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8.1 Agr 1998 Audit City Of Salina Request for Commission Action Date Time 10/19/98 4:00 PM AGENDA SECTION: ORIGINATING DEPARTMENT APPROVED NO. FOR AGENDA 8 Finance ITI~M NO, I BY: Rodney Franz BY: ~ ITEM: Resolution Number 98-5348 authorizing the Mayor to execute an agreement between the City of Salina and Agler and Gaeddart Chartered, Certified Public 'Accountants for an audit of City records for the year ending December 31, 1998. BACKGROUND: This will be the fourth year that Agler and Gaeddert will have performed the annual audit for the City of Salina. They have performed well during their prior engagements. The proposed fee for 1998 is $28,500 compared to $27,700 for 1997, $27,200 for the 1996 Audit, and $26,430 for 1995. The change in fee represents a modest inflationary adjustment of slightly less than 3%. RECOMENDATION: Staff feels that the arrangements proposed by the letter of engagement are reasonable and recommends adoption of Resolution 98-5348. RO. Box 1020 · CHARTERED Lucille L. Hinderliter Ottawa, Kansas 66067 Raymond E. Meyer, Jr. (785) 242-3170 Certified Public Accountants September 21, 1998 City COmmissioners City of.Salina Box 736 Salina, KS 67402-0736 We are pleased to confirm our understanding of the services we are to provide for the City of Salina, Kansas for the year ended December 31, 1998. We will audit the general purpose financial statements of the City of Salina as of and for the year ended December 31, 1998. Also, the document we submit to you will include the following additional information that will be subjected to the auditing procedures applied in our audit of the general purpose financial statements: Information for Comprehensive Annual Financial Report, including combining statements by fund type, individual fund and account group statements and supporting schedules. The document will also include statistical data that will not be subjected to our auditing procedures. Our audit will be a single audit 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 Single Audit Act Amendments of 1996; and the provisions of OMB Circular A-133, Audits of State and Local Governments and Non-Profit Organizations, and will include tests of the accounting records of the City of Salina and other procedures we consider necessary to enable us to express an unqualified opinion that the financial statements are fairly presented, in all material respects, in conformity with generally 'accepted accounting principles and to report on the Schedule of Expenditures of . Federal Awards and on the City of Salina's compliance with laws and regulations and its internal controls as required for a single audit. If our 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 single audit engagement, we will not issue a report as a result of this engagement. The management of the City of Salina 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 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, and that federal awards programs are managed in compliance with applicable laws and regulations. In planning and performing our audit for the year ended, December 31, 1998, we will consider the internal control in order to determine our auditing procedures for the purpose of expressing our opinions on the City of Salina's general purpose financial statements and on its compliance with requirements applicable to major programs and to report on the internal control in aCcordance with OMB Circular A-133, and not to provide assurance on the internal control. 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 general purpose 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 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 the internal control and, accordingly, no opinion will be expressed. We will perform tests of controls, as required by OMB Circular A-133', 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 of the City of Salina's major federal awards programs. Our tests will be less in scope than would be necessary to render an opinion on these controls and, accordingly, no opinion will be expressed. We will inform you 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. We will also inform you of any nonreportable conditions or other matters involving internal control, if any, as required by OMB'Circular A-133. Compliance with laws, regulations, contracts, and grant agreements applicable to the City of Salina is the responsibility of the City of Salina's 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 of Salina's compliance with certain provisions of laws, regulations, contracts, and grants. However, the objective of our audit will not beto provide an opinion on overall compliance with such Provisions, and we will not exPress such an opinion. Our audit will be conducted in accordance with the standards referred to in the second paragraph. OMB Circular A-133 requires that we Plan and perform the audit to obtain reasonable assurance about whether the auditee has complied with certain provisions of laws, regulations, contracts, and grants. Our procedures will consist of the applicable Procedures described in the OMB's compliance supplement. The purpose of our audit will be to express an opinion on the City of Salina's compliance with requirements applicable to major programs. 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 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. An audit includes examining, on a test basis, evidence supporting the am°unts and disclosures in the financial statements; therefore, our audit will involve judgment about the number of transactions to be examined and the area to be tested. Also, we will plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. As required by the Single Audit Act Amendments 1995, our audit will include tests of transactions related to federal award programs for compliance with applicable laws and regulations. Because of the concept of reasonable assurance and because we will not perform a detailed examination of all transactions, there is a risk that material errors, fraud, or illegal acts, may exist and not be detected by us. 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. 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. We understand that you will provide us with the basic 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. This responsibility includes the establishment and maintenance of adequate records and related controls, the selection and application of accounting principles, and the safeguarding of assets. Management is also responsible for identifying and ensuring the entity complies with applicable laws and regulations. We understand that your employees will locate any invoices or other documentation selected by us for testing. The workpapers for this engagement are the property of Agler & Gaeddert, Chartered and constitute confidential information. However, we may be requested to make certain workpapers available to the City of Salina, the Environmental Protection Agency, the US General Accounting Office, parties designated by federal or state governments or by the City of Salina as part of an audit quality review process, or auditors of entities of which the City of Salina is a subrecipient of grant funds. If requested, access to such workpapers will be provided under the supervision of Agler & Gaeddert, Chartered's personnel. Furthermore, upon request, we may provide photocopies of selected workpapers to the aforementioned parties. Those parties may intend, or decide, to distribute the photocopies or information contained therein to others, including other governmental agencies. We expect to begin our audit performing preliminary procedures in January, 1999 to issue our reports no later than June 30, 1999. Our fee for these services will be at discounted 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 $28,500. 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. Government Auditing Standards-1994 Revision requires that we provide you with a copy of Our most recent quality control review report. Our 1995 peer review report accompanies this letter. We appreciate the opportunity to be of service to the City of Salina 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, AGLER & GAEDDERT, CHARTERED W, Keith Gaeddert, CPA RESPONSE: This letter correctly sets forth the understanding of the City of Salina. By: Title: Date: