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HomeMy WebLinkAboutContract 1897 Ltd. Certified Public Accountants and ultants January 19,2006 William Elrite City of Columbia Heights 590 40th Avenue Northeast Columbia Heights MN 55421-3878 Dear Bill: Enclosed are two copies of the 2005 engagement letter. The engagement letter is essentially a continuation of our engagement letter dated August 21, 2001. As such, I have labeled the document as addendum #5. For your reference, the table below summarizes the chronology of engagement letter addendums. 2001 2002 2003 2004 2005 Original engagement letter (8/21/0 I) $34,765 $35,440 $36,130 $36,830 $ - Addendum # I : SAS 99 - - - - - GASS 34 - 3,000 - - - Addendum #2 (3/23/04) SAS 99 - - 2,500 - - GASS 34 - - 3,000 - - CAFR preparation - - 8,650 - - Addendum #3 (3/24/05): Wording change only - - - - Addendum #4 (5/25/05): SAS 99 - - - 2,500 - GASS 34 - - - 3,000 Addendum #5 (1/18/06): Base fee - - - - 36,830 SAS 99 - - - - 2,500 GASS 34 - - - - 3,000 $34,765 $38,440 $50,280 $42,330 $42,330 If you have any questions, please call me. Sincerely, HLB TAUTGES REDPATH, LTD. b~ David J. Mol, CPA DJM:clg 481ll White i:JU:J Suulh 'JVhite Bear Minnesotd Milliiesutd lJ~)l 42fi 7UlJlJI i 48IJ 4!:JljlJ lJ51 [iDlJ4 Fax www.hibtunlJi :iUCJ4 SUite '13 Ltd. Certified Public Accountants and Consultants January 19, 2006 City of Columbia Heights 590 40th Avenue Northeast Columbia Heights MN 55421-3878 Addendum #5 To Engagement Letter Dated August 21, 2001 Weare pleased to confirm our understanding of the services we are to provide the City of Columbia Heights, Minnesota for the year ending December 31, 2005. 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 Columbia Heights, Minnesota as of and for the year ending December 31, 2005. We will provide an "in-relation-to" opinion on the combining and individual nonmajor fund financial statements, supplementary information and schedule of expenditures of federal awards. The document will include the following supplementary information required by generally accepted accounting principles that 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 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 Statistical section · State Legal Compliance Audit . Federal Single Audit. o White Beal White Elear Lake, Minnesota 11U 6:5 I 701lU b51 1:JU3 South Huad SUite 1 Ha:;tlngs, Minnesota 1i51 48U 489U b51 5U[)4 iiU(J4 VVV'J\N. hi btl.COITl City of Columbia Heights Contract for Auditing Services January 19,2006 Page 2 Audit Obiectives The objective of our audit is the expression of an opinion as to whether your 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 financial statements taken as a whole. The objective also includes reporting 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 in accordance with Government Auditing Standards. · Internal control related to major programs and an opinion on compliance with laws, regulations, and the provisions of contracts or grant agreements that could have a direct and material effect on each major program in accordance with the Single Audit Act Amendments of 1996 and OMB Circular A-B3, Audits of States, Local Governments, and Non-Profit Organizations. The reports on internal control and compliance will each include a statement that the report is intended for the information and use of the audit committee, management, specific legislative or regulatory bodies, federal awarding agencies, and if applicable, pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. 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, the Single Audit Act Amendments of 1996; the provisions of OMB Circular A-B3, and the minimum procedures for auditors as prescribed by MS 6.65, and will include tests of the accounting records, a determination of major programs in accordance with OMB Circular A-133, and other procedures we consider necessary to enable us to express such an opinion and to render the required reports. If our opinion on the financial statements or the Single Audit compliance opinion is 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 fonned an opinion, we may decline to express an opinion or to issue a report as a result of this engagement. 694981.1 City of Columbia Heights Contract for Auditing Services January 19, 2006 Page 3 Manaaement 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 U.S. generally accepted accounting principles and that federal award programs are managed in compliance with applicable laws and regulations and the provisions of contracts and grant agreements. Management is responsible for making all financial records and related information available to us, including any significant vendor relationships in which the vendor has the responsibility for program compliance. 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. We will advise you about appropriate accounting principles and their application and will assist in the preparation of your financial statements, including the schedule of expenditures of federal awards, but the responsibility for the financial statements remains with you. 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. That responsibility includes the establishment and maintenance of adequate records and effective internal control over financial reporting and compliance, the s election and application 0 f accounting principles, and the safeguarding of assets. Management is responsible for 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 could have a material effect on the financial statements. You are also responsible for 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 a ppIicable 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. Additionally, as 6949R I .1 City of Columbia Heights Contract for Auditing Services January 19,2006 Page 4 required by OMB Circular A-133, it is management's responsibility to follow up and take corrective action on reported audit findings and to prepare a summary schedule of prior audit findings and a corrective action plan. 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. As required by the Single Audit Act Amendments of 1996 and OMB Circular A-133, our audit will include tests of transactions related to major federal award programs for compliance with applicable laws and regulations and the provisions of contracts and grant agreements. 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 willi nfonn you 0 f any material errors and fraudulent financial reporting 0 r 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. We will include such matters in the reports required for a Single Audit. Our responsibility as auditors is limited to the period covered by our audit and does not extend to matters that might arise during any later periods for which we are not engaged as auditors. Our procedures will include tests of documentary e vidence 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 a ttorneys asp art 0 f the engagement, and t hey may b ill you for responding to this inquiry. At the conclusion of our audit, we will also request certain written representations from you about the financial statements and related matters. 69498] .1 City of Columbia Heights Contract for Auditing Services January 19, 2006 Page 5 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 opinions on the City of Columbia Heights, Minnesota's financial statements and on its compliance with requirements applicable to major programs. 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 b e 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 relative to financial statements 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. As required by OMB Circular A-133, we will perform tests of controls over compliance to evaluate the effectiveness of the design and operation of controls that we consider relevant to preventing or detecting material noncompliance with compliance requirements applicable to each major federal award program. However, our tests will be less in scope than would be necessary to render an opinion on those controls and, accordingly, no opinion will be expressed in our report on internal control issued pursuant to OMB Circular A-133. 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 standards established by the American Institute of Certified Public Accountants. Reportable conditions involve matters corning 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 and OMB Circular A-i33. A049R 1 1 City of Columbia Heights Contract for Auditing Services January 19, 2006 Page 6 Audit Procedures-Compliance Our audit will be conducted in accordance with the standards referred to in the section titled Audit Objectives. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we will perform tests of the City of Columbia Heights, Minnesota's compliance with applicable laws and regulations and the provisions of contracts and agreements, including grant agreements. However, the objective of those procedures 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. OMB Circular A-133 requires that we also plan and perform the audit to obtain reasonable assurance about whether the auditee has complied with applicable laws and regulations and the provisions of contracts and grant agreements applicable to major programs. Our procedures will consist of the applicable procedures described in the OMB Circular A-133 Compliance Supplement for the types of compliance requirements that could have a direct and material effect on each of the City of Columbia Heights, Minnesota's major programs. The purpose of those procedures will be to express an opinion on the City of Columbia Heights, Minnesota's compliance with requirements applicable to major programs in our report on compliance issued pursuant to OMB Circular A-133. Audit Administration, Fees and Other We understand that your employees will prepare all cash or other confirmations we request and will locate any invoices selected by us for testing. At the conclusion of the engagement, we will complete the appropriate sections of and sign the Data Collection Form that summarizes our audit findings. We will provide copies of our reports to the City of Columbia Heights, Minnesota; however, it is management's responsibility to submit the reporting package (including financial statements, schedule 0 f expenditures of federal awards, summary schedule of prior audit findings, auditors' reports, and a corrective action plan) along with the Data Collection Form to the designated federal clearinghouse and, if appropriate, to pass-through entities. The Data Collection Form and the reporting package must be submitted within the earlier of 30 days after receipt of the auditors' reports or nine months after the end of the audit period, unless a longer period is agreed to in advance by the cognizant or oversight agency for audits. At the conclusion of the engagement, we will provide information to management as to where the reporting packages should be submitted and the number to submit. The audit documentation for this engagement is the property of HLB Tautges Redpath, Ltd. and constitute 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. Govemment Accountability Office 694981, I City of Columbia Heights Contract for Auditing Services January 19, 2006 Page 7 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 photocopies of selected audit documentation to regulators or grantor agencies. These parties may intend, or decide, to distribute the photocopies of information contained therein to others, including other governmental agencies. The audit documentation for this engagement will be retained for a minimum of three years after the date the auditors' report is issued or for any additional period requested by the federal agencies awarding grants. If we are aware that a federal awarding agency, pass- through entity, or auditee is contesting an audit finding, we will contact the party contesting the audit finding for guidance prior to destroying the workpapers. 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: Base fee GASB 34 SAS 99 $36,830 3,000 2,500 Total $42,330 Our standard hourly rates vary according to the degree of responsibility involved and the experience level of the personnel assigned to your audit. Our invoices for these fees will be rendered each month as work progresses and are payable on presentation. The above fee is based on anticipated cooperation from your personnel, completion of workpapers per the client to prepare list by your personnel, and the assumption that unexpected circumstances will not be encountered during the audit. If significant additional time is necessary, we will discuss it with you and arrive at a new fee estimate before we incur the additional costs. Government Auditing Standards requires that we provide you with a copy of our most recent external peer review report and any letter of comment, and any subsequent peer reports or letters of comment received during the period of contract. Our 2004 peer review report and letter of comment accompanies this letter as Appendix A. City of Columbia Heights Contract for Auditing Services January 19, 2006 Page 8 We appreciate the opportunity to be of service to the City of Columbia Heights, Minnesota and believe this letter accurately summarizes the significant terms of our engagement. If you have any questions, please let us know. If you agree with the terms of our engagement as described in this letter, please sign the enclosed copy and return it to us. Very truly yours, HLB TAUTGES REDPATH, LTD. -..... David J. Mol, CPA Response: This letter correctly sets forth the understanding of the City of Columbia Heights, Minnesota: By: Title: Date: 694981.1 Mt<mller 1\11%0"" SOdely 01 ~llled i'lIbfiC A((oontal1$ t,l"mtlel: Private Com~ Pl.'i>dlCt ~:m tli'lWon 01 Flrm~ I\mt>Ntiln In~'llule 01 (~lfle4 ?[''''k ~('Qllflklrll; Henry A. Liem p.e. To the Shareholders HLB Tautges, Redpath, Ltd. We have reviewed the system of quality control for the accounting and audit practice of !iLS 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 described in the Statc.'111cn1s 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 aU material respects. OUI' responsibility is to express an opinion on the design of the system of quality control and the fmn's compliance ""ith 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 frrm. interviewed firm persolmel and obtained an understanding of the nature of the tirol'S accounting and auditing practice, and the design of the u.rm'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 sta!l.dards Md CQmpliMCe with the firm's system Qf quality control. The eng~lgements selected represented it reasonable cross~section of the fl1m.'s accounting and auditing practice \\1th emphasis on higher-risk engagements. The engagements selected included among others, audits of Employee Benefit Plans and engagements performed tmder Govemment 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 beHeve that the procedures we performed provide a reasonable basis for our opinion. In performing our review, we obtail1ed an understanding of the system of quaHty control for the firm's accotmting and auditing practice. In addition, we tested compliance with the firm's quality control policies and procedures to the extent we considered appropriate. 'Inese tests covered the application of the firm's policies and procedures on selccted 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 noncompliance with it. are limitations in effectiveness of any quality control and therefore noncompliance with the system of quality control may occur and not of quality to fbture Certified Public A<cOOrltill\ts 4455 East Camelback Rood Suit!! 5290 l'1loel\ix, Arizona 8S<l18 (602} 667.(;040 (602i 667.6039 Appendix A Page 1 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 accQunting and audit practice of IlLS 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 AICP A and was compiled with during the year then ended to provide the firm with reasonable assurance of conforming with professional standards. I~q..~.,~(.. Phoenix, Arizona January 21, 2005 CITY OF COLUMBIA HEIGHTS DATE: APRIL 11, 2006 TO: WALT FEHST CITY MANACER FROM: WILLIAM ELRITE . v FINANCE DIRECTOR RE: 2005AUDITENCACEMENTLETTER Attached are two copies of the audit engagement lettcr for the 2005 audit that is being completed in 2006. I did not forward these to you earlier as I had some questions that I wanted to discuss with the City attorney. My primary concern was to reaffirm with the City attorney that it is acceptable to continue with thc previous contract we have with the auditors at the same rates and terms that were previously approved by the City Council without going back to the City Council for additional approval. The City attorney has verbally verified that there is no problem with doing this. The example he used was the contract for City attorney services, which simply continues on from year to year without any additional City Council approval as there are no changes in the tern1s, conditions or payment rates. Based on this discussion, I am forwarding the engagement letters to you for your signature. WE:sms 0604111CM Attachment: EngagementLetter.p df