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HomeMy WebLinkAbout2011 05 23 Consent 200 Audit Services McDirmit Davis COMMISSION AGENDA CONSENT X INFORMATIONAL ITEM 200 PUBLIC HEARING REGULAR MGR /DEPT May 23, 2011 Meeting Authorization REQUEST: The City Manager and the Finance & Administrative Services Department is requesting that the City Commission Authorize the City Manager to exercise the second of three one year renewals for the contract for audit services with the firm of McDirmit Davis & Company, LLC and to authorize the City Manager to complete and sign all necessary documents. SYSNOPSIS: In FY 2007, the City Commission authorized the City Manager to execute a three year contract for audit services with the firm of McDirmit Davis & Company LLC to begin with the fiscal year end September 30, 2007 with the possibility for three one-year renewals. The first of the possible 3 one year renewals is for audit services for the fiscal year end September 30, 2010. The second and third possible one year extensions will be for the fiscal year ends September 30, 2011 and September 30, 2012 respectively. CONSIDERATIONS: On June 25, 2007 the City Commission authorized the formation of a three person Audit Selection Committee, which consisted of Commissioner Rick Brown; The Finance Director; City Manager Designee. The Auditor Selection Committee recommended that the City Manager pursue negotiations with first-ranked McDirmit Davis & Company, LLC and an acceptable fee was negotiated. The Total Audit Fee for the Fiscal Year Ended September 30, 2010 was $44,500 and included Audit Fees $29,000, $10,500 CAFR and a Single Audit Fee of $5,000. A Single Audit was required for Fiscal Year Ended September 30, 2010. McDirmit Davis & Company, LLC was engaged to prepare the CAFR for Fiscal Year Ended September 30, 2010. The fees proposed by McDirmit Davis & Company, LLC for the second year of three possible one year renewals for Audit Services for Fiscal Year Ended September 30, 2011 include Audit Fees, Single Audit Fee, if required, and CAFR Preparation, if needed, are as follows: Commission Agenda Consent 200 May 23, 2011 23 Page of Single Audit Fee CAFR Prep Possible Total Fiscal Year Ended Audit Fee (if required) (if needed) Audit Fee 9/30/2011 $29,000 $5,000 $10,500 $44,500 The proposed fees for Fiscal Year Ended 9/30/2011 remain unchanged from the prior fiscal year. FISCAL IMPACT: The budget for FY 2011 includes $44,500 for audit and CAFR preparation services which will cover the fees proposed by McDirmit Davis & Company, LLC for the fiscal year ending September 30, 2011. COMMUNICATION EFFORTS: This Agenda Item Has Been Electronically Forwarded To The Mayor And City Commission, City Manager, City Attorney/Staff, And All eAlert/eCitizen Recipients; And Is Available On The City’s Website, LaserFiche, And The City’s Server. Additionally, Portions Of This Agenda Item Are Typed Verbatim On The Respective Meeting Agenda Which Has Also Been Electronically Forwarded To The Individuals Noted Above; And Which Is Also Available On The City’s Website, LaserFiche, And The City’s Server; Has Been Sent To City Staff, Media/Press Representatives Who Have Requested Agendas/Agenda Item Information, Homeowner’s Associations/Representatives On File With The City, And All Individuals Who Have Requested Such Information; And Has Been Posted Outside City Hall; Posted Inside City Hall With Additional Copies Available For The General Public; And Posted At Five (5) Different Locations Around The City. This Agenda Item Is Also Available To Any New Individual Requestors. City Staff Is Always Willing To Discuss This Or Any Agenda Item With Any Interested Individuals. Contract will be mailed back to McDirmit Davis and Company, LLC for counter signing. RECOMMENDATION: It is the recommendation of the City Manager and the Finance & Administrative Services Department that the City Commission authorize the City Manager to execute the second of three one year extensions to engage the audit firm of McDirmit Davis & Co, LLC for fiscal year end September 30, 2011 and authorize the City Manager to complete and sign all necessary documents. ATTACHMENTS: Commission Agenda Consent 200 May 23, 2011 33 Page of A)Proposed Engagement Letter provided by McDirmit Davis & Co, LLC, confirming the understanding of audit services to be provided for fiscal year end September 30, 2011. The engagement letter is to be signed upon authorization of the City Commission authorizing the City Manager to execute the second of 3 year renewal contracts. B)Copy of the opinion provided by Davidson, Jamieson & Christini, P.L. CPA for the peer review of the system of quality control for the accounting and auditing practice of McDirmit Davis & Co, LLC for the year ended June 30, 2008. MCDIRMIT /// DAVIS � CERTIFIED PUBLIC ACCOUNTANTS AND ADVISORS April 18, 2011 City of Winter Springs, Florida 1126 East State Road 434 Winter Springs, FL 3270&2799 We are pleased to confirm our understanding of the services we are to provide the City of Wnter Springs, Florida for the year ended September 30, 2011. We will audit the financial statements of the govemmental 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 year ended September 30, 2011. Accounting standards generally accepted in the United States provide for certain required supplementary information (RSI), such as management's discussion and analysis (MD8�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 Govemmental 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. ?VICDIR�tIT DAVIS & CO�IPANY, LLC Mi� E RC�51ti5pti $TREET. SL'iTE 53� • OR; .��r�, Fi_okie� ��k��l Tts_tPHt;�E -ifi?-$d?-53(�5 • F�� SO',•-fj49-4��� • E�?AI!.: 1�FO�a�1CDIRy11TU9�'iS.00�1 \11 �fiikl F'4,'�.a.' . .- ..• F'4 [ �:. .� ... , �: R��.�. . . .'. .. . . (��,�"'.. 1 v ..... �. .. . . ._ . _.:2:D� (�:r.r._.'F U: C�tFTIFlE✓ F'�.P.�C ��::r.�\':-4�`� City of Winter Springs Page 2 Engagement Letter 1. Combining nonmajor fund financial statements 2. Individual nonmajor fund 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 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 faimess 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 Govemment 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. If our opinions on the financial statements are other than unqualified, we will fully 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. 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 Govemment Audifing Standards. The report on internal control and compliance will include a statement that the report is intended solely for the information and use of management, the body or individuals charged with governance, others within the entity, and specific legislative or regulatory bodies and are not intended to be and should not be used by anyone other than these specified parties. 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 are responsible for making all management decisions and performing all management functions relating to the financial statement and related notes and for accepting full responsibility for such decisions. You will be required to acknowledge in the management 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. Further, you are required to designate an individual with suitable skill, knowledge, or experience City of Winter Springs Page 3 Engagement Letter to oversee any nonaudit services we provide and for evaluating the adequacy and results of those services and accepting responsibility for them. Management is also 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 in the financial statements of the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Wnter Springs and the respective changes in financial position and cash flows, where applicable, 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. Your responsibilities include adjusting the financial statements to correct material misstatements and for confirming to us in the 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 govemment involving (a) management, (b) employees who have significant roles in intemal control, and (c) others where the fraud 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, or illegal acts 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 present the supplementary information with the audited financial statements. 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. City of Winter Springs Page 4 Engagement Letter 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. 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 eROrs, 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 Govemment Auditing Standards do not expect auditors to provide reasonable assurance of detecting abuse. Because an audit is designed to provide reasonable, but not absolute assurance and because we will not perform a detailed examination of all transactions, there is a risk that material misstatement may exist and not be detected by us. In addition, an audit is not designed to detect immaterial misstatements, or violations of laws or govemmental regulations that do not have a direct and material effect on the financial statements. However, we will inform you of any material errors and any fraudulent financial reporting or misappropriation of assets that come to our attention. We will also inform you of any violations of laws or govemmental 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 wifl request written representations from your attomeys 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. 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 Govemment 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 Govemment Auditing Standards. City of Winter Springs Page 5 Engagement Letter 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 Govemment 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; howeve�, 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. We expect to t�sgin our audit in December, 2011, and to issue our reports no later than March 20, 2012. 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 Reauired) CAFR Preparation (If ReQUested) 2011 $ 29,000 $ 5,000 $ 10,500 Government Auditing Standards require that we provide you will a copy of our most recent extemal 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 2008 peer review report accompanies this letter. 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 retum it to us. Sincerely, McDIRMIT DAVIS & COMPANY, LLC Kelly Leary .P.A. City of Winter Springs Page 6 Engagement Letter RESPONSE: This letter correctly sets forth the understanding of the City of Winter Springs. By: Title: Date: - Davidson, Jamieson & Cristini, P.L. Certified Public Accountants 1956 Bayshore Boulevard Dunedin, Florida 34698-2503 (72'�734-5437 or 736-0771 FAX (727) 733-3487 Member Members of the Firm American Institute of John N. Davidson, CPA•, CVA Certified Public Accountanu Hazry B. Jamieson, CPA* Florida Institute of Richard A Cristini, CPA', CPPT, CGFM Certified Public Accountants 'Regulated by the State of Florida September 25, 2008 To the Shareholders McDirmit Davis & Company, LLC We have reviewed the system of quality control for the accounting and auditing practice of McDirmit Davis & Company, LLC (the firm) in effect for the year ended June 30, 2008. A system of quality control encompasses the firm's organizational structure, the policies adopted and procedures established to provide it with reasonable assurance of conforming with professional standards. The elements of quality control are described in the Statements on Quality Control Standards issued by the American Institute of CPAs (AICPA). The firm is responsible for designing a system of quality control znd complying with it to provide the firm reasonable assurance of conforming with professional standazds 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 with its system of quality control based on our review. Our review was conducted in accordance with standards established by the Peer Review Board of the AICPA. During our review, we read required representations from the firm, interviewed firm personnel and obtained an understanding of the nature of the firm's accounting and auditing practice, and the design of the firm's system of quality control sufficient to assess the risks implicit in its practice. Based on our assessments, we selected engagements and administrative files to test for conformity with professional standards and compliance with the firms' system of quality control. The engagements selected represented a reasonable cross-section of the firm's accounting and auditing practice with emphasis on higher-risk engagements. The engagements selected included among others, audits of Employee Benefit Plans and engagements performed under Government Auditing Standards. Prior to concluding the review, we reassessed the adequacy of the scope of the peer review procedures and met with firm management to discuss the results of our review. We believe that the procedures we performed provide a reasonable basis for our opinion. In performing our review, we obtai.ned an understanding of the system of quality control for the fum's accounting and auditing pracfice. In addition, we tested compliance with the firm's quality control policies and procedures to the extent we considered appropriate. These tests covered the application of the firm's policies and procedures on selected engagements. Our review was based on selected tests therefore it would not necessarily detect all weaknesses in the system of qnality control or all instances of noncompliance with it. There are inherent limitations in the effectiveness of any system of quality control and therefore noncompliance with the system of quality control may occur ' and not be detected. Projection of any evaluation of a system of quality control to future periods is subject to the risk that the system of quality control may become inadequate because of changes in conditions, or because the degree of compliance with the policies or procedures may deteriorate. 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, 2008, has been designed to meet the requirements of the quality control standards for an accounting and auditing practice established by the AICPA and was complied with during the year then ended to provide the firm with reasonable assurance of conforming with professional standards. 4��, �a.,�i.� � �.�:u-� Q �. - MCDIRMIT /// DAVIS CERTIFIED PUBLIC ACCOUNTANTS AND ADVISORS April 18, 2011 City of Winter Springs, Florida 1126 East State Road 434 Winter Springs, FL 32708 -2799 We are pleased to confirm our understanding of the services we are to provide the City of Winter Springs, Florida for the year ended September 30, 2011. 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 year ended September 30, 2011. 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. MCDIRMIT DAVIS & COMPANY, LLC 605 E. ROBINSON STREET, SUITE 635 • ORLANDO, FLORIDA 32801 TELEPHONE 407 - 843 -5406 • FAX 407- 649 -9339 • EMAIL: INFO@MCDIRMITDAVIS.COM MEMHE':Rs PRIVATId COMPANIES PRACTICE: SF( 'Ilos • ASIF.RIC'AN INSTITITI OF CFRTIFIED PIBI.IC A( COL NTANTS • FLORIDA iNSTIT1 rE OF CtRTIFIED PUBLIC ACCOUNTANTS City of Winter Springs Page 2 Engagement Letter 1. Combining nonmajor fund financial statements 2. Individual nonmajor fund 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 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. If our opinions on the financial statements are other than unqualified, we will fully 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. 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 report on internal control and compliance will include a statement that the report is intended solely for the information and use of management, the body or individuals charged with governance, others within the entity, and specific legislative or regulatory bodies and are not intended to be and should not be used by anyone other than these specified parties. 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 are responsible for making all management decisions and performing all management functions relating to the financial statement and related notes and for accepting full responsibility for such decisions. You will be required to acknowledge in the management 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. Further, you are required to designate an individual with suitable skill, knowledge, or experience City of Winter Springs Page 3 Engagement Letter to oversee any nonaudit services we provide and for evaluating the adequacy and results of those services and accepting responsibility for them. Management is also 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 in the financial statements of the respective financial position of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information of the City of Winter Springs and the respective changes in financial position and cash flows, where applicable, 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. Your responsibilities include adjusting the financial statements to correct material misstatements and for confirming to us in the 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 (a) management, (b) employees who have significant roles in internal control, and (c) others where the fraud 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, or illegal acts 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 present the supplementary information with the audited financial statements. 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. City of Winter Springs Page 4 Engagement Letter 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. 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 an audit is designed to provide reasonable, but not absolute assurance and because we will not perform a detailed examination of all transactions, there is a risk that material misstatement may exist and not be detected by us. 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 you of any material errors and any fraudulent financial reporting or misappropriation of assets that come to our attention. We will also inform you 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. 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 Tess 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. City of Winter Springs Page 5 Engagement Letter 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. We expect to begin our audit in December, 2011, and to issue our reports no later than March 20, 2012. 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) 2011 $ 29,000 $ 5,000 $ 10,500 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 2008 peer review report accompanies this letter. 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 / i Kelly Leary ' .P.A. v City of Winter Springs Page 6 Engagement Letter RESPONSE: This letter correctly sets forth the understanding of the City of Winter Springs. By: Title: Gi ?y .4.14..✓4 Date: s /7...7/4- 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 *Regulated by the State of Florida September 25, 2008 To the Shareholders McDirmit Davis & Company, LLC We have reviewed the system of quality control for the accounting and auditing practice of McDirmit Davis & Company, LLC (the firm) in effect for the year ended June 30, 2008. A system of quality control encompasses the firm's organizational structure, the policies adopted and procedures established to provide it with reasonable assurance of conforming with professional standards. The elements of quality control are described in the Statements on Quality Control Standards issued by the American Institute of CPAs (AICPA). The firm is responsible for designing a system of quality control and complying with it to provide the firm reasonable assurance of conforming with 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 with its system of quality control based on our review. Our review was conducted in accordance with standards established by the Peer Review Board of the AICPA. During our review, we read required representations from the firm, interviewed firm personnel and obtained an understanding of the nature of the firm's accounting and auditing practice, and the design of the firm's system of quality control sufficient to assess the risks implicit in its practice. Based on our assessments, we selected engagements and administrative files to test for conformity with professional standards and compliance with the firms' system of quality control. The engagements selected represented a reasonable cross - section of the firm's accounting and auditing practice with emphasis on higher -risk engagements. The engagements selected included among others, audits of Employee Benefit Plans and engagements performed under Government Auditing Standards. Prior to concluding the review, we reassessed the adequacy of the scope of the peer review procedures and met with firm management to discuss the results of our review. We believe that the procedures we performed provide a reasonable basis for our opinion. In performing our review, we obtained an understanding of the system of quality control for the firm's accounting and auditing practice. In addition, we tested compliance with the firm's quality control policies and procedures to the extent we considered appropriate. These tests covered the application of the firm's policies and procedures on selected engagements. Our review was based on selected tests therefore it would not necessarily detect all weaknesses in the system of quality control or all instances of noncompliance with it. There are inherent limitations in the effectiveness of any system of quality control and therefore noncompliance with the system of quality control may occur and not be detected. Projection of any evaluation of a system of quality control to future periods is subject to the risk that the system of quality control may become inadequate because of changes in conditions, or because the degree of compliance with the policies or procedures may deteriorate. 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, 2008, has been designed to meet the requirements of the quality control standards for an accounting and auditing practice established by the AICPA and was complied with during the year then ended to provide the firm with reasonable assurance of conforming with professional standards. r.. o .� c 64. �.