HomeMy WebLinkAboutAuditing Services Contract December 31, 2007 1
Tautges Redpath, Ltd.
Certified Public Accountants and Consultants
AUG - 3;
August 1, 2007
Ms. Judy Hoist
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 audit engagement letter for auditing services for the
year ending December 31, 2007 for the City of Oak Park Heights, Minnesota. Statements of
Auditing Standards 104 -111 are effective for the 2007 audit and will have a significant
impact on the audit. Written documentation of internal controls will help minimize the
increase in audit effort.
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, 2007. An "in- relation -to" opinion on the
combining and individual fund financial statements and supplementary information.
• 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 Letter.
Fees
We are proposing to complete the services described above for a fee not -to- exceed $33,350.
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. If significant additional time is necessary, we will discuss it with
you before we incur additional costs.
4810 White Bear Parkway White Bear Lake, Minnesota 55110 I 651 426 7000 651 426 5004 Fax I www.hlbtr.com
HLB Tautges Redpath, Ltd is a member of ® International, a world -wide organization of accounting firms and business advisors
Ms. Judy Holst, Finance Director
City of Oak Park Heights
Page 2
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.
David J. Mol, CPA
DJM /cic
921890.1
CLIENT COPY
Tautges Redpath, Ltd.
Certified Public Accountants and Consultants
August 1, 2007 ALL- �
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, 2007. 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, 2007. Accounting
standards generally accepted in the United States provide for certain required
supplementary information (RSI), such as management's discussion and analysis
(MD &A), to accompany the City of Oak Park Heights, Minnesota's basic financial
statements. As part of our engagement, we will apply certain limited procedures to
the City of Oak Park Heights, Minnesota's RSI. These limited procedures will consist
principally of inquiries of management regarding the methods of measurement and
presentation, which management is responsible for affirming to us in its
representation letter. Unless we encounter problems with the presentation of the RSI
or with procedures relating to it, we will disclaim an opinion on it. The following RSI
is required by generally accepted accounting principles and will be subjected to
certain limited procedures, but will not be audited:
1. Management's Discussion and Analysis
2. Budgetary Comparison Schedule(s)
Supplementary information other than RSI, such as combining and individual fund
financial statements, also accompanies the City of Oak Park Heights, Minnesota's
basic financial statements. We will subject the following supplementary information
to the auditing procedures applied in our audit of the basic financial statements and
will provide an opinion on it in relation to the basic financial statements:
1. Combining and Individual Fund Statements and Schedules
2. Supplementary information
4810 White Bear Parkway White Bear Lake, Minnesota 55110 I 651 426 7000 651 426 5004 Fax I www.hlbtr.com
HLB Tautges Redpath, Ltd is a member of M International, a world -wide organization of accounting firms and business advisors
City of Oak Park Heights
Contract for Auditing Services
Page 2
The following additional information accompanying the basic financial statements
will not be subjected to the auditing procedures applied in our audit of the financial
statements, and for which our auditor's report will disclaim an opinion:
• Introductory section
• Statistical section
• Preparation, copying and binding of the Annual Financial Report.
• State Legal Compliance Audit
• Preparation of Audit Management Letter.
Audit Obiectives
The objective of our audit is the expression of opinions as to whether your basic 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 basic financial statements
taken as a whole. Our audit will be conducted in accordance with U.S. generally accepted
auditing standards, 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 opinions. If our opinions on the financial statements
are 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
opinions, we may decline to express opinions 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 the provisions of applicable laws,
regulations, contracts, agreements, and grants, noncompliance with which could have a
material effect on the financial statements as required by Government Auditing Standards.
The report on internal control and compliance 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. If during
our audit we become aware that the City of Oak Park Heights, Minnesota is subject to an
audit requirement that is not encompassed in the terms of this engagement, we will
communicate to management and those charged with governance that an audit in accordance
with U.S. generally accepted auditing standards and the standards for financial audits
contained in Government Auditing Standards may not satisfy the relevant legal, regulatory,
or contractual requirements.
921890.1
City of Oak Park Heights
Contract for Auditing Services
Page 3
Management Responsibilities
Management is responsible for establishing and maintaining internal controls, including
monitoring ongoing activities; for the selection and application of accounting principles; for
the fair presentation in the financial statements of the respective financial position of the
governmental activities, the business -type activities, the aggregate discretely presented
component units (if any), each major fund, and the aggregate remaining fund information of
the City of Oak Park Heights, Minnesota and the respective changes in financial position and,
where applicable, cash flows in conformity with U.S. generally accepted accounting
principles. Management is responsible for the basic financial statements and all
accompanying information as well as all representations contained therein.
You are responsible for management decisions and functions. 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.
Management is responsible for making all financial records and related information
available to us and for the accuracy and completeness of that information. Management's
responsibilities include 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 (1) management, (2) employees who have significant roles in
internal control, and (3) others where the fraud or illegal acts could have a material effect on
the financial statements. Your responsibilities include 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, regulations, contracts, agreements, and grants, and for taking timely and
appropriate steps to remedy any fraud, illegal acts, violations of contracts or grant
agreements, or abuse that we may report.
921890.1
City of Oak Park Heights
Contract for Auditing Services
Page 4
With regard to the electronic dissemination of audited financial statements, including
financial statements published electronically on your website, you understand that electronic
sites are a means to distribute information and, therefore, we are not required to read the
information contained in these sites or to consider the consistency of other information in the
electronic site with the original document.
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 they have on the financial
statements.
Management is responsible for establishment and maintenance of a process for tracking
the status of audit findings and recommendations. Management is also responsible for
identifying for us previous audits or other engagements or studies related to the objectives
discussed in the Audit Objectives section of this letter. This responsibility includes relaying
to us corrective actions taken to address significant findings and recommendations resulting
from those audits or other engagements or studies. You are also responsible for providing
management's views on our current findings, conclusions, and recommendations, as well as
your planned corrective actions, and the timing and format related thereto.
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 (1) errors, (2) fraudulent financial
reporting, (3) misappropriation of assets, or (4) 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 the determination of abuse is subjective, Government
Auditing Standards do not expect auditors to provide reasonable assurance of detecting
abuse.
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 and any fraudulent financial reporting or
misappropriations of assets that come to our attention. We will also inform you of any
violations of laws or governmental regulations that come to our attention, unless clearly
921890.1
City of Oak Park Heights
Contract for Auditing Services
Page 5
inconsequential. Our responsibility as auditors is limited to the period covered by our audit
and does not extend to 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
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 require certain written
representations from you about the financial statements and related matters.
Audit Procedures — Internal Controls
Our audit will include obtaining an understanding of the entity and its environment,
including internal control, sufficient to assess the risks of material misstatement of the
financial statements and to design the nature, timing, and extent of further audit procedures.
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. Our tests, if performed, will be less in scope than would be necessary to render
an opinion on 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 significant
deficiencies. However, during the audit, we will communicate to management and those
charged with governance internal control related matters that are required to be
communicated under professional standards and Government Auditing Standards.
Audit Procedures - Compliance
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 provisions of applicable laws, regulations, contracts, agreements, and
grants. However, the objective of our audit will not be to provide an opinion on overall
compliance and we will not express such an opinion in our report on compliance issued
pursuant to Government Auditing Standards.
The Minnesota Legal Compliance Audit Guide for Local Government requires that we
test whether the auditee has complied with certain provisions of Minnesota Statutes. Our
audit will include such test of the accounting records and other procedures as we consider
necessary in the circumstances.
921890.1
City of Oak Park Heights
Contract for Auditing Services
Page 6
Audit Administration, Fees and Other
We understand that your employees will prepare all cash or other confirmations we
request and will locate any documents selected by us for testing.
We will provide copies of our reports to the City of Oak Park Heights, Minnesota;
however, management is responsible for distribution of the reports and the financial
statements. Unless restricted by law or regulation, or containing privileged and confidential
information, copies of our reports are to be made available for public inspection.
The audit documentation for this engagement is the property of HLB Tautges Redpath,
Ltd. and constitutes confidential information. However, pursuant to authority given by law
or regulation, we may be requested to make certain audit documentation available to a
federal agency providing direct or indirect funding, or the U.S. Government Accountability
Office for purposes of a quality review of the audit, to resolve audit findings, or to carry out
oversight responsibilities. We will notify you of any such request. 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 copies of selected audit
documentation to the aforementioned parties. These parties may intend, or decide, to
distribute the copies or 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 $33,350. 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
client to prepare list 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 2004 peer
review report accompanies this letter as Appendix A. We are pleased to report that we did
not receive a letter of comment.
921890.1
City of Oak Park Heights
Contract for Auditing Services
Page 7
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: a ��� By:
Title: � C / -ITY A-A M, N 1 t M- A-TP Title: 4
Date: R h ,�- 07 Date: 00a 7
921890.1
Appendix A
Page 1
Wm
w.
(� w.
A de4yo<Ceril POkM Qsd Private
A . G v Sectim wW R c
firms
PdbNCACCCYfNNMS 5et1{att DtolslanO[Flrms
awrican lnslRutc of
C4rt1f*0 NNIC A- (i(nntmb
P. C.
To the Shareholders
IILB Tautges, Redpath, Ltd,
We have reviewed the system of quality control for the accounting and audit practice cf
1.1LB Tautges, Redpath, Ltd. (the firm) in effect for the year ended September 30, 200
A system of quality control encompasses the firm's organizational structure, the policies
adopted and procedures established to provide it with reasonable assurance of
conforming with professional standards._ The elements of quality control are described i-i
the Statements on Quality Control Standards issued by the American Institute of CPAs
(AICPA). The firm is responsible for designing a system of quality control and
complying with it to provide the firm reasonable assurance of conforming Vita
professional standards in all material respects. Our responsibility is to express an opinion
on the design of the system of quality control and the firm's compliance with its system
of quality control based. on our review.
Our review was conducted in accordance with standards established by the Peer Review
Board of the A1CPA. During our review, we read required representations from the firm,
interviewed firm personnel and obtained an understanding of the nature of the firm's
accounting and auditing practice, and the design of the firth's system of quality control
sufficient to assess the risks implicit in its practice. Based on our assessments, we
selected engagements and administrative fades to test for conformity with professional
standards and compliance with the fiana s system of quality control. The engagements
selected represented a reasonable cross- section of the firm's accounting and auditing
practice with emphasis on higher -risk engagements. The engagements selected included
among others, audits of Employee Benefit Plans and engagements performed under
Government Auditing Standards. Prior to concluding the review, we reassessed the
;adequacy of the scrape of the peer review procedures and met with firm management to
discuss the results of our review. We believe that the procedures we performed provide a
reasonable basis for our opinion.
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 procedures on selected
engagements. Our review was based on selected tests therefore it would not necessarily
detect all weaknesses in the system of quality control or all instances of noncompliance
with it. There are inherent limitations in the effectiveness of any system of quality
control and therefore noncompliance with the system of quality control may occur and
not be detected. Projection of any evaluation of a system of quality control to future
Cedified PWic Accountants
U55 UM Camdba& iaoad
Suite f 290
Phoenix, Arizona 85038
Telephone (602) 667 -6W
Fax (M) 6167 -6039
Appendix A
Page 2
Ht.B Tautges, Redpath, Ltd.
Page Two
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 audit practice of MB
Tautges, Redpath, Ltd. in effect for the year ended September 30, 2004, has been
designed to meet the requirements of the quality control standards for an accounting and
auditing practice established by the AICPA and was compiled with during the year then
ended to provide the firm with reasonable assurance of conforming with professional
standards.
Phoenix, Arizona
January 21, 2005