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City of oaf. Park Heights
Contract for Auditing Services
'age 2
We have also been engaged to report on supplementary information other than RSI
that accompanies City's financial statements. We will subject the followin
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 stater - rents 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 auditors report will not provide an opinion or assurance:
• Introductory section
• Statistical section
The following other reports will be issued in conj with the financial audit:
• State Legal Compliance Audit
• Preparation of Audit Management Letter.
Non audit Services
o Preparation of draft financial statements document (City to provide M certain
footnote disclosures and statistical section information).
0 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
oren rally accepted in the United States of America, and the standards for financial audits
contained in Government Auditing %ndarcls, 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 discuss the reasons with you in
advance. If, for any reason, we are unable to complete the audit, or are unable to form or
1569194.1
City of oak Park Heights
Contract for Auditing Services
Page 3
have not formed opinions, we may decline to express opinions or to issue a report as a result
oft is eiigageme t.
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 l statements as required by G ei-nment Auditing '` Icmclardy. Tlie 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 durino 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 Auditingr i a i -cls may not
satisfy the relevant legal, regulatory, or contractual requirements.
Management Responsibilities
Management is responsible for the basic financial statements and all acco mpanying
inforn as well as all representations contained therein. As part of the audit, we will
assist with the preparation of your financial st .e e .t and related notes. You are
responsible for making all management decisions and performing all management functions
relating to the financial statements and related rotes and for accepting full responsibility for
such decisions. You will be required to acknowledge in the management representation letters
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 ate an individual with suitable
shill, 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 yet; 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
1569194.1
City of Oak lark Heights
Contract for Auditing Services
Page
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 s , grog ted 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 l ) management, 2 employees who have significant roles in
internal control, and 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 ill
communications from employees, former employees, grantors, regulators, or others. In
addition, you are responsible fog identifying and ensuring that the entity complies with
applicable laves, regulations., c ntracts, 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
coat his 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 ying for us previous financial audits, attestation engagements, ents, 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
ement'
views on our current findings, conclusions, and recommendations* as well as your planned
eorreoti e 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 is published electronically on your wehsite, you understand that electronic
sites are reams to distribute information arid, 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.
1569194.1
City of oak Park Heights
Contract for Auditing Services
Page
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 n misstatement, whether from f errors, 2 fraudulent financial
reporting, misappropriation of assets, or 4 violations of rays 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, Govel
Auditing icing ` to s 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 risk that
material misstatements ents 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 affect on the financial statements.
we n, 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 lags or governmental regulations that cone 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 f 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 ratters.
Audit Procedures — Internal Controls
Our audit will include obtaining an understanding; o.f 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 he
necessary to render an opinion on internal control and, accordingly, no opinion will be
1569194.1
City of oak Park Heights
Contract for Auditing Services
Page 6
expressed in our report on internal control issued pursuant to Government nment Au r r g
S andar ds.
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 A ICPA professional standards and Govemment A 11difingSimidal
Aud it Procedures — Compliance
As part of obtaining reasonable assurance about whether the financial statements are free
of material mis tatenient, 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 riot express
such are opinion in our report on compliance issued pursuant to Govemment Auditing
The Minnesot a Legal Compliance Audit Guide for Local Government requires that we
test whether the a ditee 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.
Engage 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 ents selected by 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 containin g 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 'aces 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, s, 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 T a t ;es Re dp .th,
Ltd. personnel. Furthermore, upon request, we may provide copies of selected audit
documentation to the aforementioned parties. These piles may intend, or decide, to
1569194.1
City of oak Park Heights
Conti - act for Auditing Services
Page
distribute the copies or information ation 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
arty 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 Dourly rates vary according to the degree of responsibility involve d and the
experience level of the personnel assigned to your audit. Our invoices for these Fees will be
rendered each month as word: progresses and are payable on presentation. Unless additional
work is requested, or circumstances require addition work, we estimate the basic a. di fti+ s
will be $3,500.
rfhe above fee is based on the anticipated scope of services. An increase in the scope of
service will necessitate an addendum (chan order) to this agreement. Examples of items
that may result in n increase in the scope of service include additional audit procedures
resulting from certain accounting issues or events, signif le nt 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, inco mplete
records, inaccurate records or turnover in the City's staff.
Govei Auditing 9a rd,_v 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 2010 peer
review report accompanies this letter as Appendix A. We are pleased to report that we did
not receive a letter of comment.
1569194.1
City of Oak Park eights
Contract for Auditing Services
Page
We appreciate the opportunity to be of service to the City and believe this letter
accurately summarizes the significant tern - is of our engagement. If you .ray 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,
L B TA TG S REDPATH, LTD.
David J. Mod, CPA
J1'1 : aer
Response
s
This letter c rr ly Aets forth the understanding of t e it
7 1
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Title: 'ritle;
Date: Date:
No Srvi es
The employee(s) assigned to oversee the nona dit services is as follows:
Finance Director
Assista. t Finance Director
0 other employee (name and title)
1569194.1
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