HomeMy WebLinkAboutAGENDA REPORT 2017 0621 CCSA REG ITEM 10E ITEM 10.E.
CITY OF MOO PARK,CHIP®~IA
City Council Keating
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AGENDA REPORT ACTION: IDA d .-
TO: Honorable City Council
FROM: Ron Ahlers, Finance DirectorC46
DATE: June 6, 2017 (City Council meeting of June 21, 2017)
SUBJECT: Consider Engagement Letter from External Auditors for Fiscal Year
(FY) 2016/17 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.
Council recently extended the contract with RAMS to six years, which includes FY
2016-17. 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 2016/17 audit shall cost a maximum of $38,200. This amount is included in the
proposed budget for FY 2017/18.
STAFF RECOMMENDATION
Authorize the City Manager to sign the engagement letter, subject to the final language
approval by the City Manager.
Attachment: RAMS Engagement Letter regarding the Fiscal Year 2016/17 Audit
101
' ` Ar ROGERS, ANDERSON, MALODY& SCOTT, LLP
M
S• CERTIFIED PUBLIC ACCOUNTANTS, SINCE
735 E. Carnegie Dr.Suite 100
San Bernardino,CA 92408
909 889 0871 T
909 889 5361 F
ramscpa.net
June 5, 2017
PARTN ERS
Brenda L.Odle,CPA, MST
Terry P. Shea,CPA To the Honorable City Council
Kirk A. Franks,CPA City of Moorpark
Scott W. Manno,CPA.CGMA 799 Moorpark Avenue
Leena Shanbhag,CPA,MST,CGMA Moorpark, California 93021
Bradferd A.Welebir,CPA,MBA,CGMA
Jay H.Zercher,CPA(Partner Emeritus)
Phillip H.Waller,CPA(Partner Emeritus)
The following represents our understanding of the services we will provide to
MANAGERS/STAFF the City of Moorpark (the City). You have requested that we audit the financial
Jenny Liu,CPA,MST statements of theovernmental activities, each major fund, and theaggregate
Seong-Hlyea Lee,CPA,MBA g 1
Charles De Simoni,CPA remaining fund information of the City, as of June 30, 2017 and for the year
Nathan Statham,CPA,MBA then ended, and the related notes to the financial statements, which
Gardenya Duran,CPA collectively comprise the City's basic financial statements as listed in the table
s
anna Schultz,CPA of contents. In addition, we will audit the City's compliance over major federal
Lisa Dongxue Gun,CPA,MSA
award programs for the year ended June 30, 2017, if applicable. We are
pleased to confirm our acceptance and our understanding of this audit
engagement by means of this letter. Our audits will be conducted with the
objectives of our expressing an opinion on each opinion unit and an opinion on
compliance regarding the City's major federal award programs.
Accounting principles generally accepted in the United States of America
require that supplementary information, such as management's discussion
and analysis (MD&A) and budgetary comparison information be presented to
supplement the basic financial statements. Such information, although not a
part of the basic financial statements, is required by the Governmental
Accounting Standards 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 required supplementary information
(RSI) in accordance with auditing standards generally accepted in the United
States of America. These limited procedures will consist primarily of inquiries
of management regarding their methods of measurement and presentation,
MEMBERS and comparing the informationfor consistencymanagement's
American Institute of p g ftiwith responses
Certified Public Accountants to our inquiries. We will not express an opinion or provide any form of
POPS The AICPA Alliance assurance on the RSI. The following RSI is required by accounting principles
for CPA Firms generally accepted in the United States of America.This RSI will be subjected
Governmental Audit to certain limited procedures but will not be audited:
Quality Center
California Society of
Certified Public Accountants
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STABILITY. ACCURACY. TRUST.
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City of Moorpark Page 2
1) Management's Discussion and Analysis.
2) Budgetary Comparison Schedules-General Fund.
3) Budgetary Comparison Schedules-Major Special Revenue Funds.
4) Schedule of Funding Progress-OPEB.
5) Schedule of the Proportionate Share of the Plans Net Pension Liability and Related Ratios
as of the Measurement Date.
6) Schedule of Plan Contributions.
Supplementary information other than RSI will accompany the City's basic financial statements. We
will subject the following supplementary information to the auditing procedures applied in our audit of
the basic financial statements and certain additional procedures, including comparing and reconciling
the supplementary information to the underlying accounting and other records used to prepare the
financial statements or to the financial statements themselves, and additional procedures in
accordance with auditing standards generally accepted in the United States of America. We intend to
provide an opinion on the following supplementary information in relation to the financial statements
as a whole:
1) Combined Schedules of Non-major Funds
2) Budgetary Comparison Schedules of Non-major Funds
Also, the document we submit to you will include the following other additional information that will not
be subjected to the auditing procedures applied in our audit of the financial statements:
1) Transmittal Letter
2) Statistical Section
Schedule of Expenditures of Federal Awards, if applicable
We will subject the schedule of expenditures of federal awards to the auditing procedures applied in
our audit of the basic financial statements and certain additional procedures, including comparing and
reconciling the schedule to the underlying accounting and other records used to prepare the financial
statements or to the financial statements themselves, and additional procedures in accordance with
auditing standards generally accepted in the United States of America.We intend to provide an opinion
on whether the schedule of expenditures of federal awards is presented fairly in all material respects
in relation to the financial statements as a whole.
Data Collection Form, if applicable
Prior to the completion of our engagement, we will complete the sections of the Data Collection Form
that are our responsibility. The form will summarize our audit findings, amounts and conclusions. It is
management's responsibility to submit a reporting package including financial statements, schedule
of expenditure of federal awards, summary schedule of prior audit findings and corrective action plan
along with the Data Collection Form to the federal audit clearinghouse.The financial reporting package
must be text searchable, unencrypted, and unlocked. Otherwise, the reporting package will not be
accepted by the federal audit clearinghouse. We will assist you in the electronic submission and
certification.You may request from us copies of our report for you to include with the reporting package
submitted to pass-through entities.
The Data Collection Form is required to be submitted within the earlier of 30 days after receipt of our
auditors'reports or nine months after the end of the audit period, unless specifically waived by a federal
cognizant or oversight agency for audits. Data Collection Forms submitted untimely are one of the
factors in assessing programs at a higher risk.
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The Objective of an Audit
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 accordance with 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. Our audit will be
conducted in accordance with auditing standards generally accepted in the United States of America
and will include tests of the accounting records and other procedures we consider necessary to enable
us to express such opinions.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 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.
General Audit Procedures
We will conduct our audit in accordance with auditing standards generally accepted in the United
States of America (U.S. GAAS) and in accordance with Government Auditing Standards. Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether
the basic financial statements are free from material misstatement. An audit involves performing
procedures to obtain audit evidence about the amounts and disclosures in the financial statements.
The procedures selected depend on the auditor's judgment, including the assessment of the risks of
material misstatement of the financial statements,whether due to error, fraudulent financial reporting,
misappropriation of assets, or violations of laws, governmental regulations, grant agreements, or
contractual agreements. 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.
Internal Control Audit Procedures
Because of the inherent limitations of an audit,together with the inherent limitations of internal control,
an unavoidable risk that some material misstatements may not be detected exists, even though the
audit is properly planned and performed in accordance with U.S. GAAS and in accordance with
Government Auditing Standards.
In making our risk assessments,we consider internal control relevant to the City's preparation and fair
presentation of the financial statements in order to design audit procedures that are appropriate in the
circumstances but not for the purpose of expressing an opinion on the effectiveness of the City's
internal control. However,we will communicate to you in writing concerning any significant deficiencies
or material weaknesses in internal control relevant to the audit of the financial statements that we have
identified during the audit.
Audit of Major Program Compliance, if applicable
Our audit of the.City's major federal award programs compliance will be conducted in accordance with
the requirements of the Single Audit Act, as amended; and the Uniform Guidance, and will include
tests of accounting records, a determination of major programs in accordance with the Uniform
Guidance and other procedures we consider necessary to enable us to express such an opinion on
major federal award program compliance and to render the required reports. We cannot provide
assurance that an unmodified opinion on compliance will be expressed. Circumstances may arise in
which it is necessary for us to modify our opinion or withdraw from the engagement.
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The Uniform Guidance requires that we also plan and perform the audit to obtain reasonable
assurance about whether the City has complied with applicable laws and regulations and the
provisions of contracts and grant agreements applicable to major federal award programs. Our
procedures will consist of determining major federal programs and performing the applicable
procedures described in the U.S. Office of Management and Budget OMB 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 those 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 the Uniform Guidance.
Also, as required by the Uniform Guidance, we will perform tests of controls 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's major
federal award programs. However, 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 in our report.
We will issue a report on compliance that will include an opinion or disclaimer of opinion regarding the
City's major federal award programs, and a report on internal controls over compliance that will report
any significant deficiencies and material weaknesses identified; however, such report will not express
an opinion on internal control.
Compliance with Laws and Regulations
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 the provisions of applicable laws,
regulations, 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.
Management's Responsibilities
Our audit will be conducted on the basis that management and, when appropriate,those charged with
governance acknowledge and understand that they have responsibility:
a. For the preparation and fair presentation of the financial statements in accordance with
accounting principles generally accepted in the United States of America;
b. For the design,implementation, and maintenance of internal control relevant to the preparation
and fair presentation of financial statements that are free from material misstatement,whether
due to error fraudulent financial reporting, misappropriation of assets, or violations of laws,
governmental regulations, grant agreements, or contractual agreements;
c. For safeguarding assets;
d. For identifying all federal awards expended during the period including federal awards and
funding increments received prior to December 26, 2014, and those received in accordance
with the Uniform Guidance generally received after December 26, 2014;
e. For preparing the schedule of expenses of federal awards, including notes and noncash
assistance received in accordance with the Uniform Guidance requirements;
f. For the design, implementation, and maintenance of internal control over compliance;
g. For identifying and ensuring that the City complies with laws, regulations,grants, and contracts
applicable to its activities and its federal award programs and implementing systems designed
to achieve compliance with applicable laws, regulations, grants, and contracts applicable to
activities and its federal award programs;
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h. For identifying and providing report copies of previous audits, attestation engagements, or
other studies that directly relate to the objectives of the audit, including whether related
recommendations have been implemented;
i. For addressing the findings and recommendations of auditors, for establishing and
maintaining a process to track the status of such findings and recommendations and taking
corrective action on reported audit findings from prior periods and preparing a summary
schedule of prior audit findings;
j. For following up and taking corrective action on current year audit findings and preparing a
corrective action plan for such findings;
k. For submitting the reporting package and data collection form to the appropriate parties;
I. For making the auditor aware of any significant vendor/contractor relationships where the
vendor/contractor is responsible for program compliance;
m. To provide us with:
i. Access to all information of which management is aware that is relevant to the preparation
and fair presentation of the financial statements, and relevant to federal award programs,
such as records, documentation, and other matters;
ii. Additional information that we may request from management for the purpose of the audit;
and
iii. Unrestricted access to persons within the City from whom we determine it necessary to
obtain audit evidence.
n. For adjusting the financial statements to correct material misstatements and confirming to us
in the management representation letter that the effects of any uncorrected misstatements
aggregated by us during the current engagement and pertaining to the current year period
under audit are immaterial, both individually and in the aggregate, to the financial statements
as a whole;
o. For maintaining adequate records, selecting and applying accounting principles, and
safeguarding assets; and
p. For confirming your understanding of your responsibilities as defined in this letter to us in your
management representation letter.
With regard to the supplementary information referred to above, you acknowledge and understand
your responsibility (a) for the preparation of the supplementary information in accordance with the
applicable criteria, (b) to provide us with the appropriate written representations regarding
supplementary information, (c)to include our report on the supplementary information in any document
that contains the supplementary information and that indicates that we have reported on such
supplementary information, and (d)to present the supplementary information with the audited financial
statements, or if the supplementary information will not be presented with the audited financial
statements, to make the audited financial statements readily available to the intended users of the
supplementary information no later than the date of issuance by you of the supplementary information
and our report thereon.
As part of our audit process,we will request from management and,when appropriate, those charged
with governance, written confirmation concerning representations made to us in connection with the
audit.
Reporting
We will issue a written report upon completion of our audit of the City's basic financial statements. Our
report will be addressed to the governing body of the City. We cannot provide assurance that
unmodified opinions will be expressed. Circumstances may arise in which it is necessary for us to
modify our opinions, add an emphasis-of-matter or other-matter paragraph(s), or withdraw from the
engagement.
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In accordance with the requirements of Government Auditing Standards, we will also issue a written
report describing the scope of our testing over internal control over financial reporting and over
compliance with laws, regulations, and provisions of grants and contracts, including the results of that
testing. However, providing an opinion on internal control and compliance will not be an objective of
the audit and, therefore, no such opinion will be expressed upon completion of our audit.
Other
We will assist management with drafting the financial statements based on the City's trial balances.
With respect to this or any other nonattest services we perform, the City's management is responsible
for.(a) making all management decisions and performing all management functions; (b) assigning a
competent individual to oversee the services; (c) evaluating the adequacy of the services performed; •
(d) evaluating and accepting responsibility for the results of the services performed; and (e)
establishing and maintaining internal controls, including monitoring ongoing activities.
Government Auditing Standards require that we document an assessment of the skills, knowledge,
and experience of management, should we participate in any form of preparation of the basic financial
statements and related schedules or disclosures as these actions are deemed a non-audit service.
We understand that your employees will prepare all confirmations we request and will locate any
documents or invoices selected by us for testing.
If you intend to publish or otherwise reproduce the financial statements and make reference to our
firm, you agree to provide us with printers' proofs or masters for our review and approval before
printing. You also agree to provide us with a copy of the final reproduced material for our approval
before it is distributed.
In addition, we will perform an agreed upon procedures engagement related to the City's
Appropriations Limit. The procedures have been agreed to by the City and the League of California
Cities(as presented in the publication entitled Agreed-upon Procedures Applied to the Appropriations
Limitation Prescribed by Article XIIIB of the California Constitution) and will be performed solely to
assist the City in meeting the requirements of Section 1.5 of Article XIIIB of the California Constitution.
The City's management will be responsible for the Appropriations Limit worksheet.
Provisions of Engagement Administration,Timing and Fees
During the course of the engagement, we may communicate with you or your personnel via fax or e-
mail, and you should be aware that communication in those mediums contains a risk of misdirected or
intercepted communications.
Terry Shea, CPA is the engagement partner for the audit services specified in this letter. His
responsibilities include supervising Rogers, Anderson, Malody & Scott, LLP's services performed as
part of this engagement and signing or authorizing another qualified firm representative to sign the
audit report.
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Our fees for these services are detailed in Attachment"A"to this agreement. Our standard hourly rates
vary according to your audit. Our invoices for these services will be rendered each month and are
payable upon 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 report(s). You will still 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.
Whenever possible,we will attempt to use the City's personnel to assist in the preparation of schedules
and analyses of accounts. This effort could substantially reduce our time requirements and facilitate
the timely conclusion of the audit. Further, we will be available during the year to consult with you on
financial management and accounting matters of a routine nature.
During the course of the audit we may observe opportunities for economy in, or improved controls
over, your operations. We will bring such matters to the attention of the appropriate level of
management, either orally or in writing.
We agree to retain our audit documentation or work papers for a period of at least seven years from
the date of our report.
At the conclusion of our audit engagement, we will communicate to those charged with governance
the following significant findings from the audit:
• Our view about the qualitative aspects of the City's significant accounting practices;
• Significant difficulties, if any, encountered during the audit;
• Uncorrected misstatements, other than those we believe are trivial, if any;
• Disagreements with management, if any;
• Other findings or issues, if any, arising from the audit that are, in our professional judgment,
significant and relevant to those charged with governance regarding their oversight of the
financial reporting process;
• Material, corrected misstatements that were brought to the attention of management as a
result of our audit procedures;
• Representations we requested from management;
• Management's consultations with other accountants, if any; and
• Significant issues, if any, arising from the audit that were discussed, or the subject of
correspondence, with management.
The audit documentation for this engagement is the property of Rogers, Anderson, Malody & Scott,
LLP and constitutes confidential information. However, we may be requested to make certain audit
documentation available to regulators and federal agencies and to the U.S.Government Accountability
Office pursuant to authority given to it by law or regulation, or to peer reviewers. If requested, access
to such audit documentation will be provided under the supervision of Rogers, Anderson, Malody &
Scott, LLP's personnel. Furthermore, upon request, we may provide copies of selected audit
documentation to the regulators. The regulators may intend, or decide, to distribute the copies of
information contained therein to others, including other governmental agencies.
Please sign and return the attached original of this letter to indicate your acknowledgment of, and
agreement with, the arrangements for our audit of the financial statements including our respective
responsibilities. Keep the copy for your records.
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In accordance with the requirements of Government Auditing Standards, we have attached a copy of
our latest external peer review report of our firm for your consideration and files.
In the event there is a conflict between the provisions of this Engagement Letter and the Professional
Services Agreement between the City of Moorpark and the firm of Rogers, Anderson, Malody&Scott,
LLP, dated April 19, 2012, the language contained in the Professional Services Agreement shall take
precedence.
We appreciate the opportunity to be your financial statement auditors and look forward to working with
you and your staff.
Respectfully,
ROGERS, ANDERSON, MALODY & SCOTT, LLP
Terry Shea, CPA, Partner
RESPONSE:
This letter correctly sets forth our understanding.
Acknowledged and agreed on behalf of the City of Moorpark by:
Name:
Title:
Date:
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Attachment
CITY OF MOORPARK
SCHEDULE OF PROFESSIONAL FEES AND EXPENSES
FOR THE AUDIT OF THE JUNE 30, 2017 FINANCIAL STATEMENTS
Base Services: Total
City Audit& Related Reports $ 26,000
Successor Agency Audit 5,000
Single Audit& Related Reports (if applicable) 4,000
Sub-total Base Costs 35,000
Optional Services:
State Controller's Report-Cities Financial Transactions Report 3,200
Sub-total Optional Costs 3,200
Annual Maximum Fees $ 38,200
•
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Grant Bennett Associates L
G R O U P
A PROFESSIONAL CORPORATION A Wor:dvndc nihance of o,Aependenl
Accounting, and Conau;ong Fon,,
SYSTEM REVIEW REPORT
June 30, 2015
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 30,2014. 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. As part of our peer review, we
considered reviews by regulatory entities, if applicable, in determining the nature and
extent of our procedures. 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.ore/prsummarv.
As required by the standards, engagements selected for review included engagements
performed under the 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,
2014,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 received a peer review
rating of pass.
GRANT BENNETT ASSOCIATES
A PROFESSIONAL CORPORATION
Certified Public Accountants
LoPtC..- bsuto<
1375 Exposition Boulevard, Suite 230 P.O. Box 223096
Sacramento, CA 95815 Princeville, HI 96722
w w&gbacpa.com 916/922-5109 FAX 916/641-5200 888/769-7323
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