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HomeMy WebLinkAboutENGAGEMENT LETTER AUDIT YR 2005 Deke Copenhaver, Mayor Suite 806 - Municipal Building 530 Greene Street- Augusta, GA 30911 (706) 821-1831 - Fax (706) 821-1835 www.augustaga.gov OFFICE OF THE MAYOR September 25,2006 Cherry, Bekaert & Holland, L.L.P. Augusta, Georgia ladies and Gentlemen: We are providing this letter in connection with your audit of the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of Augusta, Georgia, as of and for the year ended December 31,2005. The purpose of your audit is to express an opinion as to whether the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of Augusta, Georgia, as of December 31, 2005, and the respective changes in financial position and cash flows, where applicable, and the respective budgetary comparison for the general fund and fire protection fund for the year then ended in conformi1y with accounting principles generally accepted in the United States of America. We confirm that we have reviewed and approved the financial statements referred to above; we confirm that we are responsible for their fair presentation in conformi1y with accounting principles generally accepted in the United States of America, and we acknowledge your role as auditors in connection with the financial statements. We acknowledge that in connection with your audit, you prepared the draft financial statements and notes. We confirm that we have reviewed and approved the financial statements referred to above that were prepared by you, we confirm that we are responsible for their fair presentation in conformi1y with accounting principles generally accepted in the United States of America, and we acknowledge your role as auditors in connection with the financial statements. We have overseen this process and made all management decisions. We are also responsible for adopting' sound accounting policies, establishing and maintaining internal control, and preventing and detecting fraud. Certain representations in this letter are described as being limited to matters that are material. Items in No. 25 are considered material based on the materiali1y criteria specified in OMB Circular A-133. Items . are considered to be material, regardless of size, if they involve an omission or misstatement of accounting information that, in light of the surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would be changed or influenced by the omission or misstatement. An omission or misstatement that is monetarily small in amo~nt could be considered material as a result of qualitative factors. We confirm, to the best of our knowledge and belief, as of the date of this letter the following representations made to you during your audit: 1. The financial statements referred to above are fairly presented in conformi1y with accounting , Cherry, Bekaert & Holland, L.L.P. September 25,2006 20f7 principles generally accepted in the United States of America and include all properly classified funds and other financial information of the primary government and all component units required by accounting principles generally accepted in the United States of America to be included in the financial reporting enti1y. 2. We have made available to you all: a. Financial records and related data. b. Minutes ofthe meetings of commissioners, and committees of directors, or summaries of actions of recent meeting for which minutes have not yet been prepared. 3. There have been no communications from regulatory agencies concerning noncompliance with or deficiencies in financial reporting practices. 4. There are no material transactions that have not been properly recorded in the accounting records underlying the financial statements or the schedule of expenditures offederal awards. The adjusting journal entries for the period ended December 31, 2005, which have been proposed by you, are approved by us and will be recorded on the books of the enti1y. 5. We acknowledge our responsibili1y for the design and implementation of programs and controls to prevent and detect fraud. 6. We have no knowledge of any fraud or suspected fraud affecting the enti1y involving: a. Management, b. Employees who have significant roles in internal control, or c. Others where the fraud could have a material effect on the financial statements. 7. We have no knowledge of any allegations of fraud or suspected fraud affecting the enti1y received in communications from employees, former employees, regulators or others. 8. We have no plans or intentions thatmay materially affect the carrying value or classification of assets or liabilities. 9. Receivables recorded in the financial statements represent valid claims against debtors for transactions arising on or before the balance sheet date and have been appropriately reduced to their estimated net realizable value. Provisions for uncollectible receivables have been properly identified and recorded. 10. Provision, when material, has been made to reduce excess or obsolete inventories to their estimated net realizable value. 11. There are no related par1y transactions including sales, purchases, loans, transfers, leasing arrangements, and guarantees or amounts receivable from or payable to related parties. For purposes of this letter, we understand the following to be the definition of the term related par1y: Affiliates of the enterprise; entities for which investments are accounted for by the equi1y method by the enterprise; trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; principal owners of the enterprise; its management; members of the immediate families of principal owners of the enterprise and its management; and other parties with which the enterprise may deal if one par1y controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. Another par1y also is a related par1y if it can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more ofthe transacting parties might be prevented from fully pursuing its own separate interests. Cherry, Bekaert & Holland, L.L.P. September 25,2006 30f7 12. There are no guarantees, whether written or oral, under which the enti1y is contingently liable. 13. There are no significant estimates or material concentrations that are required to be disclosed in accordance with AICPA Statement of Position 94-6, Disclosure of Certain Significant Risks and Uncertainties. Significant estimates are estimates at the balance sheet date which could change materially within the next year. Concentration refers to volumes of business, revenues, available sources of supply, markets, or geographic areas for which events could occur which would significantly disrupt normal finances within the next year. 14. There are no: a. Violations or possible violations of budget ordinances, laws and regulations (including those pertaining to adopting, approving, and amending budgets), provisions of contracts and grant agreements, tax or debt limits, and any related debt covenants, whose effects should be considered for disclosure in the financial statements or as a basis for recording a loss contingency. b. Unasserted claims or assessments that our lawyer has advised us are probable of assertion and must be disclosed in accordance with Statement of Financial Accounting Standards No.5. c. Other material liabilities or gain or loss contingencies that are required to be accrued or disclosed by Statement of Financial Accounting Standards No.5. d. Reservations or designation of fund equi1y that were not properly authorized and approved. 15. The Ci1y has satisfactory title to all owned assets, and there are no liens or encumbrances on such assets nor has any asset been pledged as collateral, except as disclosed in the financial statements. 16. The Ci1y has complied with all aspects of contractual agreements that would have a material effect on the financial statements in the event of noncompliance. 17. Management has identified and disclosed to the auditor violations (and possible violations) oflaws, regulations, and provisions of contracts and grant agreements with effects that should be considered Cherry, Bekaert & Holland, L.L.P. September 25,2006 40f7 for disclosure in the financial statements or as a basis for recording a loss contingency. 18. Management is responsible for compliance with laws, regulations, and provisions of contracts and grant agreements applicable to the enti1y. 19. Management has identified and disclosed to the auditor all laws, regulations and provisions of contracts and grant agreements that could have a direct and material effect on the determination of financial statement amounts, including legal and contractual provisions for reporting specific activities in separate funds. 20. Management is responsible for establishing and maintaining effective internal control over financial reporting. 21. The financial statements include all component units as well as joint ventures with an equi1y interest, and properly disclose all other joint ventures and other related organizations, if applicable. 22. Deposits and investment securities are properly classified in category of custodial credit risk. 23. Management has followed applicable laws and regulations in adopting, approving, and amending budgets. 24. With regard to presentation of the financial statements in accordance with GASB 34: a. All funds that meet the quantitative criteria in GASB Statement No. 34for presentation as major are identified and presented as such and all other funds that are presented as major are particularly important to financial statement users. b. The financial statements properly classify all funds and activities. c. Expenses have been appropriately classified in or allocated to functions and programs in the statement of activities, and allocations have been made on a reasonable basis. d. Revenues are appropriately classified in the statement of activities within program revenues, general revenues, contributions to term or permanent endowments, or contributions to permanent fund principal. e. Capital assets, including infrastructure assets, are properly capitalized, reported, and, if applicable, depreciated. f. Net asset components (invested in capital assets, net of related debt; restricted; and unrestricted) and fund balance reserves and designations are properly classified and, if applicable, approved. g. Interfund, internal, and intra-enti1y activi1y and balances have been appropriately classified and reported. h. Required supplementary information (RSJ) is measured and presented within prescribed guidelines. Cherry, Bekaert & Holland, L.L.P. September 25,2006 50f7 25. With regard to federal award programs: a. We are responsible for complying and have complied with the requirements ofOMB Circular A- 133, Audits of States, Local Governments, and Non-Profit Organizations. b. We have, in accordance with OMB Circular A-133, identified in the schedule of expenditures of federal awards, expenditures made during the audit period for all awards provided by federal agencies in the form of grants, federal cost-reimbursement contracts, loans, loan guarantees, proper1y (including donated surplus proper1y), cooperative agreements, interest subsidies, insurance, food commodities, direct appropriations, and other assistance. c. We are responsible for complying with the requirements oflaws, regulations, and the provisions of contracts and grant agreements related to each of our federal programs and have identified and disclosed to you the requjrements oflaws, regulations and the provisions of contracts and grant agreements that are considered to have a direct and material effect on each major federal program. d. We are responsible for establishing and maintaining effective internal control over compliance requirements applicable to federal programs that provides reasonable assurance that we are managing our federal awards in compliance with laws, regulations, and the provisions of contracts and grant agreements that could have a material effect on our federal programs. We believe the internal control system is adequate and is functioning as intended. Also, no changes have been made in the internal control system to the date of this letter that might significantly affect internal control, including any corrective action taken with regard to reportable conditions reported in the schedule of findings and questioned costs. e. We have made available to you all contracts and grant agreements (including amendments, if any) and any other correspondence with federal agencies or pass-through entities relating to each major federal program. f. We have received no requests from a federal agency to audit one or more specific programs as a major program. g. We have complied, in all material respects, with the compliance requirements, including when applicable, those set forth in the "OMB Circular A-l33 Compliance Supplement," relating to federal awards and have identified and disclosed to you all amounts questioned and any known noncompliance with the requirements offederal awards, including the results of other audits or program reVIews. h. Amounts claimed or used for matching were determined in accordance with relevant guidelines in OMB Circular A-87, Cost Prindples for State, Local, and Tribal Governments, and OMB's Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Govem.ments. . 1. We have made available to you all documentation related to the compliance requirements, including information related to federal program financial reports and claims for advances and reimbursements. Cherry, Bekaert & Holland, L.L.P. September 25,2006 60f7 J. Federal program financial reports and claims for advances and reimbursements are supported by the books and records from which the basic financial statements have been prepared, and are prepared on a basis consistent with the schedule of expenditures of federal awards. k. The copies of federal program financial reports provided you are true copies of the reports submitted, or electronically transmitted, to the respective federal agency or pass-through enti1y, as applicable. 1. To the best of our knowledge and belief, no events, including instances of noncompliance, have occurred subsequent to the balance sheet date and through the date of this letter that would require adjustment to or disclosure in the schedule of findings and questioned costs. m. There are no material transactions that have not been properly recorded in the schedule of expenditures offederal awards. n. We have made available to you all audit or relevant monitoring reports, if any, received from funding sources. o. We are responsible for and have accurately prepared the auditee section of the Data Collection Form as required by OMB Circular A-133, and we are responsible for preparing and implementing a corrective action plan for each audit finding. p. We have monitored subrecipients to determine that they have expended pass-through assistance in accordance with applicable laws and regulations and have met the requirements of OMB Circular A-lB. 26. We believe that the effects ofthe uncorrected financial statement misstatements summarized in the accompanying schedule are immaterial, both individually and in the aggregate, to the financial statements for each opinion unit. 27. We have not completed the process of evaluating the impact that will result from adopting Governmental Accounting Standards Board (GASB) Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other than Pensions, as discussed in Note 11. TIle enti1y is therefore unable to disclose the impact that adopting GASB Statement No. 4S will have on its financial position and the results of operations when such Statement is adopted. 28. The amount of "uncollateralized" deposits or "uninsured, unregistered securities held by the counterpar1y, or by its trust department or agent but not in the enti1y's name" during the period significantly exceeded the amounts in those categories as of the balance sheet date was properly disclosed in the financial statements. 29. Tax-exempt bonds issued have retained their tax-exempt status. 30. We believe that the actuarial assumptions and methods used to measure pension liabilities and costs for financial accounting purposes are appropriate in the circumstances. 31. It is our intention and plan, based upon increased user fees charged for garbage collection services, Ch~rry, Bekaert & Holland, L.L.P. September 25,2006 70f7 that the Garbage Collection fund will have the resources and abili1y to repay the General fund all monies owed through negative pooled cash balance at December 31,2005. It is also our intention that the Housing and Neighborhood fund will repay the General fund all monies owed through negative pooled cash balance at December 31, 2005. Further, we confirm to the best of our knowledge and belief that there have been no events, except as disclosed in the financial statements, that have occurred subsequent to the balance sheet date and through the date of this letter that would require adjustment to or disclosure in the aforementioned financial statements or in the schedule of findings and questioned costs. Very truly yours, Ci1y of Augusta, Georgia Deke Copenhaver Mayor /Z-A e erick L. Russell Administrator . OO'YtMc>6 CJd (ljc~ Donna Williams Interim Finance Director