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City of Little Canada <br />Audit Contract <br />August 28, 1998 <br />Page 4 <br />Our audit is not specifically designed and cannot be relied on to disclose reportable <br />conditions, that is, significant deficiencies in the design or operation of the internal control <br />structure. However, during the audit, if we become aware of such reportable conditions or ways <br />that we believe management practices can be improved, we will communicate them to you in a <br />separate letter. <br />Our fee for these services will be at our hourly rates plus out -of- pocket costs (such as report <br />reproduction, typing, postage, travel, copies, telephone, etc.) except that we agree that our gross <br />fee, including expenses, will not exceed $18,000. Our hourly rates vary according to the degree <br />of responsibility involved and the experience level of the personnel assigned to your audit. Our <br />invoices for these fees will be rendered each month as work progresses and are payable on <br />presentation. If we elect to terminate our services for nonpayment, you will be obligated to <br />compensate us for all time expended and to reimburse us for all out -of- pocket expenditures <br />through the date of termination. The above fee is based on anticipated cooperation from your <br />personnel and the assumption that unexpected circumstances will not be encountered during the <br />audit. If significant additional time is necessary, we will discuss it with you and arrive at a new <br />fee estimate before we incur the additional costs. <br />Government Auditing Standards requires that we provide you with a copy of our most recent <br />quality control review report. Our 1995 peer review report accompanies this letter as Appendix <br />A. <br />We appreciate the opportunity to be of service to the City of Little Canada, Minnesota and <br />believe this letter accurately summarizes the significant terms of our engagement. If you have <br />any questions, please let us know. If you agree with the terms of our engagement as described in <br />this letter, please sign the enclosed copy and return it to us. <br />Very truly yours, <br />HLB TAUTGES REDPATH, LTD. <br />David J. Mol, CPA <br />RESPONSE: <br />This letter correctly sets forth the understanding of the City of Little Canada, Minnesota: <br />By: By: <br />Title: Title: <br />Date: Date: <br />Page 48 <br />