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HomeMy WebLinkAboutAuditing Services Contract December 31, 2009 Oak Park Heights Request for Council Action Meeting Date August 11, 2009 Agenda Item Title Approve HLB Taut2es Redpath, Ltd. Auditing Services for December 31, 2009 Time Required Agenda Placement Consent Originating Department /Rcqucstor Finance -Judy Holst, Dcputy Clerk /Finance Director Requester's Signature L Action Requested Approve auditing services contract with HLB Taut2cs Rcdp_ ath, Ltd. For December 31, 2009 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, 2009. HLB Tautges Redpath, Ltd. is proposing a zero increase in fee for completing the audit for 2010. 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 August 6, 2009 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 engagement letter for auditing services for the year ending December 31, 2009 for the City of Oak Park Heights, Minnesota. Services The scope of services are the same as for 2008 and are summarized as follows: • Audit the basic financial statements of the City of Oak Park Heights, Minnesota as of and for the year ending December 31, 2009. 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 As we discussed, we are proposing to complete the services described above at the same fee as for the 2008 audit. 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 Illl®i4W4 Redpath, Ltd is a member of 12 Intemational, a world -wide organization of accounting firms and busmess advisors I Equal Opportunity Employer Judy Holst, Finance Director City of Oak Park Heights August 6, 2009 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 1174409.1 CLIENT COPY Tautges Redpath, Ltd. Certified Public Accountants and Consultants August 6, 2009 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, 2009. 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, 2009. 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) 3. Schedule of Funding Progress - OPEB 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 V174419Vt Aedpath, Ltd is a rnembei at IM International, a waild -Wide orclam;aLun of auvwainy tams and husmess advisor, Equal Opportunity f niployw 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 auditing standards generally accepted in the United States of America, 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 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 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. The report on internal control and compliance will include a statement that the report is intended solely for the information and use of management, the body or individuals charged with governance, others within the entity, and specific legislative or regulatory bodies 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 1 174409.1 City of Oak Park Heights Contract for Auditing Services Page 3 Government Auditing Standards may not satisfy the relevant legal, regulatory, or contractual requirements. Management Responsibilities Management is responsible for the basic financial statements and all accompanying information as well as all representations contained therein. As part of the audit, we will assist with the prepararation of your financial statements and related notes. You are responsible for making all management decisions and performing all management functions relating to the financial statements and related notes and for accepting full responsibility for such decisions. You will be required to acknowledge in the management representation letter that you have reviewed and approved the financial statements and related notes prior to their issuance and have accepted responsibility for them. Further, you are required to designate an individual with suitable skill, knowledge or experience to oversee any nonaudit services we provide and for evaluating the adequacy and results of those services and accepting responsibility for them. Management is responsible for establishing and maintaining internal controls, including monitoring ongoing activities, to help ensure that appropriate goals and objectives are met; 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, 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 cash flows, where applicable, in conformity with U.S. generally accepted accounting principles. Management is also responsible for making all financial records and related information available to us and for ensuring that management and financial information is reliable and properly recorded. Your 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 1174409.1 City of Oak Park Heights Contract for Auditing Services Page 4 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. Management is responsible for establishing and maintaining a process for tracking the status of audit findings and recommendations. Management is also responsible for identifying for us previous audits, attestation engagements, performance audits or other 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 for the report, and for timing and format for providing that information. 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. 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 misappropriation 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 1174409.1 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, funding sources, 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 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 AICPA 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 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 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. 1174409.1 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. We agree that our fee for these services, including expenses (such as report reproduction, postage, etc.), will not exceed $34,500. 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 due to a change in scope of services or delays in receiving audit information requests, we will discuss it with you and arrive at a new fee estimate. 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 2007 peer review report accompanies this letter as Appendix A. We are pleased to report that we did not receive a letter of comment. 1 174409.1 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 correc y sets forth the understanding of the City of Oak Park Heights, Minnesota: v dministrator 1J'eputy Clerk /Finance Directo Title: Title: Date- August 14, 2009 Date: Augu t 14, 2009 11 74409.1 Appendix A Page 1 - Member: LI EM & COMPANY, P.C. PrSectio ompasion - Section, Division of-Fi American Institute of Certified Public Accountants & Business Consultants Certified Public Accountants Arizona Society of Certified Public Accountants 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, 2007. 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 in 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 with 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 firm'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. 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 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 4455 East Camelback Road Suite E290 Phoenix, Arizona 85018 Telephone (602) 667 -6040 Fax (602) 667 -6039 www.liemcpa.com Appendix A Page 2 HLB 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 auditing practice of HLB Tautges, Redpath, Ltd. in effect for the year ended September 30, 2007, 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 6, 2008 I 1174409.1