HomeMy WebLinkAboutContract 1953
August 23, 2006
William Elrite
City of Columbia Heights
590 40th Avenue Northeast
Columbia Heights MN 55421-3878
Dear Bill:
Enclosed are two copies of the 2006 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 #6. For your reference, the table below summarizes the chronology
of engagement letter addendums.
2001 2002 2003 2004 2005 2006
original engagement letter (8/21/0 I ) $ 34,765 $ 35,440 $ 36,130 $ 36,830 $ - $ -
addendum #1:
SAS 99 - - - - - -
GASB 34 - 3,000 - - -
addendum #2 (3/23/04)
SAS 99 - - 2,500 - - -
GASB 34 - - 1,000 - - -
CAFR preparation - - 8,650 - - -
addendum #3 (3/24/05):
Wording change only - - - - - -
addendum #4 (5/25/05):
SAS 99 - - - 2,500 - -
GASB 34 - - - 3,000 - -
addendum #5 (1/18/06):
Base fee - - - - 36,830 -
SAS 99 - - - - 2,500 -
GASB 34 - - - - 3,000 -
addendum #6 (08/23/06):
Base fee - - - - - 36,830
SAS 99 - - - - - 2,500
GASB 34 - - - - - 3,000
(I I Increased scope related to additional
standards
- - - - - 2,000
$34,765 $38,440 $50,280 $42,330 $42,330 $44,330
III Additional state legal compliance sections (other miscellaneous provisions and tax increment provisions;
additional accounting standards (GASB Statements 40 through 47); additional auditing standards (SAS 104
through III).
If you have any questions, please call me.
City of Columbia Heights
Contract for Auditing Services
August 23,2006
Page 2
Sincerely,
HLB TAUTGES REDPATH, LTD.
David J. Mol, CPA
DJM:clc
Enclosure
825279.1
August 23,2006
City of Columbia Heights
590 40th Avenue Northeast
Columbia Heights MN 55421-3878
Addendum #6 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, 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 Columbia
Heights, Minnesota as of and for the year ending December 31, 2006.
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
Also, the following information accompanying the basic financial statements will be
subjected to the auditing procedures applied in our audit of the financial statements
upon which we will provide an opinion in relation to the basic financial statements:
o Schedule of expenditures of federal awards
o Combining and individual fund statements
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
City of Columbia Heights
Contract for Auditing Services
August 23,2006
Page 2
. State Legal Compliance Audit
. Copying and binding of financial statements
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 additional information
referred to in the first paragraph when considered in relation to the basic financial statements
taken as a whole. The objective also includes reporting 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 in accordance
with Government Auditing Standards.
. Internal control related to major programs and an opinion (or disclaimer of 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-
133, 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 and the provisions of OMB Circular A-133, and will include tests of the accounting
records, a determination of major programs in accordance with Circular A-133, and other
procedures we consider necessary to enable us to express such opinions and to render the
required reports. If our opinions on the financial statements or the Single Audit compliance
opinion 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.
825279.\
City of Columbia Heights
Contract for Auditing Services
August 23,2006
Page 3
Management 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, 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 infonnation. 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 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 Columbia Heights, Minnesota and the respective
changes in financial position and, where applicable, cash flows 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 intonning 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 infonning 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. Additionally, as required by OMB Circular A-l33, it is management's
825279.1
City of Columbia Heights
Contract for Auditing Services
August 23,2006
Page 4
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. The
summary schedule of prior audit findings should be available for our review.
As part of the audit, we will provide template financial statements, and related notes, and
copy and bind the financial statements. In accordance with Government Auditing Standards,
you will be required to review and approve those template 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. 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
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 or major
programs. However, we will infonn you of any material errors and any 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. 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 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
825279. ]
City of Columbia Heights
Contract for Auditing Services
August 23,2006
Page 5
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 request 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 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 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 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
controi 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 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 and OMB Circular A-I33.
825279.1
City of Columbia Heights
Contract for Auditing Services
August 23,2006
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-i33 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
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confirmations we request and will locate any documents 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 of
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 infonnation 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 constitutes confidential infonnation. 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
825279. i
City of Columbia Heights
Contract for Auditing Services
August 23, 2006
Page 7
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. Furthennore, 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.
The audit documentation for this engagement will be retained for a minimum of five
years after the report release 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(ies) contesting the audit
finding for guidance prior to destroying the audit documentation.
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
Scope increase related to
additional standards
$36,830
3,000
2,500
2,000
Total
$44,330
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
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.
825279.1
City of Columbia Heights
Contract for Auditing Services
August 23,2006
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:
Date:
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825279.1
Member,
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Henry A. liem
L P.C.
To the Shareholders
I ILB Tautges, Redpath, Ltd.
V/e have reviewed the system of quality comrol [or the accounring and audit practice of
RLH Tautges, Redpath, Ltd. (tbe firm) in effect for the year ended September 30,2004.
A system of quality i,;onlrol encompa:;,ses the fi.nn's organizational s".ructure, the policies
adopted <md procedures established to provide it with rcasonahle assurance of
conforming with professional sta.ndards. The elements of quality control are described in
the StaLCm~Ilts un QLlality Control Sttimlards issued by the .A..merican Institute of CPAs
(AICPA), The firm is responsible for' designing a system of qualiTY control and
complying vvith it to provide the finD reasonable assunu:ce of conforming with
professional standards in an material respects. Our responsibility is to express an opinion
on the dC$ign of the system of quality control and t.be firm's compliance with it.s system
of quality control based on our review,
OUf review ...vas wnducted in accordance 'with standards established by the Peer Review
Buard of the Ale? A. During our revic\\', we read req uired representations trom the :tinn,
intentiev....ed linn personnel and obtained all understanding of the nature of the fim1's
accounting and auditing practice, and the design of the tinn's system of quality control
suilicicnt to assess the risks implicit in its practice. Based on our assessments, we
selected engagements and oorninistrative files to test [or cunfunnity wilh professional
standards and compliance \"'ith the lion'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 Audiling Standards. Prior to conch,ding the review, we reassessed the
adequacy of the scope of the peer review prucedLlfes and met with iion r11<magcmilnl to
discuss the results of our revie\v. We believe that the procedures We perfonned provide a
reasonable basis f0r our opinion.
In performing our review, we obtained an understanding of the system of quality control
for the fim1's accounting ,mJ aw.:li,ing practice. In addition, \ve tested compIla..'1ce with
the finn's quality contrnl policies and procedures to the extent \w cunsidereu appropriate,
These tests covered the application of the firm's policies and procedures on selected
er;gagcmenl'i, OUf review was based on selcckd tcsts therefore it would nol necessarily
detect an weaknesses in rhe system of quality control or all instances of noncompliance
........ith it. There are inherent limitations in the e:tTeetivcness of aIlY system of qualily
control and therefore nuncompliance 'Nitl: the system of quality control may occur and
not be delected. PLljection of any eVl1lllation of a system of quality contrallt) future
C~r1ifi"d Public Aa'JCJr'lJ"'l~
4455 Easl C.~rnelb,lCk Rwd
Suite E290
P!lOcr>,ix. ,Vizor," aSD' B
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Appendix A
Page 1
Appendix A
Page 2
1 [[.11 Tautges, Hedpath, 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 dl::gree of compliance "vitI, the policies
or procedures may deteriorate.
b our opinion, the system of quality control jor the accounting and audit practice of lILH
Tautges, Redpath, Ltd. in effect tor the year ended September 30, 2004, has been
designed to meet the requirements of the quality control shmdards for ill1 accOlmting and
auditing practice established by the AICPA and "vas compiled with during the year then
ended to provide the firm with reasonable assurance of conforming with professional
standards.
/~ q~~"r:'.~
Phoenix, Arizona
January 2 L 2005