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2002 City Records Audit 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: 1swwcpa@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, aUf 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 ~Iic Accountants By: /4--4. .$7~ Thomas E. Singleton, CPA RESPONSE: This letter correctly sets forth the understanding of the City of Salina, Kansas, ~ By: " 'fJt2t;Â Title ~¿;f"" Á Date: 4.Atb "/ o?¿2:/2- J 709 Engagement Letter to City of Salina02,doc