HomeMy WebLinkAbout2010 Audit Services Contract � f
H LB Tautges Redpath, Ltd.
Certified Public Accountants and Consultants CLIENT COPY
October 25, 2010
City of Oak Park Heights
14168 Oak Park Boulevard
P.O. Box 2007
Oak Park Heights, MN 55082 -2007
We are pleased to confirm our understanding of the services we are to provide the City of
Oak Park Heights (the City) for the year ending December 31, 2010. The scope of services
includes the following:
Audit and Related Services
• 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 as of and for
the year ending December 31, 2010. 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 supplement the City's basic
financial statements. Such information, although not a part of the basic financial
statements, is required by the Governmental Accounting Standards Board who
considers it to be an essential part of financial reporting for placing the basic financial
statements in an appropriate operational, economic, or historical context. As part of
our engagement, we will apply certain limited procedures to the City's RSI in
accordance with auditing standards generally accepted in the United States of
America. These limited procedures will consist of inquiries of management regarding
the methods of preparing the information and comparing the information for
consistency with management's responses to our inquiries, the basic financial
statements, and other knowledge we obtained during our audit of the basic financial
statements. We will not express an opinion or provide any assurance on the
information because the limited procedures do not provide us with sufficient evidence
to express an opinion or provide any assurance. The following RSI is required by
generally accepted accounting principles and will be subjected to certain limited
procedures, but will not be audited:
o Management's discussion and analysis
o Budgetary comparison schedules presented as RSI
o Schedule of funding progress - OPEB
4810 White Bear Parkway White Bear Lake, Minnesota 55110 I 651 426 7000 651 426 5004 fax I www.hlbtr.com
1432823.F1L6 Tautges Redpath, Ltd. is a member of International, a world -wide organization of accounting firms and business advisors. I Equal Opportunity Employer
City of Oak Park Heights
Contract for Auditing Services
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Supplementary information other than RSI also accompanies the City's basic
financial statements. We will subject the following supplementary information to the
auditing procedures applied in our audit of the financial statements and certain
additional procedures, including comparing and reconciling such information
directly to the underlying accounting and other records used to prepare the financial
statements or to the financial statements themselves, and other additional procedures
in accordance with auditing standards generally accepted in the United States of
America and will provide an opinion on it in relation to the financial statements as a
whole:
o Combining and individual fund statements and schedules
The following other information accompanying the 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 not provide an opinion or assurance:
• Introductory section
• Statistical section
The following other reports will be issued in conjunction with the financial audit:
• State Legal Compliance Audit
• Preparation of Audit Management Letter.
Nonaudit Services
• Preparation of draft financial statements document (City to provide MD &A, certain
footnote disclosures and statistical section information).
• Copying and binding of financial statement document
Audit Objectives
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 supplementary information
referred to in the second paragraph when considered in relation to the 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 will include tests of the accounting records of the City 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
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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 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.
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 preparation 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
our assistance with preparation of the financial statements and 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 effective 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 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
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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
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. You are responsible for the preparation of the
supplementary information in conformity with U.S. generally accepted accounting principles.
You agree to include our report on the supplementary information in any document that
contains and indicates that we have reported on the supplementary information. You also
agree to present the supplementary information with the audited financial statements.
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 financial 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, attestation engagements,
performance audits, or other 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 the 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.
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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
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 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
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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'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.
Audit Administration, Fees and Other
The assistance to be provided by your personnel, including the preparation of schedules
and analysis of accounts, typing all cash and other confirmations we request, and locating
any documents selected by us for testing, will be discussed and coordinated with you.
We will provide copies of our reports to the City, 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
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distribute the copies or information contained therein to others, including other governmental
agencies.
The audit documentation will be retained for a minimum of five years after the report
release date or for any additional period requested by the federal agency. If we are aware
that a federal awarding agency or auditee is contesting a finding, we will contact the
party(ies) contesting the audit finding for guidance prior to destroying the audit
documentation.
David J. Mol, CPA is the engagement partner and is responsible for supervising the
engagement and signing the report.
Our 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. Unless additional
work is requested, or circumstances require additional work, we estimate the basic audit fees
will be $34,500.
The above fee is based on the anticipated scope of services. An increase in the scope of
service will necessitate an addendum (change order) to this agreement. Examples of items
that may result in an increase in the scope of service include additional audit procedures
resulting from certain accounting issues or events, significant change in the level of
activity /number of transaction, if there is an indication of misappropriation or misuse of
public funds, or difficulties encountered due to lack of accounting records, incomplete
records, inaccurate records or turnover in the City's staff.
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.
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We appreciate the opportunity to be of service to the City 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.
&/ C/4)-- C . 1 4- f
David J. Mol, CPA
DJM:cic
Response
This letter .1.7 tly sets forth the understanding of the City:
By: By:
Title: C 1 • Aorh Title:
Date: i1 \h l 1 0 Date:
Nonaudit Services
The employee(s) assigned to oversee the nonaudit services is as follows:
❑ Finance Director
❑ Assistant Finance Director
❑ Other employee (name and title)
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Appendix A
Page 1
Member..
miff LIEM & COMPANY P.C. Private Companies Price
- Section. Division of Firms.
IMF 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.Iiemcpa.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
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