HomeMy WebLinkAboutAuditing Services Contract December 31, 2006 S
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Oak Park Heights
Request for Council Action
Meeting Date August 22, 2006
Agenda Item Title Approve HLB Tautees Redpath, Ltd. Auditing Services for
December 31, 2006 Time Required
Agenda Placement Consent
Originating Department/ Requestor Finance -Judy Holst, Deputy Clerk/Finance
Director
'i� Requester's Signature I �.2-r
1
Action Requested Approve auditing_ services contract with HLB Tautees Redpath,
Ltd. For December 31, 2006
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, 2006.
HLB Tautges Redpath, Ltd. is proposing a fee not -to- exceed $29,000. Last year
Council approved $28,500 for the audit. The actual amount of the 2005 audit was
$27,838.50. This fee is split between the General Fund, Water Utility Fund, Sewer
Utility Fund, and the Capital Revolving Fund.
1
Tautges Redpath, Ltd.
Certified Public Accountants and Consultants
JUi_ 3 1 20Gt)
July 28, 2006
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 audit engagement letter for auditing services for the
year ending December 31, 2006 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, 2006. 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 Letter.
Fees
We are proposing to complete the services described above for a fee not -to- exceed $29,000.
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 651 426 7000 651 426 5004 Fax www.hlbtr.com
1303 South Frontage Road Suite 13 Hastings, Minnesota 55033 651 480 4990 651 426 5004 Fax
HLB Tautges Redpath, Ltd is a member of M International, a world -wide organization of accounting firms and business advisors
Ms. Judy Holst, Finance Director
City of Oak Park Heights
July 28, 2006
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
818261.1
1
Tautges Redpath, Ltd. CLIENT COPY
Certified Public Accountants and Consultants
July 28, 2006
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, 2006. 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, 2006. 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:
o Introductory section
o Management's discussion and analysis
o 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 Letter.
4810 White Bear Parkway White Bear Lake, Minnesota 55110 651 426 7000 651 426 5004 Fax www.hlbtr.com
1303 South Frontage Road Suite 13 Hastings, Minnesota 55033 651 480 4990 651 426 5004 Fax
HLB Tautges Redpam, Ltd is a member of n International, a world -wide organization of accounting firms and business advisors
City of Oak Park Heights
Contract for Auditing Services
July 28, 2006
Page 2
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 and the standards for financial audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States, 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 reports on internal control and compliance will each include a statement that the report is
intended solely for the information and use of the audit committee, management, and specific
legislative or regulatory bodies and is not intended to be and should not be used by anyone
other than these specified parties.
Manauement Responsibilities
Management is responsible for establishing and maintaining effective internal control and
for compliance with the provisions of applicable laws, regulations, contracts, agreements and
grants. 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 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.
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
818261.1
City of Oak Park Heights
Contract for Auditing Services
July 28, 2006
Page 3
the latest period presented are immaterial, both individually and in the aggregate, to the
financial statements taken as a whole.
You are responsible for establishing and maintaining internal controls, including
monitoring ongoing activities; for the selection and application of accounting principles; and
for the fair presentation in the financial statements of the respective financial position of the
governmental activities, the business -type activities, 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 cash flows, where applicable, in conformity with U.S.
generally accepted accounting principles.
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, or illegal
acts 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, or illegal acts 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 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.
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.
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.
818261.1
City of Oak Park Heights
Contract for Auditing Services
July 28, 2006
Page 4
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 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 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
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
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
818261.1
City of Oak Park Heights
Contract for Auditing Services
July 28, 2006
Page 5
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.
Audit Procedures - Compliance
Identifying and ensuring that the City of Oak Park Heights, Minnesota complies with the
provisions of laws, regulations, contracts, agreements, and grants 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 the 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.
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.
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 $29,000. 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
818261.1
City of Oak Park Heights
Contract for Auditing Services
July 28, 2006
Page 6
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 and letter of comment accompanies this letter as Appendix A.
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: BY4�/
Title.0 / �� / �- �=� �-� - Title: CA r ZW
U ( /I
Date: Date:
818261.1
Appendix A
Page 1
Mmba; Coilfltd
A rHe P"M _ e4y s 4 j" A. Prt Crimpnnles Pr rctke
[+ubsc Actfluntar�ls l L�� . 5ettWa". OFc�slon of flntts
aamrkan M& hft of
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P.C
To the Shareholders
HLB Tautges, Redpath, Ltd.
We have reviewed the system of quality control for the accounting and audit practice cf
HLB Tautges, Redpath, Ltd. (the firm) in effect for the year ended September 30, 2004.
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 describers La
the Statements on Quality Control Standards issued by the American Institute of CFAs
(AICPA). The firm is responsible far designing a system of quality control and
complying with it to provide the firm: reasonable assurance of conforming wifa
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 AICPA.. 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 funk's system of quality control
sufficient to assess the risks implicit in its practice. Based on our assessments, we
selected engagements and administrative files to test for conformity with professional
standards and compliance with the firm'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 scope 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 duality 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 ane
not be detected. Projection of any evaluation of a system of quality control to future
Cried Pubik Acmuntants
4155 East Camdbadc Road
suite E 290
Phoenix, Arbour 95018
Telephone (602) 667 -6040
fax (602) 667 -6039
Appendix A
Page 2
FIL Tautges, Redpath, Ltd.
Page Two
periods is subject to the cask 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 HLB
Tautges, Redpath, Ltd. in effect for the year ended September 30, 2004, has been
designed to meet the requirements of the quality con"I 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.
1'����j -ate [� •�#ts�y�."' , �; t' '
Phoenix, Arizona
January 21, 2005