HomeMy WebLinkAboutMcDirmit, Davis, & Company, LLC Audit - 2013 08 12 MCDTRMTT 1,1/ DAVIS
CERTIFIED PUBLIC ACCOUNTANTS AND ADVISORS
June 19, 2013
City of Winter Springs, Florida
We are pleased to confirm our understanding of the services we are to provide the City of
Winter Springs, Florida for the years ended September 30, 2013 and 2014. We will audit the
financial statements of the governmental activities, business-type activities, each major fund,
and the aggregate remaining fund information, which collectively comprise the basic financial
statements of the City of Winter Springs as of and for the years ended September 30, 2013 and
2014. Accounting standards generally accepted in the United States provide for certain
required supplementary information (RSI), such as management's discussion and analysis
(MD&A), to supplement the City of Winter Springs's 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
City of Winter Springs'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:
1. Management's Discussion and Analysis
2. Supplementary Pension Schedules
3. Supplementary OPEB Schedules
We have also been engaged to report on supplementary information other than RSI that
accompanies the City of Winter Springs'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. Combining nonmajor fund financial statements
2. Individual nonmajor fund schedules
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' City of Winter Springs Page 2
Engagement Letter
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 for which our
auditor's report will not provide an opinion or any assurance.
1. Statistical Section
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
taken as a whole. Our audit will be conducted in accordance with auditing standards generally
accepted in the United States of America and the standards for financial audits contained in
Government Auditing Standards, issued by the Comptroller General of the United States, and
will include tests of the accounting records of the City of Winter Springs 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 of 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
the engagement.
We will also provide a report (that does not include an opinion) on internal control related to the
financial statements and compliance with laws, regulations, and the provisions of contracts or
grant agreements, noncompliance with which could have a material effect on the financial
statements as required by Government Auditing Standards. The reports on internal control and
compliance will include a paragraph that states that the purpose of the report is solely to
describe 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 or on compliance, and 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. The paragraph will also state that the report is not suitable for any
other purpose. If during our audit we become aware that the City of Winter Springs is subject to
an audit requirement that is not encompassed in the terms of this engagement, we will
communicate to management and those charged with governance that an audit in accordance
with U.S. generally accepted auditing standards and the standards for financial audits contained
in Government Auditing Standards may not satisfy the legal, regulatory, or contractual
requirements.
Management Responsibilities
Management is responsible for the basic financial statements and all accompanying information
as well as all representations contained therein. As part of the audit, we will assist with
preparation of your financial statements and related notes. You will be required to acknowledge
in the written representation letter our assistance with preparation of the financial statements
and that you have reviewed and approved the financial statements and related notes prior to
their issuance and have accepted responsibility for them.
City of Winter Springs Page 3
Engagement Letter
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.
Management is responsible for establishing and maintaining effective internal controls, including
monitoring ongoing activities, to help ensure that appropriate goals and objectives are met; for
the selection and application of accounting principles; and for the fair presentation of the
financial statements in conformity with U.S. generally accepted accounting principles.
Management is also responsible for making all financial records and related information
available to us and for ensuring that management 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 include adjusting the financial statements to correct material misstatements
and for 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 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 and for taking timely and appropriate steps to remedy any fraud, illegal acts, violations of
contracts or grant agreements, or abuse that we may report.
You are responsible for the preparation of the supplementary information 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 include the audited financial statements with any
presentation of the supplementary information includes our report thereon. Your responsibilities
include acknowledging to us in the written representation letter that (1) you are responsible for
the presentation of the supplementary information in accordance with GAAP; (2) that you
believe the supplementary information, including its forma 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.
City of Winter Springs Page 4
Engagement Letter
Management is responsible for establishing and maintaining of 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
other 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.
With regard to the electronic dissemination of audited financial statements, including financial
statements published electronically on your website, you understand that electronic sites are a
means to distribute information and, therefore, we are not required to read the information
contained in these sites or to consider the consistency of other information in the electronic site
with the original document.
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 errors, fraudulent financial reporting, misappropriation of assets, or 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 may exist and not be detected by us, even though the audit is
properly planned and performed in accordance with U.S. generally accepted accounting
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. However, we will inform the appropriate
level of management of any material errors and 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. Our responsibility as auditors is limited to the period covered by
our audit and does not extend to 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
conformation 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 also require certain written
representations from you about the financial statements and related matters.
City of Winter Springs Page 5
Engagement Letter
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.
An audit is not designed to provide assurance on internal control or to identify significant
deficiencies. 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 and Government Auditing Standards.
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 of Winter Springs's compliance with the
provisions of applicable laws, regulations, contracts, agreements and grants. However, the
objective of our audit 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.
Audit Administration, Fees, and Other
We understand that your employees will prepare all cash and other confirmations we request
and will locate any documents selected by us for testing. Also, we will submit a letter outlining
schedules to be prepared by your employees.
We will provide copies of our reports to the City of Winter Springs; however, management is
responsible for distribution of the reports and the financial statements. Unless restricted by law
or regulation, or containing privileged and confidential information, copies of our reports are to
be made available for public inspection.
The audit documentation for this engagement is the property of McDirmit Davis & Company,
LLC and constitutes confidential information. However, pursuant to authority given by law or
regulation, we may be requested to make certain audit documentation available to 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 McDirmitDavis &
Company 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.
City of Winter Springs Page 6
Engagement Letter
The audit documentation for this engagement will be retained for a minimum of five years after
the report release date or for any additional period requested by regulators. If we are aware
that a federal awarding agency 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.
We expect to begin our audit in December 2013, and to issue our reports no later than March
20, 2013. Kelly Leary 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 will be at our standard hourly rates except when we agree that our
gross fee will be as follows:
Fiscal Year Ending Additional Fees for Single Additional Fees for
September 30: Audit Fee Audit (If Required) CAFR Preparation (If
Requested)
2013 $ 29,500 $ 5,000 $ 10,500
2014 $ 29,500 $ 5,000 $ 10,500
The above fees are 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 will 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.
In accordance with section 119.0701, Florida Statutes, Contractor agrees that all documents,
transactions, writings, papers, letters, tapes, photographs, sound recordings, data processing
software, or other material, regardless of the physical form, characteristics, or means of
transmission, made or received pursuant to this Agreement or in connection with any funds
provided by the City pursuant to this Agreement may be considered public records pursuant to
Chapter 119, Florida Statutes. Contractor agrees to keep and maintain any and all public
records that ordinarily and necessarily would be required by the City in order to perform the
services required by this Agreement. Contractor also agrees to provide the public with access
to public records on the same terms and conditions that the City would provide the records and
at a cost that does not exceed the cost provided by Chapter 119, Florida Statutes or as
otherwise provided by law. Contractor shall also ensure that public records that are exempt or
confidential and exempt from public records disclosure requirements are not disclosed except
as authorized by law. In addition, Contractor shall meet all requirements for retaining public
records and transfer, at no cost, to the City all public records in possession of the Contractor
upon termination of this Agreement and destroy any duplicate public records that are exempt or
confidential and exempt from public records disclosure requirements. All records stored
electronically must be provided to the City in a format that is compatible with the information
technology systems of the City. If the Contractor does not comply with a public records request,
the City shall have the right to enforce the provisions of this Paragraph. In event that the
Contractor fails to comply with this Paragraph, the City is required to enforce the provisions of
this Paragraph, or the City suffers a third party award of attorney's fees and/or damages for
violating the provisions of Chapter 119, Florida Statutes due to the Contractor's failure to comply
City of Winter Springs Page 7
Engagement Letter
with the provisions of this Paragraph, the City shall be entitled to collect from the Contractor
prevailing party attorney's fees and costs, and any damages incurred by the City, for enforcing
this Paragraph against the Contractor. And, if applicable, the City shall also be entitled to
reimbursement of any and all attorney's fees and damages which the City was required to pay a
third party because of Contractor's failure to comply with the provisions of this Paragraph. This
Paragraph shall survive the termination of this Agreement.
We appreciate the opportunity to be of service to the City of Winter Springs 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.
Sincerely,
McDIRMIT DAVIS & COMPANY, LLC
icifiek/
' I
Kelly LearfiC.P.A. /
RESPONSE:
This letter correctly sets fo• - he understanding of the City of Winter Springs.
By:
Title: t✓I G(!,a"
Date: IIVI
•
Davidson,Jamieson&Cristini,P.L.
Certified Public Accountants
1956 Bayshore Boulevard
Dunedin,Florida 34698-2503
(727)734-5437 or 736-0771
FAX(727)733-3487 Member
Members of the Firm American Institute of
John N.Davidson,CPA,CVA Certified Public Accountants
Harry B.Jamieson,CPA Florida Institute of
Richard A.Cristini,CPA,CPPT,CGFM Certified Public Accountants
SYSTEM REVIEW REPORT,
To the Stockholders of
McDirmit,Davis&Company, LLC
and the Peer Review Committee of the Florida Institute of
Certified Public Accountants
We have reviewed the system of quality control for the accounting practice of McDirmit,Davis&
Company, LLC (the firm), in effect for the year ended June 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/prsunmary.
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 McDirmit,
Davis&Company,LLC in effect for the year ended June 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. McDirmit,Davis &Company,LLC has received a peer
review rating of pass.
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3 p.� •
Davidson,Jamieson&Cristini,P.L.
November 4,2011