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of his or her knowledge, make the City Manager, Finance Committee and the City
Council aware of any variances in practice from these policies or any other
deviation from prudent financial practices in accordance with GAAP, the city
charter, state laws and/or ethics of the profession.

III. ACCOUNTING, AUDITING, AND FINANCIAL REPORTING

A. ACCOUNTING. The City is solely responsible for the reporting of its financial affairs,
both internally and externally. The City Manager is the City's Chief Fiscal Officer
and the head of the administrative branch of the City government. The City
Manager may delegate some or all of the financial administration but will maintain
supervisory authority over all functions as specified in the City’s Charter Article VII,
Section 68.

B. AUDITING. An independent certified public accounting (CPA) firm will perform
annual financial audits.

1) Qualifications of the Auditor. In conformance with the City's Charter and
according to the provisions of Texas Local Government Code, Title 4, Chapter
103, the City will be audited annually by outside independent accountants.
("auditor").

2) Auditor Repute. The auditor must be a CPA firm of good reputation and must
demonstrate that it has the breadth and depth of staff to conduct the City's
audit in accordance with generally accepted auditing standards and
contractual requirements. The auditor must be registered as a partnership or
corporation or certified public accountants, holding a license under Article
41a-1, Section 9, of the Civil Statutes of Texas, capable of demonstrating that
it has sufficient staff which will enable it to conduct the City's audit in
accordance with generally accepted auditing standards as required by the City
Charter and applicable state and federal laws.

3) Timing. The auditor's report on the City's financial statements will be
completed within 180 days of the City's fiscal year end.

4) Management Letter. The independent CPA firm shall provide a management
letter, if one is issued, no later than March 31 following the end of each fiscal
year. The auditor will prepare and will review the management letter with
Management and the Finance Committee. The Finance Director shall respond
in writing to the City Manager and City Council regarding the auditor's
management letter, addressing the issues contained therein. The Council shall
schedule its formal acceptance of the auditor's report upon the resolution of
any issues resulting from the review.

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