Service Solicited - 2013 - Quest CPS's PC - Quest CPAs Yearly Audit FY 2012 / 2013 P.O.Box 100
Payette,Idaho 83661
Audits Quest CPAs, P.C. @gcpas.com
info@qcpas.com
Taxes P:208-642-1417
Special Services Quality Expertise Service Timeliness F• 208-642-1582
May 28, 2013
City of Eagle
P.O. Box 1520
Eagle, ID 83616
RE: 2012/13 Independent Audit
UPDATED FOR AUDIT FIRM NAME CHANGE
We are pleased to confirm our understanding of the services we are to provide the City of Eagle
(the City) for the year ended September 30, 2013. We will audit the financial statements of the
governmental activities, the business-type activities, the aggregate discretely presented
component unit, and each major fund, which collectively comprise the basic financial statements,
of the City as of and for the year ended September 30, 2013. Accounting standards generally
accepted in the United States of America provide for certain required supplementary information
(RSI) to supplement the City's basic financial statements. Such information, although not
required to be 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, and historical
context. As part of our engagement, we will apply certain limited procedures to the City'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. As in prior years, the management's discussion & analysis
(MD&A) will be excluded. If supplementary information other than RSI accompanies the basic
financial statements, we will subject it 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 the financial statements themselves, and other additional procedures in accordance
with auditing standards generally accepted in the United States of America and we will provide
an opinion on it in relation to the financial statements as a whole. Provisions described in this
engagement letter relating to a Single Audit, OMB Circular A-133, or the schedule of
expenditures of federal awards only apply when the City is subject to a Single Audit.
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COPY
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 above when considered in relation to the financial statements as a whole. The
objective also includes reporting on:
• Internal control related to the financial statements and compliance with the provisions of
laws, regulations, contracts, and grant agreements, noncompliance with which could
have a material effect on the financial statements in accordance with Government
Auditing Standards.
• Internal control related to major programs and an opinion (or disclaimer of opinion) on
compliance with laws, regulations, and the provisions of contracts or grant agreements
that could have a direct and material effect on each major program in accordance with
the Single Audit Act Amendments of 1996 and OMB Circular A-133, Audits of States,
Local Governments, and Non-Profit Organizations.
The reports on internal control and compliance will each include a paragraph that states the
purpose of the report is solely to describe (1) the scope of testing of internal control over
financial reporting and compliance and the result of that testing and not to provide an opinion on
the effectiveness of internal control over financial reporting or on compliance, (2) the scope of
testing internal control over compliance for major programs and major program compliance and
the result of that testing and to provide an opinion on compliance but not to provide an opinion
on the effectiveness of internal control over compliance, and (3) that the report is an integral part
of an audit performed in accordance with Government Auditing Standards in considering internal
control over financial reporting and compliance and OMB Circular A-133 in considering internal
control over compliance and major program compliance. The paragraph will also state that the
report is not suitable for any other purpose.
Our audit will be conducted in accordance with auditing standards generally accepted in the
United States of America; the standards for financial audits contained in 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 tests of the
accounting records, a determination of major program(s) in accordance with OMB Circular A-
133, and other procedures we consider necessary to enable us to express such opinions and to
render the required reports. We cannot provide assurance that unmodified opinions will be
expressed. Circumstances may arise in which it is necessary for us to modify our opinions or add
emphasis-of-matter or other-matter paragraphs. If our opinions on the financial statements or the
Single Audit compliance opinions are other than unmodified, we will discuss the reasons with
you in advance. If, for any reason, we are unable to complete the audit or are unable to form or
have not formed opinions, we may decline to express opinions or to issue a report as a result of
this engagement.
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Management Responsibilities
Management is responsible for the basic financial statements, schedule of expenditures of federal
awards (when applicable), and all accompanying information as well as all representations
contained therein. Management is also responsible for identifying government award programs
and understanding and complying with the compliance requirements, and for preparation of the
schedule of expenditures of federal awards in accordance with OMB Circular A-133. As part of
the audit, we will assist with preparation of your financial statements, schedule of expenditures
of federal awards, and related notes. You will be required to acknowledge in the written
representation letter our assistance with preparation of the financial statements and the schedule
of expenditures of federal awards and that you have reviewed and approved the financial
statements, schedule of expenditures of federal awards, and related notes prior to their issuance
and have accepted responsibility for them. You agree to assume all management responsibilities
for any nonaudit services we provide; oversee the services by designating an individual,
preferably from senior management, who possesses suitable skill, knowledge, or experience;
evaluate the adequacy and results of those services; and accept responsibility for them.
Management is responsible for establishing and maintaining effective internal controls, including
internal controls over compliance, and for evaluating and monitoring ongoing activities, to help
ensure that appropriate goals and objectives are met and that there is reasonable assurance that
government programs are administered in compliance with compliance requirements. You are
also responsible for the selection and application of accounting principles; for the preparation
and fair presentation of the financial statements in conformity with U.S. generally accepted
accounting principles; and for compliance with applicable laws and regulations and the
provisions of contracts and grant agreements.
Management is also responsible for making all financial records and related information
available to us and for ensuring that management and financial information is reliable and
properly recorded. You are also responsible for providing us with (1) access to all information of
which you are aware is relevant to the preparation of the financial statements, (2) additional
information that we may request for the purpose of the audit, and (3) unrestricted access to
persons within the government from whom we determine it necessary to obtain audit evidence.
Your responsibilities also include identifying significant vendor relationships in which the
vendor has the responsibility for program compliance and for the accuracy and completeness of
that information. Your responsibilities include adjusting the financial statements to correct
material misstatements and confirming to us in the written representation letter that the effects of
any uncorrected misstatements aggregated by us during the current engagement and pertaining to
the latest period presented are immaterial, both individually and in the aggregate, to the financial
statements taken as a whole.
You are responsible for the design and implementation of programs and controls to prevent and
detect fraud, and for informing us about all known or suspected fraud or illegal acts affecting the
City involving (1) management, (2) employees who have significant roles in internal control, and
(3) others where the fraud or illegal acts could have a material effect on the financial statements.
Your responsibilities include informing us of your knowledge of any allegations of fraud or
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suspected fraud, or illegal acts affecting the City 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. Additionally, as required by OMB Circular A-133, it is management's responsibility
to follow up and take corrective action on reported audit findings and to prepare a summary
schedule of prior audit findings and a corrective action plan and to make these items available for
our review.
You are responsible for preparation of the schedule of expenditures of federal awards in
conformity with OMB Circular A-133. You agree to include our report on the schedule of
expenditures of federal awards in any document that contains and indicates that we have reported
on the schedule of expenditures of federal awards. You also agree to include the audited financial
statements with any presentation of the schedule of expenditures of federal awards that includes
our report thereon. Your responsibilities include acknowledging to us in the written
representation letter that (1) you are responsible for presentation of the schedule of expenditures
of federal awards in accordance with OMB Circular A-133; (2) that you believe the schedule of
expenditures of federal awards, including its form and content, is fairly presented in accordance
with OMB Circular A-133; (3) that the methods of measurement or presentation have not
changed from those used in the prior period (or, if they have changed, the reasons for such
changes); and (4) you have disclosed to us any significant assumptions or interpretations
underlying the measurement or presentation of the schedule of expenditures of federal awards.
You are responsible for preparation of any other supplementary information, in conformity with
U.S. generally accepted accounting principles. You agree to include our report on the
supplementary information in any document that contains and indicates that we have reported on
the supplementary information. You also agree to include the audited financial statements with
any presentation of the supplementary information that includes our report thereon. Your
responsibilities include acknowledging to us in the written representation letter that (1) you are
responsible for presentation of the supplementary information in accordance with GAAP; (2)that
you believe the supplementary information, including its form and content, is fairly presented in
accordance with GAAP; (3) that the methods of measurement or presentation have not changed
from those used in the prior period (or, if they have changed, the reasons for such changes); and
(4) you have disclosed to us any significant assumptions or interpretations underlying the
measurement or presentation of the supplementary information.
Management is responsible for establishing and maintaining 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 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.
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Audit Procedures—General
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements; therefore, our audit will involve judgment about the number of
transactions to be examined and the areas to be tested. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of significant accounting
estimates made by management, as well as evaluating the overall presentation of the financial
statements. We will plan and perform the audit to obtain reasonable rather than absolute
assurance about whether the financial statements are free of material misstatement, whether from
(1) errors, (2) fraudulent financial reporting, (3) misappropriation of assets, or (4) violations of
laws or governmental regulations that are attributable to the entity or to acts by management or
employees acting on behalf of the entity. Because the determination of abuse is subjective,
Government Auditing Standards do not expect auditors to provide reasonable assurance of
detecting abuse.
Because of the inherent limitations of an audit, combined with the inherent limitations of internal
control, and because we will not perform a detailed examination of all transactions,there is a risk
that material misstatements or noncompliance may exist and not be detected by us, even though
the audit is properly planned and performed in accordance with U.S. generally accepted auditing
standards and Government Auditing Standards. In addition, an audit is not designed to detect
immaterial misstatements or violations of laws or governmental regulations that do not have a
direct and material effect on the financial statements or major programs. However, we will
inform appropriate level of management of any material errors and any fraudulent financial
reporting or misappropriation of assets that come to our attention. We will also inform
appropriate level of management of any violations of laws or governmental regulations that
come to our attention, unless clearly inconsequential. We will include such matters in our reports
required for a Single Audit. 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
confirmation 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 less in
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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.
As required by OMB Circular A-133, we will perform tests of controls over compliance 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.
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, Government Auditing Standards, and OMB Circular A-133.
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's compliance with provisions of
applicable laws, regulations, 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 awards. Our procedures will
consist of tests of transactions and other applicable procedures described in the OMB Circular A-
133 Compliance Supplement and related agenda for the types of compliance requirements that
could have a direct and material effect on each of the City's major programs. The purpose of
those procedures will be to express an opinion on the City's compliance with requirements
applicable to each of its major programs in our report on compliance issued pursuant to OMB
Circular A-133.
Engagement Administration, Fees, and Other
We understand that your employees will prepare all cash, accounts receivable, or other
confirmations we request and will locate any documents selected by us for testing.
At the conclusion of the engagement, we will complete the appropriate sections of the Data
Collection Form (when applicable) that summarizes our audit findings. It is management's
responsibility to submit the reporting package (including financial statements, schedule of
expenditures of federal awards, summary schedule prior audit findings, auditor's reports, and a
corrective action plan) along with the Data Collection Form to the federal audit clearinghouse.
We will coordinate with you the electronic submission and certification. If applicable, we will
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provide copies of our report for you to include with the reporting package you will submit to
pass-through entities. The Data Collection Form and the reporting package must be submitted
within the earlier of 30 days after receipt of the auditor's reports or nine months after the end of
the audit period, unless a longer period is agreed to in advance by the cognizant or oversight
agency for audits.
The audit documentation for this engagement is the property of Quest CPAs, P.C. and constitutes
confidential information. However, pursuant to authority given by law or regulation, we may be
requested to make certain audit documentation available to Legislative Services Office or its
designee, a federal agency providing direct or indirect funding, or the U.S. Government
Accountability Office for purposes of a quality review of the audit, to resolve audit findings, or
to carry out oversight responsibilities. We will notify you of any such request. If requested,
access to such audit documentation will be provided under the supervision of Quest CPAs, P.C.
personnel. Furthermore, upon request, we may provide copies of selected audit documentation to
the aforementioned parties. These parties may intend, or decide, to distribute the copies or
information contained therein to others, including other governmental agencies.
The audit documentation for this engagement will be retained for a minimum of five years after
the report release date or for any additional period requested by Legislative Services Office. If
we are aware that a federal awarding agency or auditee is contesting an audit finding, we will
contact the party(ies) contesting the audit finding for guidance prior to destroying the audit
documentation.
We expect to begin our audit on approximately September 1st and to issue our reports no later
than December 31St. Kurt R. Folke will be the engagement partner and will be 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 plus out-of-pocket costs
(such as report reproduction, word processing, postage,travel, copies,telephone, etc.) except that
we agree that our gross fees, including expenses, will not exceed:
2012/13
Financial Audit $10,200
Federal Single Audit (only if needed) $1,800
Our invoices for these fees will be rendered each month as work progresses and are payable upon
presentation. The above fees are based on anticipated cooperation from your personnel and the
assumption that unexpected circumstances will not be encountered during the audit. If significant
additional time is necessary, we will discuss it with you and arrive at a new fee estimate before
we incur the additional costs.
We appreciate the opportunity to be of service to you 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 one
copy and return it to us.
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Very truly yours,
ONO Si CPAs, P.C.
RESPONSE:
This lett correctly sets fort the understanding of the City.
By:
Title: )-11ezede,t,
Date: 7— 3 / 3
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