Horsemen Association Pre-Proposal Questions Final 12-20-12 A.pdf

2013-2015 Horsemen Association Audits Pre-proposal Conference Questions

December 20, 2012

1. Is there any information about the prior year audits, such as number of hours spent on each audit, fees, and copies of financial statements?

Response: The numbers of hours for the 2010 performance audits are as follows:

Meadows Standardbred Owners Association 141 hours Pa. Harness Horsemen’s Association 174.5 hours Pa. Thoroughbred Horsemen’s Association 293.5 hours Pa. Division Horsemen’s Benevolent & Protective Assoc. 302 hours

The costs relating to the financial statement audits are not available. The costs for the 2010 performance audit totaled $118,430 for all four Associations. The cost of the current performance audit is not yet finalized. The most recent publicly available financial statement and performance audits, for the year ended December 2010 and June 30, 2011, can be found at the following link:

http://www.agriculture.state.pa.us/portal/server.pt/gateway/PTARGS_6_2_75292_10297 _0_43/AgWebsite/Files/Publications/ReportingPackageDOAAudit.pdf

2. When are the entities ready for fieldwork this year?

Response: The winning bidder(s) will need to negotiate this with the associations.

3. Is this the first time this is going out to bid?

Response: This is the first time the Association financial statement audits have been bid.

Performance audits have been bid for the last two years.

4. Are the affiliates consolidated into the Association financial statements or are they audited and issued separately?

Response: The affiliates will be audited and financial statements issued separately.

http://www.agriculture.state.pa.us/portal/server.pt/gateway/PTARGS_6_2_75292_10297_0_43/AgWebsite/Files/Publications/ReportingPackageDOAAudit.pdf� http://www.agriculture.state.pa.us/portal/server.pt/gateway/PTARGS_6_2_75292_10297_0_43/AgWebsite/Files/Publications/ReportingPackageDOAAudit.pdf�

5. Who prepares the audit reports?

Response: The winning bidder(s) will need to negotiate this with the associations.

6. How many audit adjustments were made for each entity in the prior years?

Response: Information concerning the number of audit adjustments is not available.

7. What were the prior year audit fees for the entity's in the prior years?

Response: The costs relating to the financial statement audits are not available. The costs for the 2010 performance audit totaled $118,430 for all four Associations. The cost of the current performance audit is not yet finalized.

8. Can the prior auditors bid on the proposal?

Response: Prior auditors that are registered suppliers with the Commonwealth of Pennsylvania can bid on the proposal.

9. What assistance is provided to the auditor?

Response: The winning bidder(s) will need to negotiate this with the associations. The Office of the Budget, Bureau of Audits (issuing officer) will be available to address problems that arise as part of the status report process (RFQ – IV-5b)

10. Can we get copies of the prior audit reports?

Response: The most recent publicly available financial statement and performance audits, for the year ended December 31, 2010 and June 30, 2011, can be found at the following link:

http://www.agriculture.state.pa.us/portal/server.pt/gateway/PTARGS_6_2_75292_10297 _0_43/AgWebsite/Files/Publications/ReportingPackageDOAAudit.pdf

11. For financial capability can we submit tax returns?

Response: Tax returns may not be utilized as part of the financial capability submission.

http://www.agriculture.state.pa.us/portal/server.pt/gateway/PTARGS_6_2_75292_10297_0_43/AgWebsite/Files/Publications/ReportingPackageDOAAudit.pdf� http://www.agriculture.state.pa.us/portal/server.pt/gateway/PTARGS_6_2_75292_10297_0_43/AgWebsite/Files/Publications/ReportingPackageDOAAudit.pdf�

12. Any management letters issued?

Response: Information is not available regarding the issuance of management letters as part of the prior audits. The Office of the Budget has the expectation that management letters would be included as part of the current audit process.

13. Does the cost submittal require any detail of hours and rates to arrive at total fee?

Response: Detailed hours and rates are not required.

14. Will firms using a minority firm have any additional benefit in the proposal process?

Response: Yes, Prime contractors who utilize Small Diverse Businesses (SDB) and perform 60% of the work will be rated for their approach to enhancing the utilization of SDBs in accordance with the priority ranking listed in section III of this RFQ.

15. Are these audits performed under Government Auditing Standards and require internal control and compliance opinion?

Response: The audits will be performed in accordance with GAGAS and require internal control and compliance opinions (RFQ – Part IV – IV – 4 Tasks)

16. Under 4 PA C.S.A. § 1406(e), PA Division – HBPA prepares their statement of Racing Fund cash receipts and disbursements on the cash basis method of accounting. These statements are due no later than March 30th to the Gaming Commission. These statements are prepared on a calendar year (e.g. December 31st). Please confirm or amend this understanding. In addition, please clarify how these audits costs are to be presented in accordance with Appendix C “Cost and Price Analysis Format”.

Response: Audits of Associations using the calendar year (December 31) will be due March 31 of the following year. Audit of the Association using a fiscal year (June 30) will be due September 30th. 4 PA C.S.A § 1406(E) has been rescinded by Section 1701-O of the Fiscal Code. The Association financial statements should be prepared in accordance with GAAP. A copy of the revised Fiscal Code is included at the end of this document in Appendix A in conjunction with these questions. Please see the link below for the most current version of the Pennsylvania Gaming Control Board Regulations:

You should review the official version of the Regulations (Title 58 Pa. Code Part VII) at http://www.pacode.com/secure/data/058/058toc.html http://www.pacode.com/secure/data/058/058toc.html�

17. The PA Division – HBPA Health Benefit Plan is a December 31st year end. These financial statements are prepared on the modified cash basis method of accounting. Does the management of the benefit plan need to change their method of accounting to full accrual? Please clarify. In addition, this audit is typically performed in late April/early May. Please clarify when this audit is due, as it is not a June 30th year end.

Response: The annual financial statements of affiliates should be prepared in accordance with GAAP (Part IV – IV-4- A). In this instance when the audit years differ, the December 31st statements should be submitted no later than the due date of the Association financial statements or September 30th. The due dates for these audits do not impact other reporting requirements issued by the Pa. Gaming Control Board.

18. The PA Division – HBPA prepares its Association audit on the modified cash basis method of accounting. Please confirm these financial statements must be prepared on the accrual method of accounting.

Response: The annual financial statements should be prepared in accordance with GAAP (Part IV – IV-4- A).

19. Under IV-5 of the RFQ, the final reports must include at a minimum 5 separately defined schedules/information. Please clarify which report for Lot#4 these schedules/information should be included in (e.g. Association’s audit, GAGAS/Compliance audit, or benefit plan audit; or all three?)

Response: The schedules in section IV-5 relate to the audit of the Association, in accordance with section IV-4-D.

20. Please clarify how Appendix C “Cost and Price Analysis Format” should be presented when the management of Lot#4 prepares their own financial statements, schedules and working papers. This preparation by management will substantially reduce the number of hours for each audit engagement team.

Response: Each firm will have to determine the estimated costs to conduct the Association and Affiliate audits based on the best information available. A firm should evaluate numerous factors, including those identified above to determine the annual costs to perform the required audits.

21. Who should we refer to as the “proposed client” throughout the proposal: Commonwealth of Pennsylvania OR the Office of the Budget, Office of Comptroller Operations? I understand that reports will be issued to the Office of the Budget and each Horsemen’s Association but I was unsure who I should be addressing throughout as it appears that his was issued by the Office of the Budget, Office of Comptroller Operations on behalf of the

Commonwealth. So it would be my understanding that we should refer to the Commonwealth throughout. Is that a correct assumption?

Response: Please refer to the Office of the Budget throughout the proposal.

22. Our financials are confidential and while I know they will not be released to the public we are concerned about providing them on a CD-ROM or Flash drive. Would it be acceptable to provide them in a sealed envelope along with the technical submittals? I’m not sure if anyone else has a concern about this or not, but maybe you can share with me what the common practice is for a firm that doesn’t release this information publically.

We do not want to lose any points for not providing the information.

Response: Submitting financials in a sealed envelope along with the technical submittal is acceptable.

23. What is the due date for issuing the performance audit?

Response: The due dates for all reports are stated in Part IV Work Statement on pages 24 and 25 of the RFQ.

Due to the change in the fiscal code, there will not be a separate report issued for a performance audit.

24. What is the fiscal year used for the performance audits? Are they all December fiscal years as the reports issued for fiscal year end December 31, 2010? The report issued by Wessel & Company is dated April 18, 2012.

Response: Due to the change in the fiscal code, there will not be a separate report issued for a performance audit.

The second of the two annual financial audits includes an auditor’s report on compliance in accordance with GAGAS. Please refer to Part IV- IV-1b, Work statement on page 23 of the RFQ.

25. The Association audits are due within 90 days of the end of the fiscal year. Are the auditors allowed to request additional time to issue the reports?

Response: This deadline is required by statute. The Office of the Budget does not have the ability to grant an extension.

26. Will 1 (one) vendor perform the 4 (four) GAAP Audits for the Horsemen’s Associations and the performance audits? Will there be only 1 (one) vendor chosen for all the work?

Response: Firms are able to bid on one, two, three, or four of the lots. The evaluation criteria (RFQ Part III, III-3) will be applied to each lot. The possibility exists that one firm could perform all four audits (lots). The possibility also exists that four firms could perform the audits or any of the other possible combinations.

There is no performance audit requirement in the RFQ. The required audits are detailed in the RFQ (Part IV – IV1b)

27. Is there an estimate of hours spent on each lot for the GAAP and the GAGAS Audits?

Response: There is no estimate by lot of the number of hours that will be utilized to conduct the GAAP and GAGAS audits.

28. Will Self Certification under the Department of General Services meet the Small Business Criteria of the RFQ?

Response: No, All Offerors must meet the Small Diverse Business program requirements as defined in the RFQ.

29. Given the January 31st date for the decision of the RFQ, is there an opportunity to negotiate the due date for the December 31st financial audits?

Response: This deadline is required by statute. The Office of the Budget does not have the ability to grant an extension

30. Many of the responses to the Pre-Proposal questions require a need to negotiate with the Associations’. Will the auditors be provided with the appropriate contact information of the Associations’ prior to our proposal submission?

Response: Specific contacts within each of the Associations will not be made available as part of this RFQ.

31. Since the December 31, 2011 financial statements have been completed. Why are they not available for our review?

Response: As of this time, the December 31, 2011 financial statements are not considered public information.

32. The RFQ includes a requirement to provide additional schedules as requested by the Office of the Budget. Since the specific schedules have not been defined, how is the bidder supposed to quote on the part of the RFQ?

Response: The final presentation of the information/schedules in the audit reports will be determined at a later date. However, it is anticipated that the needed information for these presentations will be based on the additional information to be included in the final report as detailed in Part IV- IV-5d of the RFQ.

33. What is the total maximum number of points awarded in the selection process?

Response: The answer is 100% of the total points. The evaluation criteria and the percentage of total points for each criterion are detailed in the RFQ (Part III – III-3).

34. Is it permissible to quote fees on a 12/31 and a 6/30 basis for Lot #4?

Response: Appendix C requires a single cost be submitted for the two (2) required annual audits detailed in Part IV – IV-1b of the RFQ.

35. Is it permissible to quote audit fees based upon management preparing workpapers and financial statements versus management not preparing workpapers and financial statements?

Response: Each Lot should have the cost submitted based on Appendix C of the RFQ.

The schedule in Appendix C does not provide the opportunity for multiple bids per lot.

36. Has there been any issues meeting deadlines?

Response: The Office of the Budget is not aware of any instances where the auditee did not meet the required deadlines.

37. What accounting systems are being utilized?

Response: Information concerning the accounting systems in each of the Associations is not available.

38. Has there been any internal control deficiencies noted?

Response: The prior year performance audit and financial statement audits would provide the best available information on internal control related matters. The reports can be analyzed using the link in Question #1.

39. What is the level of experience of the accounting personnel?

Response: Information concerning the experience level of the accounting personnel is not available.

40. According to the RFQ, page 15, Section II-9, A-1: “A Small Diverse Business certified by BSBO as an MBE/WBE/VBE/SDVBE must provide a photocopy of their active BSBO certificate.” Letters of Certification by BSBO were issued to designate and recognize Small Business and Small Diverse Business status. With the new Self Certification approval; however, new certificates were not issued for MBE/WBE/VBE/SDVBE status although they are extended/recognized by the state and can be found on the state DGS website. According to the certification letter issued to our Small Diverse Business contractor from Curtis Burwell of the Bureau of Small Business Opportunities, “information regarding the products/services for which this individual has been certified has been electronically listed in the DGS database for use by all Commonwealth agencies.” BSBO has informed us that the Letter of Certification signed by Mr. Burwell is all that is needed for classification as a Small Diverse Business in PA.

Is it accurate for your review to solely provide the Letter of Certification from BSBO or should we also include screen shots from the DGS database on the internet to indicate our partner’s active WBE status given that new certificates have not been issued?

Response: Companies may provide either a copy of the active DGS certificate or the DGS letter verifying that they are a Small Diverse Business. Please note: the Small Business Procurement Initiative certificate and screen shots are not acceptable as proof of Small Diverse verification.

41. In the RFP page 7, you ask for CD/Flash Drives’. I-13. Proposals: To be considered, Contractors must submit a complete proposal to this RFQ, using the format provided in PART II, providing six (6) paper copies of the Technical Submittal and two (2) paper copies of the Cost Submittal for each Lot for which a proposal is being submitted, and two (2) paper copies of the Small Diverse Business Submittal for each Lot for which a proposal is being submitted. In addition to the paper copies of the proposal, Contractors shall submit two (2) complete and exact copies of the entire proposal (Technical, Cost and Small Diverse Business Submittals, along with all requested documents) on three (3) separate (one for each submittal) CD-ROM or Flash drives in Microsoft Office or Microsoft Office-compatible format. In the materials distributed at the pre-bid no CD/Flash Drives’ are mentioned. Please advise if you require CD/Flash Drives’ and the number of CD/Flash Drives’ you would like with each Lot submission. Based on the RFQ it is my understanding that you required the following for each lot submission:

• 2 technical proposal CD/Flash Drives’

• 2 cost proposal CD/Flash Drives’

• 2 small diverse business CD/Flash Drives’

For a total of 6 CD/Flash Drives’ per lot. Please confirm if this is correct.

Response: The cost, technical, and small diverse business submittals should be submitted on separate CD/flash drives for each lot. Part 1, I-13 of the RFQ indicates that three (3) separate (one for each submittal) CD/flash drives should be submitted. This requirement would apply to each lot the for which the contractor submits a proposal.

Appendix A

Effective: July 2, 2012

Purdon's Pennsylvania Statutes and Consolidated Statutes

Title 72 P.S. Taxation and Fiscal Affairs

Chapter 1. The Fiscal Code (Refs & Annos)

Article XVII-O. Audits

§ 1701-O. Audits of Race Horse Development Funds

The following shall apply:

(1) By December 31, 2011, and each December 31 thereafter, the Office of the Budget shall conduct a financial audit of all funds distributed under 4 Pa.C.S. § 1406 (relating to distributions from Pennsylvania Race Horse Development Fund) for the prior fiscal year. The audit shall include recommendations for changes relating to the maintenance, use or administration of these funds.

(2) The audits and audited financial statements required under this section shall be open to the public.

(3) The following apply:

(i) Each horsemen's organization shall, within 90 days after the end of the organization's fiscal year, prepare annual financial statements in accordance with generally accepted accounting principles for the horsemen's organization and all of its affiliates.

(ii) The financial statements required under subparagraph (i) shall be prepared beginning in the horsemen's organization fiscal year ending prior to June 30, 2011, and for each fiscal year thereafter.

(iii) The financial statements required under subparagraph (i) shall include additional information as necessary to reconcile the information in the financial statement to the amounts received by the horsemen's organization during the same fiscal year and as otherwise directed by the Office of the Budget.

(4) The office shall engage independent certified public accountants or actuaries to conduct the audit under paragraph (1) and to audit the annual financial statements and accompanying additional information filed under paragraph (3) for each fiscal year. The office shall provide copies of each audit to the persons listed in paragraph (5)(ii), (iii), (iv) and (v).

(5) Within ten days of completion of the audits under paragraphs (1) and (4), the horsemen's organization shall provide all financial statements, reports and additional information required under paragraph (3) to all of the following within 90 days of the end of the organization's fiscal year:

(i) The Department of Agriculture.

(ii) The chairman and minority chairman of the Community, Economic and Recreational Development Committee of the Senate and the chairman and minority chairman of the Gaming Oversight Committee of the House of Representatives.

(iii) The chairman and minority chairman of the Agriculture and Rural Affairs Committee of the Senate and the chairman and minority chairmen of the Agriculture and Rural Affairs Committee of the House of Representatives.

(iv) The Pennsylvania Gaming Control Board.

(v) The State Horse Racing Commission and the State Harness Racing Commission.

(6) All distributions under 4 Pa.C.S. § 1406 shall be suspended for any horsemen's organization that the office certifies is out of compliance with the requirements of this section.

(7) Each horsemen's organization shall cooperate fully with all audits under this section and shall reimburse the office for all fees and costs to administer this section.

(8) For the purposes of this section, the term “horsemen's organization” shall have the same meaning as defined under 4 Pa.C.S. § 1103 (relating to definitions).

CREDIT(S)

1929, April 9, P.L. 343, No. 176, art. XVII-O, § 1701-O, added 2011, June 30, P.L. 159, No. 26, § 12, imd. effective. Amended 2012, July 2, P.L. 823, No. 87, § 15, imd. effective.

HISTORICAL AND STATUTORY NOTES

Act 2012-87 legislation

Act 2012-87, § 15, in par. (1), substituted “the Office of the Budget” for “the Department of Agriculture, in conjunction with the Office of the Budget,” rewrote par. (2), which prior thereto read:

“(2) The audits and audited financial statements required under this section and 4 Pa.C.S. § 1406(e) for fiscal years ending prior to June 30, 2011, shall be open for public inspection and provided, within 60 days of the effective date of this section, to the persons listed in paragraph (5).”

; in par. (3)(i), deleted “Notwithstanding 4 Pa.C.S. § 1406(e),” preceding “each”; in par. (3)(iii), inserted “and as otherwise directed by the Office of the Budget”; rewrote par. (4), which prior thereto read:

“(2) The audits and audited financial statements required under this section and 4 Pa.C.S. § 1406(e) for fiscal years ending prior to June 30, 2011, shall be open for public inspection and provided, within 60 days of the effective date of this section, to the persons listed in paragraph (5).”

; in par. (5), in the introductory paragraph, inserted “Within ten days of completion of the audits under paragraphs (1) and (4),” in par. (5)(i) substituted “Department of Agriculture” for “department”; in pars. (6) and (7), substituted “office” for “department”; and made other nonsubstantive changes.

72 P.S. § 1701-O, PA ST 72 P.S. § 1701-O

Current through 2012 Regular Session Act 147