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: