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HomeMy WebLinkAboutAuditing Services Contract December 31, 2004 0k- Oak Park Heights Request for Council Action Meeting Date October 12, 2004 Agenda Item Title Approve HLB Tautges Redpath, Ltd. Auditing Services for December 31, 2004 Time Required Agenda Placement Consent Originating Department/ Requestor Finance -Judv Holst, Deputy Clerk/ Finance Director __2 Requester's Signature Action Requested Approve auditing services contract with HLB Tautges Redpath, Ltd. For December 31, 2004 Background /Justification (Please indicate any previous action, financial implications including budget information and recommendations). Attached is the standard engagement letter for auditing services for the year ending December 31, 2004. The letter is similar to last year's except that we must comply with GASB Statement No. 34. This will require additional procedures for City staff and our auditing firm. HLB Tautges Redpath, Ltd. is proposing a fee not -to- exceed $34,600. This represents an increase of 6% plus $6,000 for the additional audit effort to comply with the GASB 34 requirements. This fee is split between the General Fund, Utility Fund- Water, Utility Fund- Sewer, and the Capital Revolving Fund. � Tautges Redpath, Ltd. D � Certified Public Accountants and Consultants OCT — 7 20( September 27, 2004 Ms. Judy Holst Director of Finance City of Oak Park Heights 14168 Oak Park Boulevard Oak Park Heights, MN 55082 Dear Judy: Enclosed are two copies of our standard engagement letter for auditing services for the year ending December 31, 2004 for the City of Oak Park Heights, Minnesota. Services The scope of services are as follows: • Audit the basic financial statements of the City of Oak Park Heights, Minnesota as of and for the year ending December 31, 2004. An "in- relation -to" opinion on the combining and individual fund financial statements and supplementary information. We understand that the financial statements will be presented in accordance with the financial reporting model described in GASB Statement No. 34. • Preparation, copying and binding of the Annual Financial Report. The City is responsible for writing the Management's Discussion and Analysis. • State Legal Compliance Audit. • Preparation of Audit Management Report. Fees We are proposing to complete the services described above for a fee not -to- exceed $34,600 as follows: Annual Financial Report Audit Preparation Total Base fee $23,600 $5,000 $28,600 GASB 34 2,000 2,000 4,000 GASB 34 - convert statements and notes to GASB 34 format (nonrecurring cost) - 2,000 2,000 Total $25,600 $9,000 $34,600 White Bear Lake Office: 4810 White Bear Parkway, White Bear Lake, Minnesota 55110, USA Telephone: 651 426 7000 Fax: 651 426 5004 Hastings Office: 1303 South Frontage Road, Suite 13, Hastings, MN 55033, USA Telephone: 651 480 4990 Fax: 651 426 5004 HLB Tautges Redpath, Ltd is a member of ® International A world -wide organization of accounting firms and business advisers. Ms. Judy Holst City of Oak Park Heights September 27, 2004 Page 2 This represents an increase of 6% plus $6,000 representing our estimate of additional audit effort and AFR preparation fees to comply with the requirements of GASB 34. This fee is based on anticipated cooperation from City personnel, their completion of the workpapers per the City to prepare list and the assumption that unexpected circumstances will not be encountered. This fee is also based on GASB 34 implementation by City personnel (with the exception of converting the financial statements and notes to GASB 34 format). We are available, upon request, to assist with this implementation. Implementation assistance could include any or all of the following: • Meeting with City staff to complete a GASB 34 alternatives checklist. • Develop an implementation timeline. • Review City calculations of opening adjustments (accrued interest, infrastructure, depreciation, etc.). • Review City program revenue chart of accounts. • Periodic status meetings. • Provide research or other assistance as requested by City staff. If significant additional time is necessary, we will discuss it with you before we incur additional costs. Upon the approval of this agreement by your Council and execution, please return one copy to our office and retain the other copy for your files. If you have any questions, please don't hesitate to call. Sincerely, HLB TAUTGES REDPATH, LTD. /Dzu David J. Mol, CPA DJM:clg Enclosure 512519.1 1 Tautges Redpath, Ltd. Certified Public Accountants and Consultants CLIE col JY September 27, 2004 City of Oak Park Heights 14168 Oak Park Boulevard Oak Park Heights, MN 55082 We are pleased to confirm our understanding of the services we are to provide the City of Oak Park Heights, Minnesota for the year ending December 31, 2004. The scope of services includes the following: • We will audit the financial statements of the governmental activities, the business - type activities, each major fund, and the aggregate remaining fund information, which collectively comprise the entity's basic financial statements of the City of Oak Park Heights, Minnesota as of and for the year ending December 31, 2004. We will provide an "in- relation -to" opinion on the combining and individual fund financial statements, supporting schedules and supplementary information. The document will also include additional information that will not be subject to the auditing procedures applied in our audit of the financial statements, and for which our accountant's report will disclaim an opinion as follows: • Introductory section • Management's discussion and analysis • Budgetary comparison schedules presented as RSI We understand that the financial statements will be presented in accordance with the financial reporting model described in GASB Statement No. 34. Also as part of the audit we will prepare a draft of your financial statements and related notes. In accordance with Government Auditing Standards, you will be required to review and approve those financial statements prior to their issuance and have a responsibility to be in a position in fact and appearance to make an informed judgment on those financial statements. Further you are required to designate a qualified management - level individual to be responsible and accountable for overseeing our services. • Preparation, copying and binding of the Annual Financial Report. • State Legal Compliance Audit • Preparation of Audit Management Report. White Bear Lake Office: 4810 White Bear Parkway, White Bear Lake, Minnesota 55110, USA Telephone: 651 426 7000 Fax: 651 426 5004 Hastings Office: 1303 South Frontage Road, Suite 13, Hastings, MN 55033, USA Telephone: 651 480 4990 Fax: 651 426 5004 HLB Tautges Redpath, Ltd is a member of ® International. A world -wide organization of accounting firms and business advisers. City of Oak Park Heights Contract for Auditing Services September 27, 2004 Page 2 Audit Obiectives The objective of our audit is the expression of an opinion as to whether your financial statements are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles and to report on the fairness of the additional information referred to in the first paragraph when considered in relation to the financial statements taken as a whole. Our audit will be conducted in accordance with U.S. generally accepted auditing standards and the standards for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, and the minimum procedures for auditors as prescribed by MS 6.65, and will include tests of the accounting records of the City of Oak Park Heights, Minnesota and other procedures we consider necessary to enable us to express such an opinion. If our opinion on the financial statements is other than unqualified, we will fully discuss the reasons with you in advance. If, for any reason, we are unable to complete the audit, or are unable to form or have not formed an opinion, we may decline to express an opinion or to issue a report as a result of this engagement. We will also provide a report (that does not include an opinion) on internal control related to the financial statements and compliance with laws, regulations, and the provisions of contracts or grant agreements, noncompliance with which could have a material effect on the financial statements as required by Government Auditing Standards. This report will include a statement that the report is intended solely for the information and use of the City Council and management and is not intended to be and should not be used by anyone other than these specified parties. Management Responsibilities Management is responsible for establishing and maintaining internal control and for compliance with laws, regulations, contracts and agreements. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of the controls. The objectives of internal control are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, that transactions are executed in accordance with management's authorizations and recorded properly to permit the preparation of financial statements in accordance with U.S. generally accepted accounting principles. Management is responsible for making all financial records and related information available to us. We understand that you will provide us with such information required for our audit and that you are responsible for the accuracy and completeness of that information. We will advise you about appropriate accounting principles and their application and will assist in the preparation of your financial statements, but the responsibility for the financial statements remains with you. As part of our engagement, we may propose standard, adjusting, or correcting journal entries to your financial statements. You are responsible for reviewing the entries and understanding the nature of any proposed entries and the impact 512519.1 City of Oak Park Heights Contract for Auditing Services September 27, 2004 Page 3 they have on the financial statements. That responsibility includes the establishment and maintenance of adequate records and effective internal control over financial reporting, the selection and application of accounting principles, and the safeguarding of assets. Management is responsible for adjusting the financial statements to correct material misstatements and for confirming to us in the representation letter that the effects of any uncorrected misstatements aggregated by us during the current engagement and pertaining to the latest period presented are immaterial, both individually and in the aggregate, to the financial statements taken as a whole. You are responsible for the design and implementation of programs and controls to prevent and detect fraud, and for informing us about all known or suspected fraud affecting the government involving (a) management, (b) employees who have significant roles in internal control, and (c) others where the fraud could have a material effect on the financial statements. You are also responsible for informing us of your knowledge of any allegations of fraud or suspected fraud affecting the government received in communications from employees, former employees, grantors, regulators, or others. In addition, you are responsible for identifying and ensuring that the entity complies with applicable laws and regulations. Audit Procedures — General An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; therefore, our audit will involve judgment about the number of transactions to be examined and the areas to be tested. We will plan and perform the audit to obtain reasonable rather than absolute assurance about whether the financial statements are free of material misstatement, whether from errors, fraudulent financial reporting, misappropriation of assets, or violations of laws or governmental regulations that are attributable to the entity or to acts by management or employees acting on behalf of the entity. Because an audit is designed to provide reasonable, but not absolute assurance and because we will not perform a detailed examination of all transactions, there is a risk that material misstatements may exist and not be detected by us. In addition, an audit is not designed to detect immaterial misstatements or violations of laws or governmental regulations that do not have a direct and material effect on the financial statements. However, we will inform you of any material errors that come to our attention and we will inform you of any fraudulent financial reporting or misappropriation of assets that comes to our attention. We will also inform you of any violations of laws or governmental regulations that come to our attention, unless clearly inconsequential. Our responsibility as auditors is limited to the period covered by our audit and does not extend to matters that might arise during any later periods for which we are not engaged as auditors. Our procedures will include tests of documentary evidence supporting the transactions recorded in the accounts, and may include tests of the physical existence of inventories, and 512519.1 City of Oak Park Heights Contract for Auditing Services September 27, 2004 Page 4 direct confirmation of receivables and certain other assets and liabilities by correspondence with selected individuals, creditors, and financial institutions. We will request written representations from your attorneys as part of the engagement, and they may bill you for responding to this inquiry. At the conclusion of our audit, we will also request certain written representations from you about the financial statements and related matters. Identifying and ensuring that the City of Oak Park Heights, Minnesota complies with laws, regulations, contracts, and agreements is the responsibility of management. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we will perform tests of the City of Oak Park Heights, Minnesota's compliance with applicable laws and regulations and the provisions of contracts and agreements. However, the objective of our audit will not be to provide an opinion on overall compliance with such provisions and we will not express such an opinion. Audit Procedures — Internal Controls In planning and performing our audit we will consider the internal control sufficient to plan the audit in order to determine the nature, timing and extent of our auditing procedures for the purpose of expressing our opinion on the City of Oak Park Heights, Minnesota's financial statements. We will obtain an understanding of the design of the relevant controls and whether they have been placed in operation, and we will assess control risk. Tests of controls may be performed to test the effectiveness of certain controls that we consider relevant to preventing and detecting errors and fraud that are material to the financial statements and to preventing and detecting misstatements resulting from illegal acts and other noncompliance matters that have a direct and material effect on the financial statements. Tests of controls are required only if control risk is assessed below the maximum level. Our tests, if performed, will be less in scope than would be necessary to render an opinion on the internal control and, accordingly, no opinion will be expressed in our report on internal control issued pursuant to Government Auditing Standards. An audit is not designed to provide assurance on internal control or to identify reportable conditions. However, we will inform the governing body or audit committee of any matters involving internal control and its operation that we consider to be reportable conditions under standards established by the American Institute of Certified Public Accountants. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control that, in our judgment, could adversely affect the entity's ability to record, process, summarize, and report financial data consistent with the assertions of management in the financial statements. We will also inform you of any nonreportable conditions or other matters involving internal control, if any, as required by Government Auditing Standards. 512519.1 City of Oak Park Heights Contract for Auditing Services September 27, 2004 Page 5 Audit Administration, Fees and Other We understand that your employees will prepare all cash or other confirmations we request and will locate any invoices selected by us for testing. The audit documentation for this engagement is the property of HLB Tautges Redpath, Ltd. and constitute confidential information. However, we may be requested to make certain audit documentation available to certain regulators or grantor agencies pursuant to authority given to it by law or regulation. If requested, access to such audit documentation will be provided under the supervision of HLB Tautges Redpath, Ltd. personnel. Furthermore, upon request, we may provide photocopies of selected audit documentation to regulators or grantor agencies. The regulator or grantor agency may intend, or decide, to distribute the photocopies of information contained therein to others, including other governmental agencies. Our fee for these services will be at our standard government audit hourly rates plus out - of- pocket costs (such as report reproduction, typing, postage, travel, copies, telephone, etc.) except that we agree that our gross fee, including expenses, will not exceed $34,600. Our standard hourly rates vary according to the degree of responsibility involved and the experience level of the personnel assigned to your audit. Our invoices for these fees will be rendered each month as work progresses and are payable on presentation. The above fee is based on anticipated cooperation from your personnel, completion of workpapers per the attached Appendix B by your personnel, and the assumption that unexpected circumstances will not be encountered during the audit. If significant additional time is necessary, we will discuss it with you and arrive at a new fee estimate before we incur the additional costs. Government Auditing Standards requires that we provide you with a copy of our most recent external peer review report and any letter of comment, and any subsequent peer review reports or letters of comment received during the period of contract. Our 2001 peer review report and letter of comment accompanies this letter as Appendix A. 512519.1 City of Oak Park Heights Contract for Auditing Services September 27, 2004 Page 6 We appreciate the opportunity to be of service to the City of Oak Park Heights, Minnesota and believe this letter accurately summarizes the significant terms of our engagement. If you have any questions, please let us know. If you agree with the terms of our engagement as described in this letter, please sign the enclosed copy and return it to us. Very truly yours, HLB TAUTGES REDPATH, LTD. David J. Mol, CPA RESPONSE This letter correctly sets forth the understanding of the City of Oak Park Heights, Minnesota: By: /7 B Title: �/ ` L Title: C� i!y Aol i it�rr . Date: /D -/ ti - v Y Date: 512519.1 Appendix A Mme: mamm Henry A. Hem G"DW PUM Acangdarft P.C. To the Shareholders HLB Tautges, Redpath, Ltd. We have reviewed the system of quality control for the accounting and auditing practice of HLB Tautges, Redpath, Ltd. in effect for the year ended September 30, 2001. A system of quality control encompasses the firm's organizational structure and the policies adopted and procedures established to provide it with reasonable assurance of complying with professional standards. The elements of quality control are described in the Statements of Quality Control Standards issued by the American Institute of Certified Public Accountants ( AICPA). The design of the system and compliance with it are the responsibilities of the firm. Our responsibility is to express an opinion on the design of the system, and the firm's compliance with that system based on our review. Our review was conducted in accordance with standards established by the Peer Review Board of the AICPA. In performing our review, we obtained an understanding of the system of quality control for the firm's accounting and auditing practice. In addition, we tested compliance with the firm's quality control policies and procedures to the extent we considered appropriate. These tests covered the application of the firm's policies and procedure on selected engagements. Because our review was based on selective tests, it would not necessarily disclose all weaknesses in the system of quality control or all instances of lack of compliance with it. Because there are inherent limitations in the effectiveness of any system of quality control, departures from the system may occur and not be detected. Also, projection of any evaluation of a system of quality control to future periods is subject to the risk that the system of quality control may become inadequate because of changes in conditions, or because the degree of compliance with the policies or procedures may deteriorate. In our opinion, the system of quality control for the accounting and auditing practice of HLB Tautges, Redpath, Ltd. in effect for the year ended September 30, 2001, has been designed to meet the requirements of the quality control standards for an accounting and auditing practice established by the AICPA and was complied with during the year then ended to provide the firm with reasonable assurance of conforming with professional standards. Phoenix, Arizona March 29, 2002 Certified Public Accountant 2777 East Camelback Road Suite 325 Phoenix, Arizona 85016 -4302 Telephone (602) 760 -2920 Fax (602) 760 -2917 Appendix A Member Member Arizona Society of Certified Private companies Practice Public Accountants Henry A. t • e m American institute of Firms Certified Public Accountants P.C• To the Shareholders HLB Tautges, Redpath, Ltd We have reviewed the system of quality control for the accounting and auditing practice of HLB Tautges, Redpath, Ltd (the firm) in effect for the year ended September 30, 2001, and have issued our report thereon dated March 29, 2002 That report should be read in conjunction with the comments in this letter, which were considered in determining our opinion Independence, integrity and objectivity Finding—The firm's policies and procedures for independence, integrity and objectivity have been appropriately communicated to the firm's professional personnel through its quality control document and through training programs The firm's policies and procedures require that professional personnel be informed of all new accounting and auditing clients at staff meetings of the departments that are involved in financial statement engagements All employees of the firm do not necessarily attend these meetings Still, the firm has informed us that its independence has not been impaired on any accounting and auditing engagements Recommendation —The firm should periodically communicate in writing or by e-mail to all personnel new accounting and auditing clients or engagements accepted by the firm This commumcation should also request that any personnel with a possible independence problem with respect to the new engagement or clients contact the administrative partner immediately Phoenix, Arizona March 29, 2002 Certified Public Accountant 2777 East Carnelback Road Suite 325 Phoenix, Arizona 85016 4302 Telephone (602) 760 2920 Fax (602) 760 2917