6.2 Agr Audit 2002
CITY OF SALINA
REQUEST FOR CITY COMMISSION ACTION
DATE
11/04/02
TIME
4:00 P,M.
AGENDA SECTION
NO:
ORIGINATING DEPARTMENT:
APPROVED FOR
AGENDA:
6
ITEM
NO.
Page 1
2
BY: Rod Franz
BY:~<
ITEM:
Resolution Number 02-5887 authorizing the Mayor to execute an agreement between the City of
Salina and Lowenthal, Singleton, Webb, and Wilson PA, Certified Public Accountants for an Audit of
City records for the year ending December 31, 2002,
BACKGROUND:
The City of Salina first contracted for audit services with Lowenthal, Singleton, Webb, and Wilson
(LSWW) to conduct the audit for the 2001 fiscal year. The firm was selected in a competitive
Request for Proposal (RFP) process at that time. The City of Salina has normally maintained a
relationship with an auditing firm for a number of years, rather than doing a competitive selection
each year. The auditing firm thus becomes more familiar with City practices and policies and is able
to do a more thorough review. In addition, there is a great deal less effort on the part of both the
firm and the City in preparing, responding to, and evaluating an RFP each year.
The first year of an engagement is always somewhat challenging, as there is a significant education
process that must occur for both parties. However, our first year of experience with LSWW was
acceptable. Their staff was professional and efficient, and worked through the auditing procedures
with a minimum of disruption for the office.
Lowenthal, Singleton, Webb, and Wilson have proposed a renewal letter of engagement for our
fiscal year ending December 31, 2002. The proposed letter appears to be in standard form, and
includes a fee of $32,400. This compares to the fee last year of $31,500, and is reasonable for the
services provided
RECOMMENDATION:
Adopt Resolution Number 02-5887 authorizing the renewal letter of engagement with Lowenthal,
Singleton, Webb and Wilson for 2002 audit services.
Client Copy
LOWENTHAL SINGLETON WEBB & WILSON
PROFESSIONAL ASSOCIATION
David A. Lowenthal, CPA
Thomas E. Singleton, CPA
Patricia L. Webb, CPA
Thomas G, Wilson, CPA
CERTIFIED PUBLIC ACCOUNTANTS
900 Massachusetts, Suite 301
Lawrence, Kansas 66044-2868
Phone: (785) 749-5050
Fax: (785) 749-5061
E-mail: Iswwcpa@lswwcpa.com
Kenneth R, Hite, CPA
Mary A. LeGresley, CPA
Audrey M, Odennann, CPA
Members of American Institute
and Kansas Society of
Certified Public Accountants
October 18, 2002
City Commission
City of Salina
300 West Ash Street
Salina, KS 67402
We are pleased to confirm our understanding of the services we are to provide the City of Salina, Kansas for the
year ended December 31, 2002. We will audit the general purpose financial statements of the City of Salina,
Kansas for the year ended December 31,2002,
The objective of our audit is the expression of an opinion as to whether the general purpose financial statements are
fairly presented, in all material respects, in conformity with generally accepted accounting principles and to report on
the fairness of additional information when considered in relation to the general purpose financial statements taken
as a whole, Our audit will be conducted in accordance with generally accepted auditing standards, the standards for
financial audits contained in "Government Auditing Standards" issued by the Comptroller General of the United
States, the Kansas Municipal Audit Guide, the Single Audit Act of 1984 as amended in 1996, and OMB Circular A-
133, and will include tests of the accounting records of the City and other procedures we consider necessary to
enable us to express such an opinion. If our opinion on the general purpose financial statements 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 unable to express an opinion, we may decline to express an opinion or may not issue a report as a result of
this engagement.
The management of the City is responsible for establishing and maintaining internal control. 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
general purpose financial statements in accordance with generally accepted accounting principles,
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 opinion on the
City's general purpose financial statements.
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 misstatements resulting from illegal acts and other
noncompliance matters that have a direct and material effect on the general purpose financial statements. (Tests of
controls 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 internal control and, accordingly, no opinion will be
expressed.
City Commission
October 18, 2002
Page 2
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 general purpose
financial statements,
Identifying and ensuring that the City complies with laws, regulations, contracts, and agreements is the responsibility
of management. As part of obtaining reasonable assurance about whether the general purpose financial statements
are free of material misstatement, we will perform tests of the City's compliance with applicable laws and regulations
and the provisions of contracts and agreements, However, the objective of our audit will not be to provide an
opinion on overall compliance and we will not express such an opinion,
Our procedures will include tests of documentary evidence supporting the transactions recorded in the accounts,
and may include tests of 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 attorney as part of the engagement, and he 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.
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 caused by error or fraud, Because of
the concept of reasonable assurance and because we will not perform a detailed examination of all transactions,
there is a risk that a material misstatement may exist and not be detected by us, In addition, an audit is not
designed to detect errors, fraud, or other illegal acts that are immaterial to the general purpose financial statements.
However, we will inform you of any material errors and any fraud that come to our attention. We will also inform you
of any other illegal acts 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 matters that might arise during any later periods for
which we are not engaged as auditors,
Management is responsible for making all financial records and related information available to us, 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, but the responsibility for the financial statements
remains with you, That responsibility includes the establishment and maintenance of adequate records and effective
internal control over financial reporting, the selection and application of accounting principles, and the safeguarding
of assets,
The workpapers for this engagement are the property of Lowenthal, Singleton, Webb & Wilson, Professional
Association, Certified Public Accountants and constitute confidential information. However, we may be requested to
make certain workpapers available pursuant to authority given by law or regulation, If requested, access to such
workpapers will be provided under the supervision of firm personnel. Furthermore, upon request, we may provide
photocopies of selected workpapers to governmental agencies who may intend, or decide, to distribute the
photocopies or information contained therein to others, including other governmental agencies,
709 Engagement Letter to City of Salina02,doc
City Commission
October 18, 2002
Page 3
We agree that our gross fees plus out-of-pocket costs (such as report reproduction, typing, postage, travel, copies,
telephone, etc,), including expenses for the above services, will not exceed $32,400. Our invoices for these fees will
be rendered each month as work progresses and are payable on presentation, In accordance with our firm policies,
work may be suspended if your account becomes 30 days or more overdue and may not be resumed until your
account is paid in full. If we elect to terminate our services for nonpayment, you will be obligated to compensate us
for all time expended and to reimburse us for all out-of-pocket costs through the date of termination, The above fee
is based on anticipated cooperation from 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.
We understand that this agreement is subject to the terms and conditions contained in the City's RFP for audit
services dated October 31, 2001. Included within the City's, above mentioned, RFP terms and conditions are the
specifications that all fieldwork be completed by May 1, 2003, a draft of the audit report and management
recommendations be submitted to the Director of Finance and Administration for review by June 1, 2003, and the
final report shall be delivered to the Director of Finance and Administration by June 15, 2003, absent circumstances
beyond our control.
We appreciate the opportunity to be of service to the City of Salina, Kansas and believe this letter accurately
summarizes the significant terms of our engagement. If you have any questions, please let me 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,
LOWENTHAL SINGLETON WEBB & WILSON
Professional Association
Certified ~ic Accoun~ts
By: ßCe ~*-
Thomas E. Singleton, CPA
RESPONSE:
This letter correctly sets forth the understanding of the City of Salina, Kansas,
By:
Title
Date:
709 Engagement Letter to City of Salina02,doc