HomeMy WebLinkAboutExhibit D Auditor's Engagement Letter
"Exhibit 0"
City of Miami Beach, Florida
1700 Convention Center Drive
Miami Beach, FL 33139
Attention: The Honorable Mayor and City Commission
This letter is to explain our understanding of the arrangements for the services we are to perform for the City of Miami
Beach, Florida (the "City") for the fiscal years ending September 30,2006 through September 30,2010. We ask that
you either confirm or amend this understanding.
We will perform an audit of the City's governmental activities, business-type activities, the aggregate discretely
presented component units, each major fund, and aggregate remaining fund information as of and for the years
ending September 30, 2006 through September 30,2010, which collectively comprise the basic financial statements.
We will also perform an audit of the City's financial statements noted below as of and for the years ended September
30,2006 through September 30,2010:
Parking System Enterprise Fund of the City of Miami Beach Florida
Miami Beach Redevelopment Agency (A Component Unit of City of Miami Beach, FL)
Miami Beach Convention and Jackie Gleason Theater of the Performing Arts, as managed by SMG
Miami Beach Visitor and Convention Authority (A Component Unit of City of Miami Beach, FL)
City of Miami Beach Safe Neighborhood Parks Bond Projects
We understand that these financial statements will be prepared in accordance with accounting principles generally
accepted in the United States of America. The objective of an audit of financial statements is to express an opinion
on those statements.
We will also perform the audit of the City as of and for the years ended September 30, 2006 through September 30,
2010, so as to satisfy the audit requirements imposed by the Single Audit Act and the U.S. Office of Management
and Budget (OMB) Circular No. A-133 and the Florida Single Audit Act, should they become necessary during the
contract period.
Our acceptance of this engagement is subject to our satisfactorily completing communication with and review of the
working papers of your previous auditors. We will notify you promptly if we become aware of anything during that
communication or review which results in our not being able to continue this engagement.
We will conduct the audit in accordance with auditing standards generally accepted in the United States of America
and "Government Auditing Standards" issued by the Comptroller General of the United States, and the provisions of
the Single Audit Act, OMB Circular A-133 and OMB's Compliance Supplement. Those standards, circulars,
supplements or guides require that we plan and perform the audit to obtain reasonable rather than absolute,
assurance about whether the financial statements are free of material misstatement whether caused by error,
fraudulent financial reporting, or misappropriation of assets. Accordingly, a material misstatement, whether caused
by error, fraudulent financial reporting, or misappropriation of assets, may remain undetected. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. As a result,
an audit is not designed to detect errors or fraud that are immaterial to the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audit will provide a reasonable basis for
our reports.
In addition to our reports on the City's financial statements noted above, we will also issue the following reports or
types of reports:
A report on the faimess of the presentation of the City's Schedule of Expenditures of Federal Awards and
State Financial Assistance for the years ending September 30, 2006 through September 30, 2010, if
applicable during the contract period.
Reports on intemal control related to the financial statements and major programs. These reports will
describe the scope of testing of internal control and the results of our tests of internal controls.
Reports on compliance with laws, regulations, and the provision of contracts or grant agreements. We will
report on any noncompliance, which could have a material effect on the financial statements and any
noncompliance, which could have a direct and material effect on each major program.
A schedule of findings and questioned costs.
A Management Letter in Accordance with the Rules of the Auditor General of the State of Florida.
A report on the financial condition of the City, in accordance with the rules of the Auditor General.
The funds that you have told us are maintained by the City and that are to be included as part of our audit are listed
in the City's 2005 financial statements.
Our reports on intemal control will include any reportable conditions and material weaknesses in the system of which
we become aware as a result of obtaining an understanding of internal control and performing tests of intemal control
consistent with requirements of the standards and circular identified above. Our reports on compliance will address
material errors, fraud; violations of compliance requirements, and other responsibilities imposed by state and federal
statutes and regulations and assumed by contracts; and any state or federal grant, entitlement of loan program
questioned costs of which we become aware, consistent with requirements of the standards and circulars identified
above.
If circumstances arise relating to the conditions of your records, the availability of sufficient, competent evidential
matter, or indications of a significant risk of material misstatement of the financial statements because of error,
fraudulent financial reporting, misappropriation of assets, or noncompliance which in our professional judgment
prevent us from completing the audit or forming an opinion, we retain the unilateral right to take any course of action
permitted by professional standards, including declining to express an opinion or issue a report, or withdrawal from
the engagement.
As you know, management is responsible for 1) the preparation of City's financial statements and the schedule of
federal awards and state financial assistance, 2) establishing and maintaining effective internal control over financial
reporting and safeguarding assets and intemal control over compliance, including monitoring ongoing activities, and
for informing us of all significant deficiencies in the design or operation of such controls of which it has knowledge, 3)
properly recording transactions in the records, 4) identifying and ensuring that the City complies with the laws and
regulations applicable to its activities, and for informing us about all known material violations of such laws or
regulations, 5) 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 entity involving management, employees who have significant
roles in internal control and others where the fraud could have a material effect on the financial statements, 6)
informing us of its knowledge of any allegations of fraud or suspected fraud affecting the entity received in
communications from employees, regulators, or others, 7) making all financial records and related information
available to us, 8) for adjusting the financial statements to correct material misstatements, 9) following up and taking
corrective action on audit findings, including the preparation of a summary schedule of prior audit findings, and a
corrective action plan, and 10) report distribution including submitting the reporting packages. At the conclusion of
our audit, we will request certain written representations from management about the financial statements and
matters related thereto. We will also require that you affirm to us 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.
The City Commission is responsible for informing us of its views about the risks of fraud within the entity, and its
knowledge of any fraud or suspected fraud affecting the entity. We will also determine that certain matters related to
the conduct of the audit are communicated to the City Commission including 1) fraud involving senior management
and fraud (whether caused by senior management or other employees) that causes a material misstatement of the
financial statements, 2) illegal acts that come to our attention (unless they are clearly inconsequential), 3)
disagreements with management and other serious difficulties encountered in performing the audit, and 4) various
matters related to the entity's accounting policies and financial statements.
The City hereby indemnifies McGladrey & Pullen, LLP and its partners, principals, and employees and holds them
harmless from all claims, liabilities, losses, and costs arising in circumstances where there has been a knowing
misrepresentation by a member of the City's management, regardless of whether such person was acting in The
City's interest. This indemnification will survive termination of this letter.
You have informed us that you intend to prepare a Comprehensive Annual Financial Report (CAFR) and submit it for
evaluation by the Government Finance Officers Association's Certificate of Achievement for Excellence in Financial
Reporting Program. Our participation in the preparation of the CAFR is to consist of having the audit and accounting
report review performed by a person who is also a reviewer for the GFOA certificate program and have them involved
in the resolution of any accounting or reporting questions that arise during the engagement. We will also read the
material included in the Introductory and Statistical Sections.
The working papers for this engagement are the property of McGladrey & Pullen, LLP. However, you acknowledge
and grant your assent that representatives of the cognizant or oversight agency or their designee, other government
audit staffs, and the U.S. Government Accountability Office shall have access to the audit working papers upon their
request; and that we shall maintain the working papers for a period of at least three years after the date of the report,
or for a longer period if we are requested to do so by the cognizant or oversight agency. Access to requested
workpapers will be provided under the supervision of McGladrey & Pullen, LLP audit personnel and at a location
designated by our Firm.
The two overarching principles of the independence standards of the "Government Auditing Standards" issued by the
Comptroller General of the United States provide that management is responsible for the substantive outcomes of
the works, and therefore, has a responsibility and is able to make any informed judgment on the results of the
services described above. Accordingly, the City agrees to the following:
Patricia D. Walker, Chief Financial Officer will be accountable and responsible for overseeing the
preparation of the Comprehensive Annual Financial Report.
The City will establish and monitor the performance of the preparation of the Comprehensive Annual
Financial Report to ensure that they meet management's objectives.
The City will make any decisions that involve management functions related to the Comprehensive Annual
Financial Report and accepts full responsibility for such decisiqns.
The City will evaluate the adequacy of services performed and any findings that result.
During the course of our engagement, we may accumulate records containing data, which should be reflected in your
books and records. You will determine that all such data, if necessary, will be so reflected. Accordingly, you will not
expect us to maintain copies of such records in our possession.
From time to time and depending upon the circumstances, we may use third-party service providers to assist us in
providing professional services to you. In such circumstances, it may be necessary for us to disclose confidential
client information to them. We enter into confidentiality agreements with all third-party service providers and we are
satisfied that they have appropriate procedures in place to prevent the unauthorized release of your confidential
information to others.
The assistance to be supplied by organization personnel, including the preparation of schedules and analyses of
accounts, has been discussed and coordinated with Patricia D. Walker, Chief Financial Officer. The timely and
accurate completion of this work is an essential condition to our completion of the audit and issuance of our audit
report.
Our fees are based on the time required by the individuals assigned to the engagement, plus direct expenses.
Individual hourly rates vary according to the degree of responsibility involved and the skill required. Interim billings
will be submitted as work progresses and as expenses are incurred. Billings are due upon submission. The actual
fees billed in each year will not exceed the amount noted in the Professional Services Agreement, unless
unanticipated changes in the scope of our work are required due to 1) a change in the operating size of the City, 2) a
change in applicable laws, regulations or generally accepted auditing standards as applied in the United States, and
3) new accounting or grant compliance standards are issued that have a significant effect on the City and/or for the
incomplete or untimely receipt by us of the information on the client participation list which significantly effects our
ability to perform our audit procedures on a timely and efficient basis.
Our professional standards require that we perform certain additional procedures, on current and previous years
engagements, whenever a partner or professional employee leaves the firm and is subsequently employed by or
associated with a client. Accordingly, the City agrees it will compensate McGladrey & Pullen, LLP for any additional
costs incurred as a result of the employment of a partner or professional employee of McGladrey & Pullen, LLP.
In the event we are requested or authorized by the City or are required by government regulation, subpoena, or other
legal process to produce our documents or our personnel as witnesses with respect to our engagements for the City,
the City 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 expenses, as well as the fees and expenses of our counsel, incurred in responding to such
requests.
Professional standards and our Firm policies require that we perform certain additional procedures whenever our
reports are included, or we are named as accountants, auditors, or "experts" in a document used in a public offering
of debt securities. Our report on the financial statements is not to be included in an official statement or other
document involved with the sale of debt instruments without our prior consent. Additionally, if you intend to publish or
otherwise reproduce the financial statements and/or make reference to us or our audit, you agree to provide us with
printe~s proofs or master for our review and consent before reproduction and/or release occurs. You also agree to
provide us with a copy of the final reproduced material for our consent before it is distributed or released. Our fees
for any additional services that may be required under our quality assurance system as a result of the above will be
established with you at the time such services are determined to be necessary.
Any claim arising out of services rendered pursuant to this agreement shall be resolved in accordance with the laws
of Florida. It is agreed by the City and McGladrey & Pullen, LLP or any successors in interest that no claim arising
out of services rendered pursuant to this agreement by or on behalf of the City shall be asserted more than two years
after the date of the last audit report issued by McGladrey & Pullen, LLP.
This letter constitutes the complete and exclusive statement of agreement between McGladrey & Pullen, LLP and the
City, superseding all proposals oral or written and all other communication, with respect to the terms of the
engagement between the parties.
In accordance with Government Auditing Standards, a copy of our most recent peer review report has been provided
to you, for your information.
If this letter defines the arrangements, as you understand them, please sign and date the enclosed copy, and return it
to us. We appreciate your business.
McGladrey & Pullen, LLP