm's expectations for serving clients. Below is a summary of those five standards. Integrity First We work hard to do what is right for you. You can rely on us to tell you what you need to hear. True Expertise From BKD, you can expect trained, capable staff and a high level of supervision by partners and experienced personnel. Professional Demeanor You can depend on prepared and attentive advisors to help meet your needs and provide new ideas. Responsive Reliability Accurate and thorough work, combined with timely delivery, is what you require, and at BKD, we would not want it any other way. Principled Innovation We want you to succeed. For TDPUD, that means looking for new ideas to streamline a process, to better document work, to train your own staff and to improve your effectiveness. Response to Request for Proposal For your convenience, we have structured our proposal according to the questions in your Request for Proposal (RFP). We believe our proposal will demonstrate our qualifications to serve TDPUD. Firm's Qualifications A. A description of the audit firm's qualifications More than 420 governmental entities nationwide depend on BKD as their CPA and advisory firm of choice. With approximately 180 advisors in BKD National Not -for -Profit & Government Group, we have the experience and commitment you require as you look for help enhancing your performance. Our Clients & Services Expand yoi your missic Develop strong compliance programs and find solutions for tough issues Keep your vitai sysiems ano data safe Gain operational efficiency by con- trolling the ebb and flow of your business cycle rnance orting Geographically spread throughout the U.S., our significant client base reflects the diversity of governmental entities, both in size and types of organizations. The following graphs demonstrate the clients we serve and the services we provide. BKD Not -for -Profit & Government Clients Government 41% Education 29% Social Services 6% Museums & Misc. 1% Membership Religion 5% Organizations 8% Social Advocacy 1% Grantmaking &Gifting 9% BKD Not -for -Profit & Government Services Accounting Outsourcing 3% Consulting 7% Tax Services 9% Audit & Assurance 81% 6 BKD Specialized Skills & Expertise BKD National Not -for -Profit & Government Group advisors offer specialized skills and expertise necessary to help you achieve your objectives. Our advisors include: ♦ Auditors and internal auditors ♦ A-133 audit professionals ♦ Tax advisors ♦ Internal controls and risk assessment advisors ♦ Employee benefit plan professionals ♦ Form 990 specialists ♦ Finance advisors ♦ Litigation and support professionals ♦ Forensic advisors ♦ Strategic planners ♦ Information technology professionals Our Commitment to Government Our commitment to the industry accounting profession also expands to involvement on National Industry Committees, such as the American Institute of Certified Public Accountants (AICPA) and Governmental Accounting Standards Board (GASB). Andy Richards, senior manager in our Little Rock office, was involved with governmental accounting standards -setting process as a practice Fellow with the GASB in Norwalk, Connecticut. He is a member of the AICPA State & Local Government Expert Panel, which identifies state and local government financial reporting and auditing issues and works to achieve resolutions benefiting the public interest. BKD National Not -for -Profit & Government Group advisors also actively serve as participants, exhibitors, speakers and sponsors in regional and national associations for government and not -for -profit organizations, including: ♦ American Public Power Association (APPA) ♦ American Society of Association Executives (ASAE) ♦ Association of Government Accountants (AGA) ♦ Government Finance Officers Association (GFOA) ♦ National League of Cities (NLC) ♦ National Society of Accountants for Cooperatives (NSAC) BKD 7 Your Proposed Engagement Team B. Biographies of the key personnel The most critical factor in providing you high -quality service is choosing your engagement team. We take team selection seriously and have the appropriate team of advisors to meet your needs. Engagement Team Organizational Chart Senior Manager a ner Audit Senior Manager uality Control Partner upervi. or enior Audit Supervisor Audit Senio Engagement Team Experience Roger I Watton, CPA Partner Roger is regional industry leader for BKD National Not -for -Profit & Government Group. He has more than 35 years of experience in accounting, audit and consulting for not -for -profit and governmental entities. He has served as the engagement partner on a variety of engagements and currently spends more than 50 percent of his time working in the not -for -profit and government industries. He has been a presenter and speaker on a variety of not -for -profit and government -related topics and attends several not -for - profit and government seminars and conventions annually. Roger is a member of the American Institute of Certified Public Accountants and Nebraska Society of Certified Public Accountants. He is involved with the League of Nebraska Municipalities, Government Finance Officers Association and National League of Cities. He is a graduate of University of Nebraska -Lincoln, with a B.S. degree in business administration. Chad M. Moore, CPA Senior Manager Chad is a member of BKD National Not -for -Profit & Government Group and BKD Oklahoma's commercial enterprises team. He has more than 11 years of experience in audit and consulting services for electric utilities, manufacturers, state and local governments and not -for -profit organizations. He also helps BKD with firmwide internal training, including Camp BKD for new professionals and government and not -for -profit instruction for new in - charges. He is a member of the American Institute of Certified Public Accountants, 8 BKD Oklahoma Society of Certified Public Accountants, Government Finance Officers Association and National Society of Accountants for Cooperatives. Chad presents to various organizations on accounting and industry -related matters facing electric utilities and is licensed in Oklahoma. Chad is actively involved in the community through his participation in numerous charitable and civic organizations. He also received the local office Achieving Client Excellence Award for providing unmatched client service. He is a 2001 graduate of Northwestern Oklahoma State University, Alva, with a B.S. degree in accounting. Douglas E. Tye, CPA Partner Doug is accounting and auditing director for BKD's Oklahoma offices. He assists with recommended improvements to internal controls, selection of accounting methods, budgets and cash flow projections, bond issues and debt refunding. He has more than 30 years of experience providing audit, accounting, consulting and tax services to clients in the governmental and not -for -profit, health care and commercial enterprises industries. Doug is a member of the American Institute of Certified Public Accountants, Oklahoma Society of Certified Public Accountants and Oklahoma Chapter of the Healthcare Financial Management Association. He has served on the boards of various charitable organizations in Tulsa, including Big Brothers Big Sisters and the Arthritis Foundation. He is a graduate of University of Missouri, Columbia, with a B.S.B.A. degree in accounting. James M. Gripka, CPA Supervisor James has four years of in -charge experience providing audit and attestation services to clients from various industries, including manufacturers, government agencies, employee benefit plans, electric cooperatives and not -for -profit entities. He is a member of the American Institute of Certified Public Accountants and the Oklahoma Society of Certified Public Accountants. James is a 2006 graduate of University of Central Oklahoma, Edmond, with a B.S. in accounting. Caleb K. Bachelor, CPA Senior Caleb has more than two years of experience in audit and consulting services for electric utilities, manufacturers, state and local governments and not -for -profit organizations. He also helps BKD with firmwide internal training, including Camp BKD for new professionals and is actively involved with the BKD Oklahoma recruiting team. He has received computer -assisted auditing techniques training and is an ACL software champion for the Oklahoma City and Tulsa offices. Caleb is a member of the American Institute of Certified Public Accountants and Oklahoma Society of Certified Public Accountants. He is licensed in Oklahoma. He is a 2008 graduate of The University of Oklahoma with a B.S. degree in accounting and an M.Acc. References & Representative Clients C. At least ten references of past audit experiences in the electric and/or water public utility industry References Our clients are our best ambassadors, and we encourage you to contact them about their satisfaction with our services. The following public utility clients have consented to discussing BKD's services and service delivery with you at your convenience. American Public Energy Agency Roger Mock President & Chief Executive Officer 402.438.1177 Lincoln, NE Central Plains Energy Project James Knight Project Manager 402.504.7771 Omaha, NE City of Brookings Municipal Utilities Mr. Steve Meyer General Manager 605.692.6325 Brookings, SD City of Lincoln Nebraska Mr. Don Herz Finance Director 402.441.7411 Lincoln, NE City Utilities of Springfield, Missouri Mr. Michael Finch Chief Financial Officer 417.831.8544 Springfield, MO Heartland Consumers Power District Mr. Mike Malone Financial Operations Manager 605.256.6536 Madison, SD Municipal Energy Agency of Nebraska Mr. Ron Haase Director, Finance & Accounting 402.474.4759 Lincoln, NE NMPP Energy Mr. Ron Haase Director, Finance & Accounting 402.474.4759 Lincoln, NE Oklahoma City Water Utilities Trust Mr. Billy Little Trust Accountant 405.297.2800 Oklahoma City, OK Oklahoma Municipal Power Authority Mr. Bruce Jackson Controller 405.340.5047 Edmond, Oklahoma Pedernales Electric Cooperative Ms. Monica Williams Accounting Director 830.868.4940 Johnson City, TX Public Power Generation Agency David Dietz Project Manager 402.474.4759 Lincoln, NE 10 BKD Representative List of Clients BKD is proud to work with other electric, natural gas, telecommunications/broadband and water utility clients, including: American Public Energy Agency - Lincoln, Nebraska Carroll Electric Cooperative Corporation — Berryville, Arkansas Central Plains Energy Project — Omaha, Nebraska City of Grand Island Electric Department — Grand Island, Nebraska City of Grand Island Water & Wastewater Utilities — Grand Island, Nebraska City of Lincoln Water & Wastewater Utilities — Lincoln, Nebraska City of Seward Utilities — Seward, Nebraska Electric Cooperatives of Arkansas — Little Rock, Arkansas Heartland Consumers Power District — Madison, South Dakota KAMO Electric Cooperative, Inc. — Vinita, Oklahoma Midwest Energy, Inc. — Hays, Kansas Municipal Energy Agency of Nebraska — Lincoln, Nebraska Municipal Energy Agency of Mississippi — Jackson, Mississippi National Public Gas Agency — Lincoln, Nebraska Nebraska Educational Telecommunications — Lincoln, Nebraska Nebraska Municipal Power Pool — Lincoln, Nebraska Pedernales Electric Cooperative, Inc. — Johnson City, Texas Public Alliance for Community Energy — Lincoln, Nebraska Public Power Generation Agency — Lincoln, Nebraska BKD 11 Experience reach from a top -tier firm serving clients in all50 states and more than 40 countries. Appendix 12 BKD Service Description Financial Statement Audit BKD's audit approach focuses on areas of high risk —the unique Our Five -Phase characteristics of TDPUD's operating environment, the design Approach to Financial effectiveness of your internal controls and your financial statement Statement Audits amounts and disclosures. The objectives: to express an opinion on the conformity of your financial statements, in all material respects, with accounting principles generally accepted in the U.S. of America (U.S. ' GAAP) and determine, within a reasonable degree of certainty, whether error or fraud has caused the financial statements to be materially 1 misstated. Our audit will be performed in accordance with auditing standards Risk Assessment generally accepted in the U.S. and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the U.S. Below is our five -phase approach to your financial statement audit. We Fieldwork, will work with you to develop an audit plan tailored to your specific FiiitWer4udit Procedures circumstances and risks. Phase 1: Planning y BKD will work closely with your Board of Directors early during the '' • • audit, as required by auditing standards, giving the group an overview of the scope and timing. We ask that your Board of Directors let us know about any risk issues they are aware of, any areas where they would like us to perform additional procedures or anything else material to the audit. Materiality BKD has a defined methodology for utility clients that does not simply consider net income, but focuses on total assets and total revenue, to scope our audit approach, to evaluate actual or potential errors and to develop audit samples. In addition, we will seek the input of your Board of Directors to further direct our testing procedures prior to finalizing our scope. Phase 2: Risk Assessment BKD will follow standards established by the Auditing Standards Board of the American Institute of Certified Public Accountants (AICPA). These auditing standards affect the amount and type of information BKD will gather to perform your audit. We will: ♦ Obtain an understanding of your business and business environment, significant risks you face and how you mitigate those risks. This will include examining how you measure and manage financial performance, as well as your internal control over financial reporting. ♦ Evaluate where your financial statements might be susceptible to material misstatement or fraud. ♦ Consider if internal controls have been implemented and assess the general controls around your information technology area or department. BKD 13 We will consider your internal controls documentation and ask you to complete various questionnaires for significant areas, such as utility plant cash inflows and cash outflows. In addition, we will observe transactions or prepare or review narratives describing the steps taken during various phases of your operating cycles. We expect to interview your personnel and review prior board meeting minutes as part of our information -gathering process. Phase 3: Fieldwork, Testing & Further Audit Procedures We will design our fieldwork procedures based on our consideration of your internal control system and will take advantage of the strengths in your system. During fieldwork, we will: ♦ Assess risks of material misstatement for the most significant financial statement amounts and disclosures ♦ Ask management to further explore and clarify any potential misstatements, if any, we have identified ♦ Evaluate the materiality of those misstatements, if applicable ♦ Conclude that all identified risks of material misstatement have been addressed ♦ Test compliance with certain provisions of laws, regulations, contracts and grant agreements ♦ Hold a formal exit conference with your management to share findings and preliminary deliverables BKD also will perform additional tests from these alternatives: ♦ Test key items — Some items within an account may be large enough by themselves to involve significant risk of material misstatement. These key items can be audited individually. ♦ Sampling — A detailed audit of representative individual items (a sample) selected from a population. ♦ Analytical procedures — Taking a closer look at a grouping of information by examining it as it relates to other accounts, historical trends or other measures. Phase 4: Report & Communications Delivery Our commitment to a smooth engagement also includes the timely delivery of our completed report. After completing our fieldwork, we generally deliver our audit report and other communications within three to four weeks. To make sure you get the results you expect, our quality control professionals will review and, if needed, further challenge the work performed. We know a great deal of audit information often comes from third parties. Sometimes information from those parties is not received on time. To keep your report timely, we will keep you informed and may ask your help getting third -party information. Phase 5: Presentation to Board of Directors You may want to formally share your audit results with your Board of Directors. We can help make a presentation to your Board of Directors, answer their questions and help them better understand the financial statements. The Auditing Standards Board's Statement on Auditing Standards No. 114 (SAS 114), The Auditor's Communication With Those Charged With Governance, establishes standards and provides guidance on the auditor's communication with those charged with governance. We will discuss its implications with you. 14 BKD In addition, if applicable, we will issue a SAS 115 report to management and those charged with governance. SAS 115, Communicating Internal Control Related Matters Identified in an Audit, requires we report any significant deficiencies or material weaknesses identified during the audit. Timing & Your BKD Team Overall, we plan to spend about two weeks in your office working, approximately one week for interim/planning and one week for final fieldwork at year-end. We will coordinate the scheduling of your audit with you to both accommodate your schedule and to allow for the timely completion of deliverables. Your BKD team will include an experienced engagement in -charge and one or two staff members, who will be on site performing further audit procedures or getting the information we need to support our report. BKD 15 Areas of Emphasis Although we do not anticipate these areas to be potential audit problems, based on our past experience with similar clients and a review of your financial statements, we consider the following areas to have greater sensitivity or risks for TDPUD audit. BKD's approach to those areas will likely include: Electric Plant in Service — Due to the significant amount of capital assets held by TDPUD, we believe this would be an area of focus in conducting our audit. This is a significant audit area due to the risks associated with the capitalization of costs, impairment issues with long-lived assets and varying depreciation methods used under Accounting Standards Codification 980, Regulated Operations (ASC 980). We employ a variety of audit procedures in this area, including vouching capitalized costs and searching for events or circumstances, which would indicate potential impairment and comparing depreciation methods used against other alternative methods for reasonableness. Debt — Long-term debt is an area of greater emphasis for many public power entities, which require significant issuances in relation to their investments in generating facilities. This audit area carries varying risks for utilities due to certain complex provisions and terms included within the bond indentures and due to the disclosures required by recent accounting pronouncements. Procedures we perform in this area include confirming the balances and terms of debt agreements with outside third parties, reviewing debt agreements for debt covenants and callable provisions and testing the presentation and classification of debt balances in the financial statements and related footnotes. Revenue Recognition & Regulatory Accounting — Professional standards include a rebuttable presumption that for each audit, there is a risk of material misstatement due to fraud relating to improper revenue recognition. For a ratemaking entity like TDPUD, this includes the recognition of deferred revenues and expenses in accordance with ASC 980. Our approach is to gain an understanding of revenue recognition criteria and policies and then perform a variety of inquiry, analytical and substantive audit procedures to confirm our understanding. We also review the types of revenues and costs that are being deferred, the justification for deferral and the presentation and disclosure of regulatory assets and liabilities within the financial statements and footnotes. Risk of Management Override of Controls — Statement on Auditing Standards (SAS) No. 99, Consideration of Fraud in a Financial Statement Audit, requires that auditors consider this area to be a risk of material misstatement in every audit. Procedures include interviews of selected individuals in the organization, an audit team brainstorming session and the selection and application of unpredictable audit procedures. Related -Party Transactions — All financial transactions with participants are defined by standards to be related -party activity, and therefore require disclosure, regardless of whether monetary values have been assigned to those transactions. We understand TDPUD strives for clarity and transparency in all reporting, particularly these related -party contracts and agreements. We will incorporate into our audit program a careful review of all contracts and business agreements with your participants and agree the monetary amounts assigned to these transactions to your financial statements, as well as, discuss appropriate disclosures with management and the Board of Directors. 16 BKD BKD at a Glance experienceBKDLLP CPAs & Advisors Clients - Private and publicly traded companies, governmental entities, not -for -profit organizations and individuals Service Mix Total Personnel - Approximately 2,000 Consulting 23 /o Partners & Principals - Approximately 250 Net Revenues -Approximately $402 million Fiscal Year -End - May 31 Tax 29% Founded - 1923 Locations - 30 offices serving clients in all 50 states and internationally Assurance & Accounting Outsourcing 48% Client Service -The BKD Experience is a promise of unmatched client service brought to you by approximately 2,000 CPAs, advisors and dedicated staff who take your business personally. International Solutions - The firm is the largest U.S. member of Praxity, A15BL, a global alliance of independent firms serving clients in more than 80 countries. We offer multinational clients a gateway to the global marketplace with services delivered by alliance firms committed to the highest standards required in international business. Professional Affiliations - BKD is a member of the American Institute of Certified Public Accountants (AICPA) and its three quality centers: Center for Audit Quality, Employee Benefit Plan Audit Quality Center and Governmental Audit Quality Center. BKD is registered with the Public Company Accounting Oversight Board (PCAOB), which is required to serve as an independent auditor of public companies. BKD audits approximately 80 U.S. Securities and Exchange Commission registrants, including approximately 30 benefit plans. Mission Statement -The mission of BKD is to always strive for excellence in providing services to clients, create rewarding career opportunities and maintain sound professional, business and financial standards. 2000 ?he BKD Experience is a promise of unmatched client service brought to you by approximately 2,000 CPA, advisors and dedicated staff'who take your business personally. BKD 17 BKD PRIDE Values erience What's important to you? A commitment to excellence? Independence and objectivity? A broad skill set? Exceeding expectations? At BKD, these are all essential. That's why every day you can see our partners and employees "living the PRIDE." These values - passion, respect, integrity, discipline and excellence - are the hallmarks of BKD and guide us as we provide solutions for your business and financial needs. Experience what BKD PRIDE values can mean for you. PASSION • Passion for service to others • Passion for making tomorrow better than today Experience how our dedication and enthusiasm for making tomorrow better than today can help you make informed decisions to improve business and financial outcomes. RESPECT ■ • Respect for the differences that make our team strong • Respect for our legacy and the benefits of change Experience how our respect for diversity can provide a variety of skills and talents to meet your needs. Respecting the lessons of our legacy and yours, we can help you capitalize on the opportunities change inevitably offers. INTEGRITY • Integrity to do the right thing • Integrity to be objective and independent Experience how our integrity and objectivity can help you make smart business decisions. You want an advisor to tell you what you need to know, not just what you want to hear. DISCIPLINE • Discipline in process and innovation • Discipline to balance professional and personal commitments Experience how our well -established protocols and low -risk approaches can help resolve issues 7b3and advance your goals. EXCELLENCE • Excellence in skills and competencies • Excellence in our quest to be the best Experience how our ambition and knowledge, commitment to lifelong learning and drive to improve technical and analytical skills can work to consistently surpass your expectations. 18 BKD Inside Public Accounting Report Public P�K�[B � Accounting Aln�s rnemmpennveaava eageror—unti.3 r—lesaerzxt 19V August 2o,0 Volume 24, Number 8 INSIDEPUBLIC t THE ,, TOP THE LARGEST ACCOUNTING RANKED BY U.S, NET .. 0, FIRMS FIRMS IN THE U.S. REVENUE ,. 1 1 oeloitte LLP & Subsidiaries I New York Barry Salzberg 100 5110 $10,938,000,000 2 2 Ernst & Young LLPI 1 New York James S. Turley 80 6109 $7,620,000,000 3 3 PricewatediouseCoopers LLP 1 New York Robert Moritz 76 6109 $7,369,000,000 4 4 KPMGI LLP 1 New York Timothy P. Flynn 88 9109 $5,076,000,000 C. E. Andrews 5 5 RSM McGladrey Inc. and McGladrey & Pullen LLP2 i Minneapolis 88 4110 $1,378,867,000 David Scudder 6 6 Grant Thornton LLP 1 Chicago Stephen Chipman 52 12109 $1,147.809,000 CBIZ Inc. & Mayer Hoffman McCann PC41 Dave Sibits 7 8 144136 12I49 $599,270A00 Cleveland 1 Leawood, Kan. Bill Hancock 8 7 BDO USA LLP31 Chicago Jack Weisbaum 39 6110 $585,000,000 9 9 Crowe Horwath LLP I Oak Brook, III. Charles M. Allen 26 3110 $481,292,473 11 11 Moss Adams LLP I Seattle Rick Anderson 18 12109 $322,000,000 12 12 Plante & Moran PLLC 1 Southfield, Mich. Gordon E. Krater 20 6/10 $296,000,000 13 14 Clifton Gunderson LLP 1 Milwaukee Krista M. McMasters 41 5110 $241,008,817 14 17 Baker Tilly Virchow Krause LLP I Chicago Timothy Christen 11 5110 $238,000,000 15 20 Marcum' LLP! New York Jeffrey M. Weiner 17 12109 $233,754,427 16 15 J.H. Cohn LLP 1 Roseland, N-J. Thomas J. Marino 10 1110 $232,358,000 Anthony Frabottal 7 16 UHY Advisors Inc bChicago Rick Stein 18 12I09 $228,275,400 18 19 LarsonAllen LLP I Minneapolis Gordon A. Viere 19 10109 $217,866,000 19 13 Reznick Group PC I Bethesda, Md. Kenneth Baggett 10 5110 $195,500,000 20 18 Dixon Hughes PLLC 1 High Point, N.C. Ken Hughes 21 5110 $194,000,000 21 361 ParenteBeard LLC 1 Philadelphia Robert J. Ciaruffoli 25 12109 $17l,449,771 Steven Kass 22 21 Rothstein Kass 1 Roseland, N.J. Howard Altman 8 12109 $169,475,000 23 22 Eide Bally LLP 1 Fargo, N.D. Jerry A. Topp 19 4110 $151,798,263 24 23 Eisner LLP 1 New York Charles Weinstein 3 1110 $134,729,000 25 24 1NeiserMazars LLP' I New York Douqlas A Phillips 5 12109 5124,40C,000 © 2010 INSIDE Public Accounting. Reprinted with Permission. www insidepublicaccounting.com BKD 19