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
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September 25,2006
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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.
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September 25,2006
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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
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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.
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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.
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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,
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September 25,2006
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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