HomeMy WebLinkAboutLETTER OF ENGAGEMENT CHERRY BEKARET HOLLAND
-. .
. ~
. . .
Cherry, Bekaert & Bolland, L.L.P.
The Firm of Choice.
~
~
www.cbh.com
CERTIFIED PUBLIC
ACCOUNTANTS &
CONSULTANTS
December 12,2005
1029 Greene Street
Augusta, Georgia 30901
phone 706.724.3557
fax 706.724.1667
RECEIVED
Ms. Lena Bonner
Board of Commissioners
530 Greene St.
Augusta, GA 30911
DEe 1 3 2005
COUNTY ATTORNEY
Dear Ms. Bonner:
Enclosed please find our engagement letter for the year ended December
31, 2005. Please have the enclosed copy signed by the Mayor and the
Chairman of the Finance Committee, and return it to us in the envelope
provided.
If you have any questions or problems, please do not hesitate to call me at
706.724.3557. Thank you for your prompt attention to this matter.
Sincerely,
CHERRY, BEKAERT & HOLLAND, L.L.P.
~~~
Bonnie Cox, CPA
Senior Manager
~an;ndependentmembero'
BAKER TILLY
INTERNATIONAL
-. .
. ~
. . .
Cherry, Bekaert & Bolland, L.L.P.
The Firm of Choice.
www.cbh.com
CERTIFIED PUBLIC
ACCOUNTANTS &
CONSULTANTS
1029 Greene Street
Augusta, Georgia 30901
phone 706.724.3557
fax 706.724.1667
December 6, 2005
Mr. Mayor and Chair of Finance Committee
Augusta, Georgia Board of Commissioners
530 Greene Street
Augusta, Georgia 30911
Dear Mr. Mayor:
This letter of arrangement between Augusta, Georgia and Cherry, Bekaert & Holland, L.L.P. sets forth the
nature and scope of the services we will provide, the Augusta, Georgia's required involvement and
assistance in support of our services, the related fee arrangements and other terms and conditions
designed to assure that our professional services are performed to achieve the mutually agreed upon
objectives of Augusta, Georgia.
SUMMARY OF SERVICES
We will audit the financial statements of the governmental activities, the business-type activities, each
major fund and the aggregate remaining fund information, which collectively comprise the basic financial
statements of Augusta, Georgia as of and for the year ended December 31,2005.
Our audit will be conducted in accordance with auditing standards generally accepted in the United States
of America; Government Auditing Standards, issued by the Comptroller General of the United States; the
Single Audit Act Amendments of 1996; and the provisions of OMB Circular A-133, and will include test of
accounting records, a determination of major programs in accordance with Circular A-133, and other
procedures as deemed necessary to enable us to express such an opinion and to render the required
reports. The objective of an audit is the expression of our opinion concerning whether the basic financial
statements are fairly presented, in all material respects, in conformity with accounting principles generally
accepted in the United States of America.
In connection with our audit, we will report on the fairness of presentation of the schedules of federal
financial assistance and state financial assistance in relation to the financial statements taken as a whole.
We will also perform tests of compliance as required by Government Auditing Standards, the provisions of
OMB Circular A-133, and the, and issue our reports thereon.
If any of our opinions resulting from the procedures described above are other than unqualified, we will fully
discuss the reasons with you in advance.
The reports on internal control and compliance will each include a statement that the report is intended
solely for the information and use of the audit committee, management, specific legislative or regulatory
bodies, federal awarding agencies, and if applicable, pass-through entities and is not intended to be and
should not ,be used by anyone other than these specified parties.
As part of our engagement, we will prepare the financial statements and note disclosures from individual
fund trial balances that you will provide. However, management is responsible for the financial statements
and note disclosures. In your representation to us, you will be asked to acknowledge our role in this
~anindependentmembefOf
BAKER TILLY
INTERNATIONAL
regard, and your review, approval, and responsibility for the financial statements and note disclosures.
Further, you are responsible for designating a qualified management-level individual to be responsible and
accountable for overseeing these services.
We expect to utilize the Finance department staff and responsible management personnel during the audit
to assist us in providing information, documentation and explanations. As stated in your request for audit
services dated 4/28/2005, we also expect the following assistance to be provided to us as a part of our
audit engagement:
o Preparation of the confirmations and lead schedules
o Assistance in providing paid invoices, cancelled checks and other supporting documentation as
requested by us
o Year-end closing of the books of account and preparation of necessary adjusting journal entries
o Preparation of schedules and related material as requested by us
o Assistance in the preparation of all financial statements including related notes and required
supplemental financial information
o Assistance in the preparation of the annual grant report to be submitted to the Georgia State Auditor
Any additional services that you may request, and that we agree to provide, will be the subject of separate
written arrangements. Should the Augusta, Georgia wish to include or incorporate by reference these
financial statements and our report thereon into any official statement or any other document related to the
offering of debt securities at some future date, we would consider our consent to the inclusion of our report
into another such document at that time. However, we are required by auditing standards generally
accepted in the United States of America to perform certain procedures before we can give our permission
as to the inclusion of our report into another such document. You agree that you will not include or
incorporate by reference these financial statements and our report thereon into any other document without
our prior written consent.
Ken Fields, who will be responsible for assuring the overall quality, value, and timeliness of our services to
you, will lead the engagement.
YOUR EXPECTATIONS
As part of our planning process, we will discuss with you your expectations of Cherry, Bekaert & Holland,
L.L.P., changes that occurred during the year, your views on risks facing you, any relationship issues with
Cherry, Bekaert & Holland, L.L.P., and specific engagement arrangements and timing. Our service plan,
which includes our audit plan, is designed to provide a foundation for an effective, efficient, and quality-
focused approach to accomplish the engagement objectives and to meet or exceed your expectations.
Our service plan will be reviewed with you periodically and will serve as a benchmark against which you will
be able to measure our performance.
AUDIT SCHEDULE
Books closed
Pre-audit meeting with Director of Finance and City Administrator
First day of field work; lead schedules provided*
Fieldwork completed; CAFR completed and to auditors for review
CAFR review by auditors
Meet with Director of Finance to discuss commitments, contingencies, and
subsequent events
Audit opinion issued
Printing of CAFR by City staff
Single audit reports and management letter completed; Exit conference with
Director of Finance and City Administrator
Presentation to Finance Committee
As stated in your request for audit services dated 4/28/2005, we expect the schedule for the 2005 Fiscal
Year Audit to be as follows:
DATES
February 15, 2005
February 24, 2006
February 28, 2006
April 10, 2006
April 10-20, 2006
April 14, 2006
April 24-28, 2006
April 28,2006
May, 2006
Upon receiving this signed engagement letter, we will begin our audit process, which will require interim
financial statements for all funds of the Government to be provided as soon as possible. We will also
provide listing of items and schedules which we will require in connection with our audit.
*We expect other requested items and schedules to be provided on the first day of fieldwork.
TERMS AND CONDITIONS SUPPORTING FEE
As a result of our planning process, Augusta, Georgia and Cherry, Bekaert & Holland, L.L.P. have agreed
to a fee, subject to the following conditions.
To facilitate meeting our mutual objectives, Augusta, Georgia will provide in a timely manner audit
schedules and supporting information, including timely communication of all significant accounting and
financial reporting matters, as well as working space and clerical assistance as mutually agreed upon and
as is normal and reasonable in the circumstances. When and if for any reason Augusta, Georgia is unable
to provide such schedules, information and assistance, Cherry, Bekaert & Holland, L.L.P. and Augusta,
Georgia will mutually revise the fee to reflect additional services, if any, required of us to achieve these
objectives.
In providing our services, we will consult with Augusta, Georgia with respect to matters of accounting,
financial reporting, or other significant business issues. Accordingly, time necessary to effect a reasonable
amount of such consultation is reflected in our fee. However, should a matter require research,
consultation, or audit work beyond that amount, Cherry, Bekaert & Holland, L.L.P. and Augusta, Georgia
will agree to an appropriate revision in services and fee.
Except for any changes in fees, which may result from the circumstances described above, our fees will be
limited to those set forth below.
FEE
Financial Audit - Our fees for these services will be based upon our customary billing practices at the time
of the engagement. Bills for services will be rendered as work progresses and are due within 15 days from
invoice date. A service charge will be added to past due accounts equal to 1 1/2% per month (18% annual
rate) on the previous month's balance less payments received during the month, with a minimum charge of
$2.00 per month. The fee for our audit as described in this letter will not exceed $129,430. This fee is
based on anticipated cooperation from your personnel and the assumption that unexpected circumstances
will not be encountered during the audit. If significant additional time is necessary, we will discuss it with
you and arrive at a new fee estimate before we incur the additional costs. Any modification to the fee shall
be in writing and signed by both parties. You agree to pay all costs of collection (including reasonable
attorneys' fees) that we may incur in connection with the collection of unpaid invoices.
The fees set forth below are based on auditing standards effective as of the date of this engagement letter
and do not contemplate research andlor implementation of FIN46R, Consolidation of Variable Interest
Entities, if applicable. If new auditing standards are issued and are effective for the period under audit or it
is determined Augusta, Georgia must implement the provisions of FIN46R, either of which may require
additional audit procedures that were not known at the date of this engagement letter, we will estimate the
impact of any new such standard on the nature, timing and extent of our planned audit procedures and will
communicate with you concerning the scope of the additional procedures and the estimated fees.
Any additional accounting matters which may be necessary to complete the accounting for the year ended
December 31, 2005 will be performed in addition to the audit services and billed at our standard billing
rates. Examples of accounting services which may be provided are:
· Reconciling balance sheet accounts to account for unrecorded activity during the year.
· Preparing the year-end accruals for various areas.
LIMITATIONS OF THE AUDITING PROCESS
Our audit will include procedures designed to obtain reasonable assurance of detecting misstatements due
to errors or fraud that are material to the financial statements. Absolute assurance is not attainable
because of the nature of audit evidence and the characteristics of fraud. For example, audits performed in
accordance with GAAS are based on the concept of selective testing of the data being examined and are,
therefore, subject to the limitation that material misstatements due to errors or fraud, if they exist, may not
be detected. Also, an audit is not designed to detect matters that are immaterial to the financial statements.
In addition, an audit conducted in accordance with GAAS does not include procedures specifically
designed to detect illegal acts having an indirect effect (e.g., violations of fraud and abuse statutes that
result in fines or penalties being imposed on the Government) on the financial statements.
As required by the Single Audit Act Amendments of 1996 and OMB Circular A-133, our audit will include
tests of transactions related to major federal award programs for compliance with applicable laws and
regulations and the provisions of contracts and grant agreements. 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 errors, fraud, other illegal acts, or noncompliance may exist and
not be detected by us. In addition, an audit is not designed to detect immaterial errors, fraud, or other
illegal acts or illegal acts that do not have a direct effect on the basic financial statements or to major
programs. It should be recognized that our audit generally provides no assurance that illegal acts will be
detected, and only reasonable assurance that illegal acts having a direct and material effect on the
determination of financial statement amounts will be detected. However, we will inform you with respect to
material errors and fraud, or illegal acts that come to our attention during the course of our audit. We will
include such matters in the reports as required for a Single Audit.
If, for any reason, we are unable to complete the audit, or are unable to form or have not formed an opinion
on the basic financial statements, we may decline to express an opinion or decline to issue a report as a
result of the engagement.
RESPONSIBILITIES AS TO INTERNAL CONTROLS
As a part of our audit, we will consider Augusta, Georgia's internal control structure, as required by auditing
standards generally accepted in the United States of America and Government Auditing Standards,
sufficient to plan the audit and to determine the nature, timing, and extent of auditing procedures necessary
for expressing our opinion concerning the basic financial statements. You recognize that the basic
financial statements and the establishment and maintenance of an effective internal control over financial
reporting are the responsibility of management. You also recognize that management is responsible for
identifying and ensuring that the entity complies with the laws and regulations applicable to its activities.
Appropriate supervisory review procedures are necessary to provide reasonable assurance that adopted
policies and prescribed procedures are adhered to and to identify errors, fraud, or illegal acts. An audit is
not designed to provide assurance on internal control. As part of our consideration of Augusta, Georgia's
internal control structure, however, we will inform you of reportable conditions and other matters that come
to our attention that represent significant deficiencies in the design or operation of the internal control
structure, if any, as required by OMB Circular A-133.
As required by OMB Circular A-133, we will perform tests of controls to evaluate the effectiveness of the
design and operation of controls that we consider relevant to preventing or detecting material
noncompliance with compliance requirements, applicable to each major federal award program. However,
our tests will be less in scope than would be necessary to render an opinion on those controls and,
accordingly, no opinion will be expressed in our report on internal control issued pursuant to OMB Circular
A-133.
You are also 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. You are also responsible for informing us of your
knowledge of any allegations of fraud or suspected fraud affecting the Government received in
communications from employees, former employees, regulators, or others.
RESPONSIBILITIES AS TO COMPLIANCE
Our audit will be conducted in accordance with the standards referred to in the section Summary of
Services. As part of obtaining reasonable assurance about whether the basic financial statements are free
of material misstatement, we will perform tests of Augusta, Georgia's compliance with applicable laws and
regulations and the provisions of contracts and agreements, including grant agreements. However, the
objective of those procedures 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.
OMB Circular A-133 requires that we also plan and perform the audit to obtain reasonable assurance about
whether the auditee has complied with applicable laws and regulations and the provisions of contracts and
grant agreements applicable to major programs. Our procedures will consist of the applicable procedures
described in the OMB Circular A-133 Compliance Supplement for the types of compliance requirements
that could have a direct and material effect of each of Augusta, Georgia's major programs. The purpose of
those procedures will be to express an opinion on Augusta, Georgia's compliance with requirements
applicable to major programs in our report on compliance issued pursuant to OMB Circular A-133.
REPRESENTATION FROM MANAGEMENT
Management is responsible for the fair presentation of the basic financial statements in conformity with
accounting principles generally accepted in the United States of America, for making all financial records
and related information available to us, and for identifying and ensuring that the entity complies with the
laws and regulations applicable to its activities. Management is also responsible for adjusting the financial
statements to correct material misstatements. Additionally, as required by OMB Circular A-133, it is
management's responsibility to follow up and take corrective action on prior audit findings and to prepare a
summary schedule of prior audit findings and a corrective action plan. The summary schedule of prior
audit findings and the corrective action plan should be made available to us during the course of our
engagement. Management, at the conclusion of the engagement, will provide to us a representation letter
that, among other things, addresses these matters and confirms certain representations made during the
audit, including, to the best of their knowledge and belief, the absence of fraud involving management or
those employees who have significant roles in the entity's internal control, or others where it could have a
material effect on the basic financial statements. The representation letter will also affirm to us that
management believes that the effects of any uncorrected misstatements aggregated pertaining to the
current year financial statements are immaterial, both individually and in the aggregate, to the financial
statements taken as a whole.
Cherry, Bekaert & Holland, L.L.P. will rely on the Government's management providing these
representations to us, both in the planning and performance of the audit, and in considering the fees that
we will charge to perform the audit. Because we will be relying on management's representations, you
agree to indemnify Cherry, Bekaert & Holland, L.L.P., and its partners and employees, and hold them
harmless from all claims, liabilities, losses, and costs arising in circumstances where there has been a
knowing misrepresentation by an officer or employee of the Government regarding fraud or suspected
fraud regardless of whether such officer or employee was acting in the Government's interest, and even if
Cherry, Bekaert & Holland, L.L.P. acted negligently or wrongfully in failing to uncover or detect such
misrepresentation regarding fraud or suspected fraud. This indemnification will survive termination of this
letter.
COMMUNICATIONS
At the conclusion of the engagement, we will provide management, in a mutually agreeable format, our
recommendations designed to help Augusta, Georgia make improvements in its internal control structure
and operations, and other matters that may come to our attention (see "Responsibilities as to Intemal
Controls" above).
As part of this engagement we will ensure that certain additional matters are communicated to the
appropriate members of management and the Augusta, Georgia Board of Commissioners. Such matters
include (1) our responsibility under auditing standards generally accepted in the United States of America;
(2) the initial selection of and changes in significant accounting policies and their application; (3) our
independence with respect to the entity; (4) the process used by management in formulating particularly
sensitive accounting estimates and the basis for our conclusion regarding the reasonableness of those
estimates; (5) audit adjustments that could, in our judgment, either individually or in the aggregate be
significant to the financial statements or our report; (6) any disagreements with management concerning a
financial accounting, reporting or auditing matter that could be significant to the financial statements; (7)
our views about matters that were the subject of management's consultation with other accountants about
auditing and accounting matters; (8) major issues that were discussed with management in connection with
the retention of our services, including, among other matters, any discussions regarding the application of
accounting principles and auditing standards; and (9) serious difficulties that we encountered in dealing
with management related to the performance of the audit.
Government Auditing Standards require that we provide you with a copy of our most recent quality control
review report. Our most recent peer review report accompanies this letter.
ACCESS TO WORKING PAPERS
The working papers for the engagement are the property of Cherry, Bekaert & Holland, L.L.P. and
constitute confidential information. Except as discussed below, any requests for access to our working
papers will be discussed with you prior to making them available to requesting parties.
The workpapers for this engagement will be retained for a minimum of three years after the date the
auditors' report is issued or for any additional period requested by Augusta, Georgia. If we are aware that a
USE OF THIRD PARTY SERVICE PROVIDERS
federal awarding agency, pass-through entity, or auditee is contesting an audit finding, we will contact the
party(ies) contesting the audit finding for guidance prior to destroying the workpapers.
Our Firm, as well as all other major accounting firms, participates in a "peer review" program, covering our
audit and accounting practices. This program requires that once every three years we subject our quality
assurance practices to an examination by another accounting firm. As part of the process, the other firm
will review a sample of our work. It is possible that the work we perform for you may be selected by the
other firm for their review. If it is, they are bound by professional standards to keep all information
confidential. If you object to having the work we do for you reviewed by our peer reviewer, please notify us
in writing.
The firm may from time to time, and depending on the circumstances, use third-party service providers
in serving your account. We may share confidential information about you with these service
providers, but remain committed to maintaining the confidentiality and security of our information.
Accordingly, we maintain internal policies, procedures and safeguards to protect the confidentiality of
your personal information. In addition, we will secure confidentiality agreements with all service
providers to maintain the confidentiality of your information and we will take reasonable precautions to
determine that they have appropriate procedures in place to prevent the unauthorized release of your
confidential information to others. In the event that we are unable to secure an appropriate
confidentiality agreement, you will be asked to provide your consent prior to the sharing of your
confidential information with the third-part service provider. Furthermore, the firm will remain
responsible for the work provided by any such third-party service providers.
SUBPOENAS
In the event we are requested or authorized by you or required by government regulation, subpoena, or
other legal process to produce our working papers or our personnel as witnesses with respect to our
engagement for you, you will, so long as we are not a party to the proceeding in which the information is
sought, reimburse us for our professional time and expense, as well as the fees and expenses of our
counsel, incurred in responding to such a request.
OTHER MA TIERS
If any dispute, controversy or claim arises in connection with the performance or breach of this agreement,
either party may, on written notice to the other party, request that the matter be mediated. Such mediation
would be conducted by a mediator appointed by and pursuant to the rules of the American Arbitration
Association (AAA) or such other neutral facilitator acceptable to both parties. Both parties would exert their
best efforts to discuss with each other in good faith their respective positions in an attempt to finally resolve
such dispute, controversy, or claim.
Client and accountant both agree that any dispute over fees charged by the accountant to the client will be
submitted for resolution by arbitration in accordance with the Rules for Professional Accounting and
Related Services Disputes of the AAA. Any award rendered by the Arbitrator pursuant to this Agreement
may be filled and entered and shall be enforceable in the Superior Court of the County in which the
arbitration proceeds. In agreeing to arbitration, we both acknowledge that, in event of a dispute over fees
charge by the accountant, each of us is giving up the right to have the dispute decided in a court of law
before a judge or jury and instead we are accepting the use of arbitration for resolution.
The prevailing party shall be entitled to an award of reasonable attorneys' fees and costs incurred in
connection with the arbitration of the dispute in an amount to be determined by the arbitrator.
If the foregoing is in accordance with your understanding, please sign a copy of this letter in the space
provided and return it to us. If you have any questions, please call Ken Fields or Bonnie Cox at
706.724.3557.
Cd ~""'"'- ~ t.r ~
Very truly yours,
CHERRY, BEKAERT & HOLLAND, L.L.P.
~,~~7~44e
Enclosure
RESPONSE:
This letter correctly sets forth the understanding of Augusta, Georgia.
t~
~
~- By:
de,(Q
By. CQcM< ~
Title:~
Date I (q /0 <)
Title: ft,~ ~V
Date