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MOORPARK CITY COUNCIL AGENDA REPORT
REPORT
TO: Honorable City Council
FROM: Ron Ahlers, Finance Director 64—
DATE: May 1, 2013 (City Council meeting of May 15, 2013)
SUBJECT: Consider Engagement Letter from External Auditors for Fiscal Year
(FY) 2012/13 Audit
BACKGROUND
Annually the City of Moorpark engages the services of a CPA firm to perform an audit of
the financial statements of the City. The City contracts with the firm of Rogers,
Anderson, Malody & Scott, LLP Certified Public Accountants (RAMS) for these services
for a five year period. The attached letter specifies the performance of the audit in
regards to: Audit Objectives, Management Responsibilities, Auditing Procedures,
Internal Controls and Compliance, Fees charged and a peer performance review.
DISCUSSION
Auditing standards (SAS 114) require that communications from the audit firm be sent
to the governing board of the corporation. The attached engagement letter requires the
signature of a City official. Staff recommends that the City Council authorize the City
Manager to sign the engagement letter.
FISCAL IMPACT
The FY 2012/13 audit shall cost a maximum of $32,650. This amount is included in the
proposed budget for FY 2013/14.
STAFF RECOMMENDATION
Authorize the City Manager to sign the engagement letter, subject to the final language
approval by the City Manager and City Attorney.
Attachment: RAMS Engagement Letter regarding the Fiscal Year 2012/13 Audit
309
omROGERS,ANDERSON, MALODY& SCOTT, LLP
meCERTIFIED PUBLIC ACCOUNTANTS,SINCE 1948
735 E. Carnegie Dr. Suite 100
San Bernardino, CA 92408
909 889 0871 T April 23, 2013
909 889 5361 F
ramscpa-net
PARTNERS To the Honorable City Council
Brenda L. Odle,CPA,MST City of Moorpark
Terry P. Shea,CPA 799 Moorpark Avenue
Kirk A.Franks,CPA p
Matthew B.Wilson,CPA,MSA Moorpark, California 93021
Scott W. Manno,CPA
Leena Shanbhag,CPA,MST
Jay H. Zercher,CPA(Retired)
Phillip H.Waller,CPA(Retired) We are pleased to confirm our understanding of the services we are to
provide the City of Moorpark (the City) for the year ended June 30, 2013. We
MANAGERS/STAFF will audit the financial statements of the governmental activities, each major
Nancy O'Rafferty.CPA,MBA fund, and the aggregate remaining fund information, including the related
Bradferd A.Welebir,CPA,MBA
Jenny Liu,CPA,MST notes to the financial statements, which collectively comprise the basic
Katie L. Millsom,CPA financial statements of the City, as of and for the year ended June 30, 2013.
Papa Matar Thiaw,CPA,MBA Accounting standards generally accepted in the United States of America
Maya S. Ivanova,CPA,MBA provide for certain required supplementary information (RSI), such as
Willim C. Clayton, PA
E. Murray,CPA
Pe management's discussion and analysis (MD&A), to supplement the City's
Genivive Schwarzkopf,CPA basic financial statements. Such information, although not a part of the basic
Seong-Hyea Lee,CPA,MBA financial statements, is required by the Governmental Accounting Standards
Charles De Simoni,CPA 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. 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 generally accepted accounting principles and will be subjected
to certain limited procedures, but will not be audited:
MEMBERS
American Institute of
Certified Public Accountants 1) Management's Discussion and Analysis.
POPS The AI Alliance
for CPA Firms s 2) PERS/OPEB schedules of funding progress.
Governmental Audit
Quality Center 3) Major fund budgetary comparison schedules.
California Society of
Certified Public Accountants
STABILITY. ACCURACY. TRUST. 310
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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 auditing
standards generally accepted in the United States of America and will provide an opinion on it in
relation to the financial statements as a whole:
1) Schedule of expenditures of federal awards, if applicable.
2) Combining fund schedules.
3) Budgetary comparison schedules.
The following other information accompanying the financial statements will not be subjected to
the auditing procedures applied in our audit of the financial statements, and our auditor's report
will not provide an opinion or any assurance on that other information.
1) Statistical data.
2) Introductory section.
Audit Objectives
The objective of our audit is the expression of opinions as to whether your basic financial
statements are fairly presented, in all material respects, in conformity with U.S. generally
accepted accounting principles and to 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. The objective also includes reporting 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 in accordance with Government
Auditing Standards.
• Internal control related to major programs and an opinion (or disclaimer of opinion) on
compliance with laws, regulations, and the provisions of contracts or grant agreements
that could have a direct and material effect on each major program in accordance with
the Single Audit Act Amendments of 1996 and OMB Circular A-133, Audits of States,
Local Governments, and Non-Profit Organizations.
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The reports on internal control and compliance will each include a paragraph that states that the
purpose of the report is solely to describe (1) the scope of testing of internal control over
financial reporting and compliance and the result of that testing and not to provide an opinion on
the effectiveness of internal control over financial reporting of on compliance, (2) the scope of
testing internal control over compliance for major programs and major program compliance and
the result of that testing and to provide an opinion on compliance but not to provide an opinion
on the effectiveness of internal control over compliance, and (3) that the report is an integral
part of an audit performed in accordance with Government Auditing Standards in considering
internal control over financial reporting and compliance and OMB Circular A-133 in considering
internal control over compliance and major program compliance. The paragraph will also state
that the report is not suitable for any other purpose.
Our audit will be conducted in accordance with auditing standards generally accepted in the
United States of America; 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, and will include tests of
accounting records, a determination of major program(s) in accordance with OMB Circular A-
133, and other procedures we consider necessary to enable us to express such opinions and to
render the required reports. We cannot provide assurance that unmodified opinions will be
expressed. Circumstances may arise in which it is necessary for us to modify our opinions or
add emphasis-of-matter or other-matter paragraphs. If our opinions on the financial statements
or the Single Audit compliance 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 to issue a report as a
result of this engagement.
Management Responsibilities
Management is responsible for the basic financial statements, schedule of expenditures of
federal awards, and all accompanying information as well as all representations contained
therein. Management is also responsible for identifying government award programs and
understanding and complying with the compliance requirements, and for preparation of the
schedule of expenditures of federal awards in accordance with the requirements of OMB
Circular A-133. As part of the audit, we will assist with preparation of your financial statements,
schedule of expenditures of federal awards, and related notes. You will be required to
acknowledge in the written representation letter our assistance with preparation of the financial
statements and schedule of expenditures of federal awards and that you have reviewed and
approved the financial statements, schedule of expenditures of federal awards, and related
notes prior to their issuance and have accepted responsibility for them. You agree to assume all
management responsibilities for any nonaudit services we provide; oversee the services by
designating an individual, preferably from senior management, who possesses suitable skill,
knowledge, or experience; evaluate the adequacy and results of the services; and accept
responsibility for them.
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Management is responsible for establishing and maintaining effective internal controls, including
internal controls over compliance, and for evaluating and monitoring ongoing activities, to help
ensure that appropriate goals and objectives are met and that there is reasonable assurance
that government programs are administered in compliance with compliance requirements. You
are also responsible for the selection and application of accounting principles; for the
preparation and fair presentation of the financial statements in conformity with U.S. generally
accepted accounting principles; and for compliance with applicable laws and regulations and the
provisions of contracts and grant agreements.
Management is also responsible for making all financial records and related information
available to us and for ensuring that management is reliable and financial information is reliable
and properly recorded. 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, (2) additional information that we may request for the purpose of the
audit, and (3) unrestricted access to persons within the government from whom we determine it
necessary to obtain audit evidence.
Your responsibilities also include identifying significant vendor relationships in which the vendor
has responsibility for program compliance and for the accuracy and completeness of that
information. 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 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 or illegal acts affecting the
government involving (1) management, (2) employees who have significant roles in internal
control, and (3) others where the fraud or illegal acts 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 government 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. Additionally, as required by OMB Circular A-133, it is
management's responsibility to follow up and take corrective action on reported audit findings
and to prepare a summary schedule of prior audit findings and a corrective action plan.
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You are responsible for preparation of the schedule of expenditures of federal awards in
conformity with OMB Circular A-133. You agree to include our report on the schedule of
expenditures of federal awards in any document that contains and indicates that we have
reported on the schedule of expenditures of federal awards. You also agree to make the audited
financial statements readily available to intended users of the schedule of expenditures of
federal awards no later than the date the schedule of expenditures of federal awards is issued
with our report thereon. Your responsibilities include acknowledging to us in the written
representation letter that (1) you are responsible for presentation of the schedule of
expenditures of federal awards in accordance with OMB Circular A-133; (2) that you believe the
schedule of expenditures of federal awards, including its form and content, is fairly presented in
accordance with OMB Circular A-133; (3) that 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 schedule of expenditures of federal awards.
You are also responsible for the preparation of the other supplementary information, which we
have been engaged to report on, in conformity with U.S. generally accepted accounting
principles. 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 make the audited financial statements readily available to users of the supplementary
information no later than the date the supplementary information is issued with 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) that you believe the supplementary information, including its form and content, is
fairly presented in accordance with GAAP; (3) that 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.
Management is responsible for establishing and maintaining a process for tracking the status of
audit findings and recommendations. Management is also responsible for identifying for us
previous financial audits, attestation engagements, performance audits, or other studies related
to the objectives discussed in the Audit 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
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.
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Audit Procedures—General
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. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of significant accounting
estimates made by management, as well as evaluating the overall presentation of the financial
statements. 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
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 abuse is subjective,
Government Auditing Standards do not expect auditors to provide reasonable assurance of
detecting 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 a
risk that material misstatements or noncompliance may exist and not be detected by us, even
though the audit is properly planned and performed in accordance with U.S. generally accepted
auditing standards 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 or major programs. However, we
will inform the appropriate level of management of any material errors, any fraudulent financial
reporting, or misappropriation of assets that come 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, and of any material abuse that comes to
our attention. 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
any later periods for which we are not engaged as auditors.
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, funding sources, 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 require certain written
representations from you about the financial statements and related matters.
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Audit Procedures—Internal Controls
Our audit will include obtaining an understanding of the entity and its environment, including
internal control, sufficient to assess the risks of material misstatement of the financial
statements and to design the nature, timing, and extent of further audit procedures. 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.
As required by OMB Circular A-133, we will perform tests of controls over compliance 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 major federal award program. However, our tests will be less in scope than would be
necessary to render an opinion on those controls and, accordingly, no opinion will be expressed
in our report on internal control issued pursuant to OMB Circular A-133.
An audit is not designed to provide assurance on internal control or to identify significant
deficiencies or material weaknesses. 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, Government Auditing
Standards, and OMB Circular A-133.
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 provisions of
applicable laws, regulations, contracts, and agreements, including grant agreements. However,
the objective of those procedures 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.
OMB Circular A-133 requires that we also plan and perform the audit to obtain reasonable
assurance about whether the auditee has complied with applicable laws and regulations and the
provisions of contracts and grant agreements applicable to major programs. Our procedures will
consist of tests of transactions and other applicable procedures described in the OMB Circular
A-133 Compliance Supplement for the types of compliance requirements that could have a
direct and material effect on each of the City's major programs. The purpose of these
procedures will be to express an opinion on the City's compliance with requirements applicable
to each of its major programs in our report on compliance issued pursuant to OMB Circular A-
133.
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Engagement Administration, Fees, and Other
We may from time to time, and depending on the circumstances, use third-party service
providers in serving your account. We may share confidential information about you with these
service providers, but remain committed to maintaining the confidentiality and security of your
information. Accordingly, we maintain internal policies, procedures, and safeguards to protect
the confidentiality of your personal information. In addition, we will secure confidentiality
agreements with all service providers to maintain the confidentiality of your information and we
will take reasonable precautions to determine that they have appropriate procedures in place to
prevent the unauthorized release of your confidential information to others. In the event that we
are unable to secure an appropriate confidentiality agreement, you will be asked to provide your
consent prior to the sharing of your confidential information with the third-party service provider.
Furthermore, we will remain responsible for the work provided by any such third-party service
providers.
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.
At the conclusion of the engagement, we will complete the appropriate sections of the Data
Collection Form that summarizes our audit findings. It is management's responsibility to submit
the reporting package (including financial statements, schedule of expenditures of federal
awards, summary schedule of prior audit findings, auditors' reports, and corrective action plan)
along with the Data Collection Form to the federal audit clearinghouse. We will coordinate with
you the electronic submission and certification. If applicable, we will provide copies of our report
for you to include with the reporting package you will submit to pass-through entities. The Data
Collection Form and the reporting package must be submitted within the earlier of 30 days after
receipt of the auditors' reports or nine months after the end of the audit period, unless a longer
period is agreed to in advance by the cognizant or oversight agency for audits.
The audit documentation for this engagement is the property of Rogers, Anderson, Malody &
Scott, LLP and constitutes confidential information. However, pursuant to authority given by law
or regulation, we may be requested to make certain audit documentation available to various
regulators or its designee, a federal agency providing direct or indirect funding, or the U.S.
Government Accountability Office for 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 Rogers,
Anderson, Malody & Scott, LLP 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.
The audit documentation for this engagement will be retained for a minimum of seven years
after the report release or for any additional period requested by any regulator. If we are aware
that a federal awarding agency, pass-through entity, 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.
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We expect to begin our audit on approximately June 24, 2013. Terry Shea, CPA is the
engagement partner and is responsible for supervising the engagement and signing the reports
or authorizing another individual to sign them. Our fees for these services are detailed in
attachment B to this agreement. Our invoices for these fees will be rendered each month as
work progresses and are payable on presentation. If we elect to terminate our services for
nonpayment, our engagement will be deemed to have been completed upon written notification
of termination, even if we have not completed our reports. 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 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 require that we provide you with a copy of our most recent
external peer review report and any letter of comment, and any subsequent peer review reports
and letters of comment received during the period of the contract. Our 2011 peer review report
accompanies this letter.
We appreciate the opportunity to be of service to the City 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,
ROGERS, ANDERSON, MALODY & SCOTT, LLP
Ter hea, CPA
RESPONSE:
This letter correctly sets forth the understanding of the City of Moorpark.
By:
Title:
Date:
318
TiMPSON GARCIA
11 J:PA
System Review Repo Alit l
rt
WN!A(W Nlts.
May 31, 2012
To the Owners of
Rogers, Anderson, Malody& Scott, LLP
and the Peer Review Committee of the
California Society of Certified Public Accountants
We have reviewed the system of quality control for the accounting and auditing practice of Rogers,
Anderson, Malody & Scott, LLP (the firm) in effect for the year ended November 30, 2011. Our peer
review was conducted in accordance with the Standards for Performing and Reporting on Peer Reviews
established by the Peer Review Board of the American Institute of Certified Public Accountants. The firm
is responsible for designing a system of quality control and complying with it to provide the firm with
reasonable assurance of performing and reporting in conformity with applicable professional standards in
all material respects. Our responsibility is to express an opinion on the design of the system of quality
control and the firm's compliance therewith based on our review. The nature, objectives, scope,
limitations of, and the procedures performed in a System Review are described in the standards at
www.aicpa.org/prsummary.
As required by the standards, engagements selected for review included engagements performed under
Government Auditing Standards and audits of employee benefit plans.
In our opinion, the system of quality control for the accounting and auditing practice of Rogers,
Anderson, Malody & Scott, LLP in effect for the year ended November 30, 2011, has been suitably
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(ies) or fail. Rogers, Anderson, Malody & Scott, LLP has received a peer
review rating of pass.
P44 n�t C,4�,
3 31
4633 319
Attachment B
CITY OF MOORPARK
SCHEDULE OF PROFESSIONAL FEES AND EXPENSES
FOR THE AUDIT OF THE JUNE 30, 2013 FINANCIAL STATEMENTS
Base Services: Total
City Audit& Related Reports $ 22,000
Successor Agency Audit 4,000
Single Audit& Related Reports (if applicable) 3,200
Sub-total Base Costs 29,200
Optional Services:
State Controller's Report-Cities Financial Transactions Report 2,750
State Controller's Report-Transit Operators Financial Transactions Report 700
Sub-total Optional Costs 3,450
Annual Maximum Fees $ 32,650
320