HomeMy WebLinkAboutCity Council Agenda Item No 071:44:101:4 6 0 k
TO: HONORABLE MAYOR
AND MEMBERS OF THE CITY COUNCIL
FROM: PAT KILROY
INTERIM CITY MANAGER
DATE: APRIL 24, 2012
SUBJECT: EXTENSION OF AUDIT SERVICES WITH WHITE NELSON DIEHL,
EVANS LLP FOR THE FISCAL YEAR ENDED JUNE 309 2012
W
On April 12, 2005, the Cit Council approved the selection of Diehl, Evans & Compan
to perform the annual audit services for the Cit for the three fiscal y ears endin June
30, 2005, 2006 and 2007, with an option for the two y ears ended June 30, 2008 and
2009. The two y ear option was exercised and an additional two y ear contract extension
to June 30, 2011 was approved b Cit Council on April 27, 2010.
On December 1, 2011, Diehl, Evans & Compan mer with White Nelson & Co. to
become White Nelson Diehl Evans LLP.
At the April 10, 2012 Cit Council meetin we received the latest audit report from
White Nelson Diehl Evans for the fiscal y ear ended June 30, 2011.
1 1:164 1 mlj
Consideration had been g iven to issue a Re for Proposal {RFP) to select an audit
firm for the three y ears, be with fiscal y ear endin June 30, 2012. However, in
li of the dissolution of the Redevelopment A b the State of California and the
time and cost that would be involved in brin a new audit firm on board, Cit staff is
re a one y ear extension with White Nelson Diehl Evans LLP. A RFP will be
considered after the completion of the audit report issued for the fiscal y ear endin June
30, 2012.
4GENDA ITEM NO. 7
Pa I of 11
Extension of Audit Services with White Nelson Diehl Evans LLP
April 24, 2012
Pa 2
Fiscal Impact
The maximum annual audit fees for the fiscal y ears endin June 30, 2012 under the
proposed contract attached, which represents a two% (3%) increase, will be as follows:
Cit Audit and CAFR
Redevelopment A
Public Financin Authorit
Recreation Authorit
Sin Audit
Gann Limit Verification
June 30. 2011
28,100
8,925
5,925
4,100
3,820
435
51,105
Recommendation
Authorize the Interim Cit Mana to enter into a professional services a with
White Nelson Diehl Evans LLP to perform professional auditin services for the fiscal
y ear endin June 30, 2012 in accordance with the fee and terms noted in the proposal
attached.
Attachments:
White Nelson Diehl Evans LLP Proposed En Letter for June 30, 2012 audit
Pa 2 of IT
April 17, 2012
Mr. James Rile
Director of Administrative Services
Cit of Lake Elsinore
130 South Main Street
Lake Elsinore, CA 92530
Dear Mr. Rile
We are pleased to present our en letter to provide audit services to the Cit of Lake Elsinore
( the Cit the Lake Elsinore Redevelopment A the Lake Elsinore Public Financing Authorit
and the Lake -Elsinore Recreation Authorit for the y ear endin June 30, 2012. We will audit the
financial statements 'of the g overnmental activities, each major fund, and the a remainin fund
information, which collectivel comprise the basic financial statements, of the Cit as of and for each
of the y ear endin June 30, 2012. Accountin standards g enerall y accepted in the United States of
America provide for certain re supplementar information ( RSI ) , such as mana
discussion and anal (MD &A.), to supplement the Cit basic financial statements. Such
information, althou not a part of the basic financial statements, is re b the Governmental
Accountin Standards Board who considers it to be an essential part ' of financial reportin for placin
the basic financial statement's in an appropriate operational, economic, or historical context. As part of
our en we will appl certain limited procedures to the Cit RSI in accordance with auditin
standards g enerall y accepted in the United States of America. These limited procedures will consist of
in of mana re the methods of preparin the information and comparin the
information for consistenc with mana responses to our in the basic financial
statements, and other knowled we obtained durin our audit of the basic financial statements. We
will not express an opinion or provide an assurance on the information because the limited procedures
do not provide us with sufficient evidence to express an opinion or provide an assurance. The
followin RSI is re b accepted accountin principles and will be subjected to certain
limited procedures, but will not be audited:
1) Mana Discussion and Anal
2) Bud Comparison Schedules = General and Ma Special Revenue Funds.
Pa I
2875 Michelle Drive, Suite 300, Irvine, CA 92606 * Tel.- 714-978.1300 * Fax: 714.978.7893
O located in Oran and San Die Counties Pa 3 of 11
Mr. James Rile Director of Administrative Services
Cit of Lake . Elsinore
April 17, 2012
Pa 2
We have also been en to report on supplementar information other than RSI that accompanies
the Cit financial statements. We will sub the followin supplementar information to the
auditin procedures applied in our audit of the basic financial statements and certain additional
procedures, includin comparin and reconcilin such information directl to the underl
accountin and other records used to prepare the financial statements or to the financial statements
themselves, and other additional procedures in accordance with auditin standards g enerall y accepted
in the United States of America and will provide an opinion on it in relation to the basic financial
statements as a whole:
1) Combinin and individual other g overnmental fund financial statements.
The followin additional information i
accompan Y n g the basic financial statements will not be
subjected to the auditin procedures applied in our audit of the financial statements, and for which our
auditors' report will not provide an opinion or an assurance:
1 Introductor Section.
2 Statistical Section.
Audit objectives:
The objective of our audit is the expression of opinions as to whether y our basic financial statements
are fairl presented, in all material respects, in conformit with accountin principles g enerall y
accepted in the United States of America and to report on the fairness of the supplementar
information referred to in the second para when considered in relation to the basic financial
statements taken as'a whole. Our audit will be conducted in accordance with auditin standards
g enerall y accepted in the United States of America and the standards for financial audits contained in
Government Auditin Standards, issued b the Comptroller General of the United States, and will
include tests of the accountin records of Cit and other procedures we consider necessar to enable us
to express such opinions. If our opinions on the financial statements are other than un we
will discuss the reasons with y ou in advance. If, for an reason, we are unable to complete the audit or
are unable to form or have not formed opinions, we ma decline to express opinions or to issue a report
as a result of this en g a g ement.
We will also provide a report (that does not include an opinion) on internal control related to the
financial statements and compliance with laws, re and the provisions of contracts or g rant
a noncompliance with which could have a material effect on the financial statements as
re b Government Auditin Standards. The report on internal control and compliance will
include a statement that the report is intended solel for the information and use of mana the
bod or individuals char with g overnance, others within the entit and specific le or
re g ulator y bodies and is not intended to be and should not be used b an other than these specified
parties. If durin our audit we become aware that the Cit is subject to an audit re that is not
encompassed in the terms of this en we will communicate to mana and those char
with g overnance that an audit in accordance with U.S. g enerall y accepted auditin standards and the
standards for financial audits contained in Government Auditin Standards ma not satisf the relevant
le re or contractual re
Pa 4 of 11
Mr. James Rile Director of Administrative Services
Cit of Lake Elsinore
April 17, 2012
Pa 3
Mana Responsibilities:
Mana is responsible for the basic financial statements and all accompan information as
well as all representations contained therein. As part of the audit, we will assist with preparation of
y our financial statements and related notes. You are responsible for makin all mana decisions
and performin all mana functions relatin to the financial statements and related notes and for
acceptin full responsibilit for such decisions. You will be re to acknowled in the
mana representation letter our assistance with preparation of the financial statements and that
y ou have reviewed and approved the financial stateme and related notes prior to their issuance and
have accepted responsibilit for them. Further, y ou are re to desi an individual with
suitable skill, knowled or experience to oversee an nonaudit services we provide and for evaluatin
the ade and results of those services and acceptin responsibilit for them.
Mana is responsible for establishin and maintainin effective internal controls, includin
evaluatin and monitorin on activities, to help ensure that appropriate g oals and objectives are
met for the selection and application of accountin principles and for the fair presentation in the
financial statements of the respective financial position of the g overnmental activities, each ma
fund, and the a remainin fund information of the Cit and the respective chan in financial
position in conformit with U.S. g enerall y accepted accountin principles.
Mana is also responsible for makin all financial records and related information available to us
and for ensurin that mana and financial information is reliable and properl recorded. Your
responsibilities include adjustin the financial statements to correct material misstatements and for
confirmin to us in the representation letter that the effects of an uncorrected misstatements
a b us durin the current en and pertainin to the latest period presented are
immaterial, both individuall and in the a to the financial statements taken as a whole.
You are responsible for the desi and implementation of pro and controls to prevent and detect
fraud, and for informin us about all known or suspected fraud affectin the g overnment involvin
(1) mana (2) emplo who have si roles in internal control, and (3) others where the
fraud or ille acts could 'have a material effect on the financial statements. Your responsibilities
include informin us of y our knowled of an alle of fraud or suspected fraud affectin the
g overnment received in communications from emplo former emplo g rantors, re or
others. In addition, y ou are responsible for identif and ensurin that the entit complies with
applicable laws, re contracts, a and g rants for takin timel and appropriate steps
to remed an fraud, ille acts, violations of contracts or g rant a or abuse that we ma
report. You are responsible for the preparation of the supplementar information in conformit with
U.S. g enerall y accepted accountin principles. You a to include our report on the supplementar
information in an document that contains and indicates that we have reported on the supplementar
information. You also a to include the audited financial statements with an presentation of the
supplementar information that includes our report thereon OR make the audited financial statements
readil available to users of the supplementar information no later than the date the supplementar
information is issued with our report thereon.
Pa 5 of 11
Mr. James Rile Director of Administrative Services
Cit of Lake Elsinore
April 17, 2012
Pa 4
Mana Responsibilities ( Continued ) :
Mana is responsible for establishment and maintenance of a process for trackin the status of
audit findin and recommendations. Mana is also responsible for identif for us previous
financial audits, attestation en performance audit or other studies related to the objectives
discussed in the Audit Objectives section of this letter. This responsibilit includes rela to us
corrective actions taken to address si findin and recommendations resultin from those
audits or other en or studies. You are also responsible for providin mana views on
our current findin conclusions, and recommendations, as well as y our planned corrective actions, for
the report, and for the timin and format for providin that information.
Audit Procedures - General:
An audit includes examinin on a test basis, evidence supportin the amounts and disclosures in the
financial statements therefore, our audit will involve jud 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 (1) errors, (2) fraudulent financial reportin (3) misappropriation of assets, or
(4) violations of 'laws or g overnmental re that are attributable to the entit or to acts b
mana or emplo actin on behalf of the entit Because the determination of abuse is
subjective, Government Auditin Standards do not expect auditors to provide reasonable assurance of
detectin abuse.
Because an audit is desi 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 misstatements or
noncompliance ma exist and not be detected b us. In addition, an audit is no desi to detect
immaterial misstatements or violations of laws or g overnmental re that do not have a direct
and material effect on the financial statements or major pro However, we will inform y ou of an
material errors and an fraudulent financial reportin or misappropriation of assets that come to our
attention. We will also inform y ou of an violations of laws or g overnmental re that come to
our attention, unless clearl inconse We will include such matters in the reports re for a
Sin Audit. Our responsibilit as auditors is limited to the period covered b our audit and does not
extend to an later periods for which we are not en as auditors.
Our procedures will include tests of documentar evidence supportin the transactions recorded in the
accounts, and ma include tests of the ph existence of inventories, and direct confirmation of
receivables and certain other assets and liabilities b correspondence with selected individuals,
creditors, and financial institutions. We will re written representations from y our attorne as part
of the en and the ma bill y ou for respondin to this in At the conclusion of our.
audit, we will also re certain written representations from y ou about the financial statements and
related matters.
Pa 6 of 11
Mr. James Rile Director of Administrative Services
Cit of Lake Elsinore
April 17, 2012
Pa 5
0
Audit Procedures - Internal Controls.
Our audit will include obtainin an understandin of the entit and its environment, includin internal
control, sufficient to assess the risks of material misstatement of the financial statements and to desi
the nature, timin and extent of further audit procedures. Tests of controls ma be performed to test
the effectiveness of certain controls that we consider relevant to preventin and detectin errors and
fraud that are material to the financial statements and to preventin and detectin misstatements
resultin from ille 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 necessar to render an
opinion on internal control and, accordin no opinion will be expressed in our report on internal
control issued pursuant to Government Auditin Standards.
An audit is not desi to provide assurance on internal control or to identif si deficiencies.
However, durin the audit, we will communicate to mana and those char with g overnance
internal control related matters that are re to be communicated under AICPA professional
standards and Government Auditin Standards.
Audit Procedures - Compliance:
As part of obtainin reasonable assurance about whether the financial statements are free of material
misstatement, we will perform tests of the Cit compliance with the provisions of applicable laws,
re contracts, a and g rants. However, the objective of those procedures will not be
to provide an opinion on overall compliance and we will not express s an opinion in our report on
compliance issued pursuant to Government Auditin Standards.
Audit Administration, Fees and Other:
Noted below is a listin of work re b Cit staff to assist in the audit.
1. Preparation of trial balances for all funds, after postin of all y ear end -journal entries.
2. Preparation of schedules supportin all major balance sheet accounts, and - selected revenue and
expenditure accounts.
3. T of all confirmation re
4. Pullin and refilin of all supportin documents re for audit verification.
5. Assistance with the preparation of the CAFR and notes to the financial statements, includin
a. Determination of major funds.
b. Determination of g eneral and pro revenues and allocation of pro revenues to'.
1. char for services,
2. operatin g rants and contributions, and
3. capital g rants and contributions.
c. Determinin components of net assets into capital assets net of related debt, restricted and
unrestricted assets.
d. Assistance in determinin the amounts to be reported (1) in the Reconciliation of the Statement
of Revenues, Expenditures and Chan in Fund Balances of Governmental Funds to the
Statement of Activities and (2) the Reconciliation of the Balance Sheet of Governmental Funds
to the Statement of Net Assets.
Pa 7 of 11
Mr. James Rile Director of Administrative Services
Cit of Lake Elsinore
April 1 7, 2012
Pa 6
Audit Administration, Fees and Other ( Continued ) :
Our maximum annual fees for the y ear endin June 30, 2012 are as follows.-
Cit Audit and CAFR
Redevelopment A A (1)
Public Financin Authorit
Recreation Authorit
Gann Limit Verification
Sin Audit (2)
28,100
8,925
5,925
4,1010
435
3,620
$ 5 L, 105
(1) The fee represents the cost to audit the residual activit of the Redevelopment A which
will be included in the Cit financial statements. There will be n o ext char should
separa financial statements be re for the Successor A
(2) Our fixed fee contemplates up to one ma pro A price adjustment ran from $1,000
to $1,500 will be made for each additional pro
The maximum annual fees stipulated herein contemplate that conditions satisfactor to the normal
pro and completion of the examination will be encountered and the Cit accountin personnel
will furnish the a upon assistance in connection with the audit. However, if unusual
circumstances are encountered which make it necessar for us to do additional work we shall report
such conditions to the responsible Cit officials and provide the Cit with an estimate of the additional
accountin fees involved. You ma terminate our services or we ma withdraw from this en
at an time. An disputes arisin under this a shall be mediated under the rules of the
American Arbitration Association.
The workpapers, for this en are the propert of White Nelson Diehl Evans LLP and constitute
confidential information. However, pursuant to authorit g iven b law or re we ma be
re to make certain audit documentation available to a g rantor a or its desi a federal
a providin direct or indirect fundin or the U.S. Government Accountabilit Office for purpose
of a q ualit y review of the audit, to resolve audit findin or to carr out oversi responsibilities. We
will notif y ou of an such re q uest. If re access to such workpapers will be provided under the
supervision of our personnel. Furthermore, upon re q uest, we ma provide photocopies of selected
audit documentation to the aforementioned parties. These parties ma intend, or decide, to distribute
the photocopies or information contained therein to others, includin other g overnmental a
Page8ofli
Mr. James Rile Director of Administrative Services
Cit of Lake Elsinore
April 17, 2012
Pa 7
Audit Admunstration, Fees and Other (Continued):
In accordance with our firm's current record retention polic all of y our ori records will be
returned to y ou at the conclusion of this en Our accountin workpaper files will be kept for
a period of seven y ears after the issuance of the audit report. All other files will be kept for as lon as
y ou retain us as y our accountants. However, upon termination of our service, all records will be
destro after a period of seven y ears. Ph deterioration or catastrophic events ma further
shorten the life of these records. The workin papers and files of our firm are not a substitute for y our
ori records.
Government Auditin Standards re that we provide y ou with a cop of our most recent external
peer review report and an letter of comment, and an subsequent peer review reports and letters of
comment received durin the period of the contract. Our 2009 peer reviews accompanies this letter.
We appreciate the opportunit to be of service to the Cit of Lake Elsinore and believe this letter
accuratel summarizes the si terms of our en If y ou have an q uestions, please let
us know. If y ou a with the terms of our en as described in this letter, please si the
enclosed cop and return it to us.
Ver trul y ours,
WHITE NELSON DIEHL EVANS LLP
B
Nitin P. Patel, CPA
En Partner
This letter correctl sets forth the understandin
of the Cit of Lake Elsinore.
B
Title
Date
Pa 9 of I I
HEIDENREICH & HEfDENREiCH, CPAs, PLLC
10201 S.51s'street #170
Phoenix, AZ 85044
(480)704-6301 fax 785-4619
S Review Report
To the Owners of
Diehl, Evans & Compan LLP
and the Peer Review Committee of the CA Societ of CPAs
We have reviewed the s of q ualit y control for the accountin and auditin practice of Diehl,
Evans & Compan LLP ( the firm) in effect for the y ear ended September 30, 2008. Our peer
review was conducted in accordance with the Standards for Performin and Reportin on Peer
Reviews established b the Peer Review Board of the American Institute of Certified Public
Accountants. The firm is responsible for desi a s of q ualit y control and compl with
it to provide the firm with.reasonable assurance of performin and reportin in conformit with
applicable professional standards in all material respects. Our responsibilit is to express an
opinion on the desi of the s of q ualit y control and the firm's compliance therewith based
on our review. The nature, objectives, scope, limitations of, and the procedures performed in a
S Review are described in the standards at www.aicpa.or
As re b the standards, en selected for review included en performed
under the Government Auditin Standards and audits of emplo benefit plans.
In our opinion, the s of q ualit y control for the accountin and auditin practice of Diehl,
Evans & Compan LLP in effect for the y ear ended September 30, 2008, has been suitabl
desi and complied with to provide the firm with reasonable assurance of performin and
reportin in conformit with applicable professional standards in all material respects. Firms can
receive a ratin of pass, pass with deficienc or fail. Diehl, Evans & Compan LLP has
received a peer review ratin of pass.
NAaMM"i & XAaeM "i
Heidenreich & Heidenreich, CPAs, PLLC
Pa 10 of 11
�rtil ■ zL
Gunderson LLP
Certified Public Accountants & Consultants
S Review Report
To the Partners
White Nelson & Co., LLP
and the Peer Review Committee of the California Societ of Certified Public Accountants
We have reviewed the s of q ualit y control for the accountin and auditin practice of
White Nelson & Co. LLP (the firm) in effect for the y ear ended March 31, 2009. Our peer review
was conducted in accordance with the Standards for Performin and Reportin on Peer
Reviews established b the Peer Review Board of the American Institute of Certified Public
Accountants. The firm is responsible for desi a s of q ualit y control and compl
with it to provide the firm with reasonable assurance of performin and reportin in conformit
with applicable professional standards in all material respects. Our responsibilit is to express
an opinion on the desi of the s of q ualit y control and the firm's compliance therewith
based on our review. The nature, objectives, scope, limitations of, and the procedures
performed in a S Review are described in the standards at www.aicPa.
As re b the standards, en selected for review included en
performed under the Govemment Auditin Standards and audits of emplo benefit plans.
In our opinion., the s of q ualit y control for the accountin and auditin practice of White
Nelson & Co., LLP in effect for the y ear ended March 31, 2009, has been suitabl desi and
complied with to provide the firm with reasonable assurance of performin and reportin in
conformit with applicable professional standards in all material respects. Firms can receive a
rantin of pass, pass with deftcienc or fail. White Nelson & Co., LLP has received a peer
review ratin of pass.
Phoenix, Arizona
September 30, 2009
Officcs in 17 states and Washin DC
Mef"bor of
tnternationed
Pa 11 of 11