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HomeMy WebLinkAbout2021-4041Contract #2021- 4041 FEEPC.A..ATN.H A N D November 23, 2021 Joe Kloiber City of Columbia Heights 590 40th Avenue Northeast Columbia Heights, MN 55421 We are pleased to confirm our understanding of the services we are to provide the City of Columbia Heights, Minnesota (the City) for the year ending December 31, 2021. Audit Scope and Objectives We will audit the financial statements of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information, and the disclosures, which collectively comprise the basic financial statements of the City of Columbia Heights, Minnesota as of and for the year then ending December 31, 2021. Accounting standards generally accepted in the United States of America (GAAP) 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 (GAAS). 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 GAAP and will be subjected to certain limited procedures, but will not be audited: • Management's Discussion and Analysis • Budgetary Comparison Schedules presented as RSI • Schedule of Changes in the Total OPEB Liability and Related Ratios • Schedules ofProportionate Share of Net Pension Liability • Schedules of Pension Contributions • Schedule of Changes in Net Pension Liability and Related Ratios 55 511 Street East, Suite 1400, St. Paul, MN, 55101 www.redpathcpas.com City of Columbia Heights, Minnesota Contract for Auditing Services Page 2 We have also been engaged to report on supplementary information other than RSI that accompanies the City's 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 GAAS, and we will provide an opinion on it in relation to the financial statements as a whole in a report combined with our auditor's report on the financial statements: Combining and Individual Nonmajor Fund Statements and Schedules Schedule of Expenditures of Federal Awards (if applicable) In connection with our audit of the basic financial statements, we will read the following other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report. • Introductory Section ■ Statistical Section The objectives of our audit are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error; issue an auditor's report that includes our opinion about whether your financial statements are fairly presented, in all material respects, in conformity with GAAP; and report on the fairness of the supplementary information referred to in the second paragraph when considered in relation to the financial statements as a whole. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards will always detect a material misstatement when it exists. Misstatements, including omissions, can arise from fraud or error and are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment of a reasonable user made based on the financial statements. The objectives also include reporting on internal control over financial reporting and compliance with provisions of laws, regulations, contracts, and award agreements, noncompliance with which could have a material effect on the financial statements in accordance with Government Auditing Standards. We will also issue a report on compliance based on the Minnesota Legal Compliance Audit Guide for Cities, promulgated by the State Auditor pursuant to Minnesota Statute 6.65. 3580452 City of Columbia Heights, Minnesota Contract for Auditing Services Page 3 Auditor's Responsibilities for the Audit of the Financial Statements We will conduct our audit in accordance with GAAS; the standards for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the minimum procedures for auditors as prescribed by Minnesota Statute 6.65, and will include tests of your accounting records of the City and other procedures we consider necessary to enable us to express such opinions. As part of an audit in accordance with GAAS and Government Auditing Standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We will evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management. We will evaluate the overall presentation of the financial statements, including the disclosures, and determine whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We will plan and perform the audit to obtain reasonable 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 waste and abuse is subjective, Government Auditing Standards do no expect auditors to perform specific procedures to detect waste or abuse in financial audits nor do they expect auditors to provide reasonable assurance of detecting waste or abuse. Because of the inherent limitations of an audit, combined with the inherent limitations of internal control, and because we will not perform a detailed examination of all transactions, there is an unavoidable risk that some material misstatements may not be detected by us, even though the audit is properly planned and performed in accordance with GAAS and Government Auditing Standards. 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 the appropriate level of management of any material errors, fraudulent financial reporting, or misappropriation of assets that comes to our attention. We will also inform the appropriate level of management 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 any later periods for which we are not engaged as auditors. We will also conclude, based on the evidence obtained, whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time. 3580452 City of Columbia Heights, Minnesota Contract for Auditing Services Page 4 Our procedures will include tests of documentary evidence supporting the transactions recorded in the accounts, tests of the physical existence of inventories, and direct confirmation of certain assets and liabilities by correspondence with selected creditors and financial institutions. We will also request written representations from your attorneys as part of the engagement. Audit Procedures — Internal Control We will obtain an understanding of the entity and its environment, including internal control relevant to the audit, sufficient to identify and assess the risks of material misstatement of the financial statements, whether due to error or fraud, and to design and perform audit procedures responsive to those risks and obtain evidence that is sufficient and appropriate to provide a basis for our opinions. Tests of controls may be performed to test the effectiveness of certain controls that we consider relevant to preventing and detecting errors and fraud that are material to the financial statements and to preventing and detecting misstatements resulting from illegal acts and other noncompliance matters that have a direct and material effect on the financial statements. Our tests, if performed, will be less in scope than would be necessary to render an opinion on internal control and, accordingly, no opinion will be expressed in our report on internal control issued pursuant to Government Auditing Standards. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentation, or the override of internal control. An audit is not designed to provide assurance on internal control or to identify significant deficiencies or material weaknesses. Accordingly, we will express no such opinion. 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 Cities requires that we test whether the entity has complied with certain provisions of Minnesota statutes. Our audit will include such tests of the accounting records and other procedures as we consider necessary in the circumstances. 3580452 City of Columbia Heights, Minnesota Contract for Auditing Services Page 5 Other Services We will also assist in preparing the financial statements and related notes of the City in conformity with accounting principles generally accepted in the United States of America based on information provided by you, and assist with preparation of pension and OPEB workpapers and journal entries based on information provided by you, PERA and actuaries. These nonaudit services do not constitute an audit under Government Auditing Standards and such services will not be conducted in accordance with Government Auditing Standards. We will perform the services in accordance with applicable professional standards. The other services are limited to financial statement, pension and OPEB services previously defined. We, in our sole professional judgment, reserve the right to refuse to perform any procedure or, take any action that could be construed as assuming management responsibilities. Responsibilities of Management for the Financial Statements Our audit will be conducted on the basis that you acknowledge and understand your responsibility for designing, implementing, establishing, and maintaining effective internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, and for evaluating and monitoring ongoing activities to help ensure that appropriate goals and objectives are met; following laws and regulations; and ensuring that management and financial information is reliable and properly reported. Management is also responsible for implementing systems designed to achieve compliance with applicable laws, regulations, contracts, and grant agreements. You are responsible for the selection and application of accounting principles, for the preparation and fair presentation of the financial statements and all accompanying information in conformity with accounting principles generally accepted in the United States of America, and for 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 and for the accuracy and completeness of that information (including information from outside of the general and subsidiary ledgers). You are also responsible for providing us with (1) access to all information of which you are aware that is relevant to the preparation and fair presentation of the financial statements, such as records, documentation, identification of all related parties and all related -party relationships and transactions, and other matters; (2) additional information that we may request for the purpose of the audit; and (3) unrestricted access to persons within the entity from whom we determine it necessary to obtain audit evidence. At the conclusion of our audit, we will require certain written representations from you about your responsibilities for the financial statements; compliance with laws, regulations, contracts, and grant agreements; and other responsibilities required by GAAS and Government Auditing Standards. 3580452 City of Columbia Heights, Minnesota Contract for Auditing Services Page 6 Your responsibilities include adjusting the financial statements to correct material misstatements and confirming to us in the written 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 of each opinion unit 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 entity 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. Your responsibilities include informing us of your knowledge of any allegations of fraud or suspected fraud affecting the entity 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 fraud and noncompliance with provisions of laws, regulations, or contracts or grant agreements that we report. 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 include the audited financial statements with any presentation of the supplementary information that includes our report thereon. Your responsibilities include acknowledging to us in the written representation letter that (1) you are responsible for presentation of the supplementary information in accordance with GAAP; (2) you believe the supplementary information, including its form and content, is fairly presented in accordance with GAAP; (3) the methods of measurement or presentation have not changed from those used in the prior period (or, if they have changed, the reasons for such changes); and (4) you have disclosed to us any significant assumptions or interpretations underlying the measurement or presentation of the supplementary information. With regard to publishing the financial statements on your website, you understand that websites are a means of distributing information and, therefore, we are not required to read the information contained in those sites or to consider the consistency of other information on the website with the original document. Management is responsible for establishing and maintaining a process for tracking the status of audit findings and recommendations. Management is also responsible for identifying and providing report copies of previous financial audits, attestation engagements, performance audits or other studies related to the objectives discussed in the Audit Scope and 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. 3580452 City of Columbia Heights, Minnesota Contract for Auditing Services Page 7 You agree to assume all management responsibilities relating to the financial statements and related notes, the preparation of pension and OPEB workpapers and journal entries, and any other nonaudit services we provide. You will be required to acknowledge in the management representation letter our assistance with the preparation of the financial statements and related notes, the pension and OPEB workpapers and journal entries, and that you have reviewed and approved the financial statements and related notes, including the pension and OPEB workpapers and journal entries, prior to their issuance and have accepted responsibility for them. Further, you agree to oversee the nonaudit services by designating an individual, preferably from senior management, with suitable skill, knowledge, or experience; evaluate the adequacy and results of those services; and accept responsibility for them. Engagement Administration, Fees and Other We understand that your employees will prepare all cash, accounts receivable, or other confirmations we request and will locate any documents selected by us for testing. We will schedule the engagement based in part on deadlines, working conditions, and the availability of your key personnel. We will plan the engagement based on the assumption that your personnel will cooperate and provide assistance by performing tasks such as preparing requested schedules, retrieving supporting documents, and preparing confirmations. If, for whatever reason, your personnel are unavailable to provide the necessary assistance in a timely manner, it may substantially increase the work we have to do to complete the engagement within the established deadlines, resulting in an increase in fees over our original fee estimate. 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 Redpath and Company, Ltd. and constitutes confidential information. However, subject to applicable laws and regulations, audit documentation and appropriate individuals will be made available upon request and in a timely manner to a federal agency providing direct or indirect funding, or the U.S. Government Accountability Office for the 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 Redpath and Company, Ltd. personnel. Furthermore, upon request, we may provide copies of selected audit documentation to the aforementioned parties. These parties may intend or decide to distribute the copies or information contained therein to others, including other governmental agencies. 3580452 City of Columbia Heights, Minnesota Contract for Auditing Services Page 8 The audit documentation for this engagement will be retained for a minimum of five years after the report release date or for any additional period requested by regulators. If we are aware that a federal awarding agency 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. The AICPA Code of Professional Conduct requires Redpath to maintain our independence with regards to certain attestation services provided to the City. These rules require the City to take responsibility for all nonattest services. Redpath cannot serve as custodian for your data in such a way that your data is incomplete and accessible only through Redpath or the Redpath portal. As such, any financial report, reconciliation, document, and calculation (depreciation schedules, journal entries, etc.) that we prepare or update on your behalf will be sent to you at the completion of each attest or nonattest service. You are responsible for downloading and maintaining these records as well as all supporting documents generated in the normal course of business until the retention period expires. David J, Mol, CPA is the engagement partner and is responsible for supervising the engagement and signing the reports or authorizing another individual to sign them. We expect to begin our audit on approximately April 4, 2022 and to issue our reports no later than June 15, 2022. Unless additional work is requested or required, our fee for these services will be as follows: 2021 Financial audit, including copying and binding of CAFR $37,000 Sin le audit assumes one major program) $ 3,600 Nonaudit services related to GASB 68 and 75 disclosures/calculations $ 2,500 Out-of-pocket costs, such as confirmation and courier fees, will be billed in addition to the fees stated above. We bill our fees monthly as work progresses and expect payment within thirty (30) days. Each invoice includes a detailed description of the services provided. Amounts over thirty (30) days will be considered delinquent. We reserve the right to assess a 1.5% per month service charge on any balance older than thirty (30) days. In the event it becomes necessary to refer this account to an attorney for collection (whether or not suit is commenced), you will be responsible for payment of all reasonable costs of such collections, including reasonable attorney fees. Our policy is to suspend work if your account becomes overdue by sixty (60) days or more, and work will not be resumed until your account is paid in full. Should we elect to discontinue services, you will be responsible for all time and expenses incurred through the date of termination regardless of whether we have issued a report or other final product. 3580452 City of Columbia Heights, Minnesota Contract for Auditing Services Page 9 The above fees are based on the anticipated scope of services, anticipated cooperation from your personnel and the assumption that unexpected circumstances will not be encountered. the City acknowledges that the following circumstances may result in a change in scope of services and an increase in fees: • Significant audit adjustments, internal control deficiencies or compliance findings, • New accounting standards, • Failure to complete the preparation work by the applicable due dates, • Inaccurate records, • Turnover in your staff, • Significant unanticipated or undisclosed transactions, issues, or other such unforeseeable circumstances, • Delays causing scheduling changes or disruption of previously scheduled timing of work (fieldwork), • Circumstances requiring revisions to work previously completed or delays in resolution of issues that extend the period of time necessary to complete the audit, and/or Our fees do not include bookkeeping or accounting assistance, preparation of audit workpapers, reconciliations or similar assistance (unless otherwise noted in the sections above). Our fees for such services will be dependent on the level of effort required. Services requested by you that are not included in this engagement letter will be billed dependent on the level of effort required and will be subject to all the terms of this letter. Our fees and rates are adjusted annually for general economic factors. If we are requested or required to provide documents or testimony to support litigation proceedings as a professional service on your behalf (that is, litigation in which we are not a party as a result of our engagement), you will be billed for our time at the current standard rates and all out-of-pocket expenditures, including copying costs and legal fees. In recognition of the importance of our employees, it is hereby agreed that the City will not solicit our employees for employment or enter into an independent contractor arrangement with any individual who is or was an employee of Redpath and Company for a period of twelve months following the date of the conclusion of this engagement. If the City violates this non - solicitation clause, the City agrees to pay Redpath and Company a fee equal to 25% of the hired person's last annual salary at Redpath and Company at the time of violation so as to reimburse Redpath and Company for the costs of hiring and training a replacement. 3580452 City of Columbia Heights, Minnesota Contract for Auditing Services Page 10 Reporting We will issue a written report upon completion of our audit of the City's financial statements which will also address other information in accordance with AU-C 720, The Auditor's Responsibilities Relating to Other Information Included in Annual Reports. Our report will be addressed to the city council of the City. Circumstances may arise in which our report may differ from its expected form and content based on the results of our audit. Depending on the nature of these circumstances, it may be necessary for us to modify our opinions, add a separate section, or add an emphasis -of -matter or other -matter paragraph to our auditor's report, or if necessary, withdraw from this engagement. If our opinions are other than unmodified, 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 have not formed opinions, we may decline to express opinions or issue reports, or we may withdraw from 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 the provisions of laws, regulations, contracts, and 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 on compliance and other matters will state (1) that the purpose of the report is solely to describe the scope of testing on internal control and compliance, and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control on compliance, and (2) that the report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. The report will also state that the report is not suitable for any other purpose. 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. 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 this letter and return it to us via email. Sincerely, REDPATH AND COMPANY, LTD. David J. Mol, CPA DJM/aj f 3580452 City of Columbia Heights, Minnesota Contract for Auditing Services Page 11 Response This letter correctly sets forth t e understanding of the City of Columbia Heights, Minnesota. dC�� ��••-r�c1 Signature Signature Finance Director City Manager Title Title 11/23/21 Date Date Nonaudit Services 11/23/21 The individual(s) assigned to oversee the nonaudit services is the finance director, unless indicated below: (name and title) 3580452 Appendix A Heidenreich & Heidenreich, CPAs, PLLC 1{I2t}15.31�svect, su�e� ifY7r? Phoenoa, AZ 85044 14MI704-6301 faz 785-4619 Report on the Firm's System of Quality Control October 7, 2019 To tine Owners or REDPATH AND COMPANY, LTD. and the Peer Review Committee of the Minne-aota Society of CPAs We have reAeared the system of quality control fof the accounting and auditing practice of REDPATH AND COMPANY- LTD_ (the firm) in effect for the year ended May 31, 2V 9- Our peer re:rew was conducted m accordance with the Standards for Performing and Reporting on Peer Reviews established by the Peer Review Board of the An rericasn I ns#itute of Cerii€ied Public ACoountants (Standards)_ A surnmary of the nature, objectives, scope, limitations of, and the procedures performed in a System Rewiew as described in the Standards may be found at vww.aicpa.orgfpcsurnriWy. The sumrnaryr also includes an explanation of how engagements Mentifaed as not pedonrs.-d or reported m conforntfty vvM applicable prnffessnonal standards, if any; are evaluated by a peer reJewuer to determine a peer review rating. Firm's Responsibility The firm is responsible for designing a system of quaW control sad cc rnplying with it to provide the firm with reasonable assurance of performing and reporting in conformity+with applicable professional standards in all material respects_ The farm is also responsible for evaluating actions to promptly rerr'�ediate engagements deemed as not performed or reported in conformity with professional standards: whaen appropriate, and for remedsating weaknesses in its system of quality control, if any - Reef Reviewer's Responsibility Our responsiNit r is to express an opinion on the design of the system of quality control and the firm's ccniplia.nce themmith Nwed on our review. Required Selections and Considerations Engagernents selected for re%lew indt;ded engagements performed under Government AcacWng .Sfa dards, including a cornpliance audit under the Single Audit Act and auffft of employee benefit plans - As a part of our peer review, we considered reviews by regulatory entities as communicated by the firm., if applicable. in determining the nature and extent of our procedures. Opinion In our opinion„ the system of quality control for the accounting and auditiir>'g practice of REDPATH AND COMPANY, LTD_ in effect for the year ended May 31, 2019, has been suitab�j designed and complied with to provide the firm with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects. Firms can receive a rating of pass, pass with deficiency(vs) or fail- REDPATH AND COMPANY, LTD. has received a peer review rating of pass Heidenreich B Heidenreich, CPAs, PLLC 3580452