HomeMy WebLinkAboutResolution 6668RESOLUTION NO. 6668
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CITY OF MOUNDS VIEW
COUNTY OF RAMSEY
STATE OF MINNESOTA
RESOLUTION APPOINTING MMKR TO PROVIDE AUDITING SERVICES FOR
THE YEAR ENDED DECEMBER 31, 2005
WHEREAS, Minnesota Statue 471.697 requires all cities with a population
over 2,500 to submit an audited annual financial report to the state auditor affice; and
WHEREAS, Malloy, Montague, Karnowski, Radosevich, & Co., P.A. (MMKR)
provided the City of Mounds View with financial auditing services beginning with the
year ended December 31, 2001; and
WHEREAS, MMKR has provided a letter of engagement that outlines the
services which they will perform; and
WHEREAS, the audit services described include the base audit, GASB 34
implementation, and the fraud audit requirements for an estimated total of $26,300
plus direct expenses.
NOW, THEREFORE, BE IT RESOLVED, that the City Council of the City of
Mounds View does hereby authorize the Mayor to sign the engagement letter dated
October 20, 2005 with MMKR for the provision of auditing services for the year
ending 2005.
ATTEST:
(SEAL)
\\l'routtFinaneetResoWlionsWutldor engagement o5 tloc
Adopted this 14th day of November, 2005.
Rob arty, Mayor
i_/
Kurt Ulrich, City Administrator
WIPFLi.
November 3, 2004
To the Principals
Malloy, Montague, Karnowski, Radosevich, ~ Co., P.A.
Minneapolis, Minnesota
We have reviewed the system of quality control for the accounting and auditing practice of Malloy,
Montague, Karnowski, Radosevich, ~ Co., P.A. (the "Firm") in effect for the year ended May 31, 2004. A
system of quality control encompasses the Firm's organizational structure and the policies adopted and
procedures established to provide it with reasonable assurance of conforming with professional
standards. The elements of quality control are described in the Statements on Quality Control Standards
issued by the American Institute of Certified Public Accountants (AICPA). The design of the system and
compliance with it are the responsibility of the firm. Our responsibility is to express an opinion on the
design of the system, and the Firm's compliance with the system based on our review.
Our review was conducted in accordance with standards established by the Peer Review Board of the
AICPA. In performing our review, we obtained an understanding of the system of quality control for the
Firm's accounting and auditing practice. In addition, we tested compliance with the Firm's quality
control policies and procedures to the extent we considered appropriate. These tests covered the
application of the Firm's policies and procedures on selected engagements. Because our review was
based on selective tests, it would not necessarily disclose all weaknesses in the system of quality control
or all instances of lack of compliance with it.
Because there are inherent limitations in the effectiveness of any system of quality control, departures
from the system may occur and not be detected. Also, projection of any evaluation of a system of
quality control to future periods is subject to the risk that the system of quality control may become
inadequate because of changes in conditions, or because the degree of compliance with the policies or
procedures may deteriorate.
In our opinion, the system of quality control for the accounting and auditing practice of Malloy,
Montague, Karnowski, Radosevich, ~ Co., P.A. in effect for the year ended May 31, 2004, has been
designed to meet the requirements of the quality control standards for en accounting and auditing
practice established by the AICPA and was complied with during the year then ended to provide the
Firm with reasonable assurance of conforming with professional standards.
G(1~ LLP
Wipfli LLP
Eau Claire, Wisconsin
Wipfli LLP
3703 Oakwood Nips Parkway
Eau Claire, WI 54701
PO Box 640
Eau Claire, WI 54702-0690
715..832.3407
tax 715.832D475
www.wipfli.com
November 3, 2004
To the Principals
Malloy, Montague, Karnowski, Radosevich, ~ Co., P.A.
We have reviewed the system of quality control for the accounting and auditing practice of Malloy,
Montague, Karnowski, Radosevich, ~ Co., P.A. (the "Firm") in effect for the year ended May 31, 2004,
and have issued our report thereon dated November 3, 2004. That report should be read in conjunction
with the comments in this letter, which were considered in determining our opinion.
Matters That Did Not Resu/t in a Modified Report
Engagement Performance
Finding-The Firm's quality control policies and procedures require that all engagements be properly
documented in accordance with the requirements of professional standards, regulatory authorities, and
the Firm. Idowever our review disclosed instances (expectations of results of analytical testing,
compliance testing procedures in an ERISA plan audit) where the testing documentation was lacking.
Through discussions wif}l.engagement personnel, we were able to satisfy ourselves that appropriate
testing had been completed.
Recommendations-The Firm should discuss at a staff training session its policies regarding engagement
testing documentation. All Principals should be advised to monitor compliance with these policies when
reviewing audit working papers.
l,U~ LLB
Wipfli LLP
Eau Claire, Wisconsin
I:\WORD1Audit G Accounting\70390 Malloy Montague\70390 Letter Of Comments.Doc
ERTIFIED PUBLIC
ACCOUNTANT S
October 20, 2005
Mr. Mark Beer
City of Mounds View
2401 Highway 10
Mounds View, MN 55112-1429
Dear Mr. Beer:
PRINCIPALS
Kenneth UV. Malloy, C.PA
Thomas M Monta'ue, CPA
Thomas A. Karnowslci, CPA
Paul A. Radosevich, CPA
William J. Lauer, CPA
James H. E.ichren, CPA
We are pleased to confirm our understanding of the services we are to provide the City of Mounds View
(the City) for the year ended December 31, 2005. 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 City's basic financial statements, as of and for the year
ended December 31, 2005 .
The document we submit to you will include the management's discussion and analysis, which is
supplementary information required by accounting principles generally accepted in the United States of
America that will be subjected to certain limited procedures, but will not be audited.
Also, the document we submit to you will include combining and individual fund statements and
schedules that will be subjected to the auditing procedures applied in our audit of the financial statements
upon which we will provide an opinion in relation to the basic financial statements.
The document will also include statistical information that will not be subject to the auditing procedures
applied in our audit of the fnancial statements, and for which our auditor's report will disclaim an
opinion.
We will ,perform the required State Legal Compliance Audit conducted in accordance with auditing
standards generally accepted in the United States of America and the provisions of the Legal Compliance
Audit Guide promulgated by the Office of the State Auditor pursuant to Minnesota Statutes § 6.65, and
will include such tests of the accounting records and other procedures we consider necessary to enable us
to conclude that, for the items tested, the City has complied with the material terms and conditions of
applicable legal provisions.
We will also prepare a management report for the City Council and administration. This report will
communicate such things as our concerns regarding accounting procedures or policies brought to our
attention during our audit, along with recommendations for improvements. The report will also contain
certain financial comparisons and analysis and a summary of legislative activity affecting Minnesota
cities.
Our services will not include an audit in accordance with the single audit act amendments of 1996 and the
Office of Management and Budget Circular A-133, which would only be required if the City expended
$500,000 or more in federal assistance funds during the year. If the City is required to have a single audit
of federal assistance funds, this engagement letter would need to be modified.
Malloy, Montague, Karnowski, Radosevich, & Co., P. A.
X353 \y7zyzata Boule~~ard • Suite 410 • T.hinneapolis, M>t' 55416 • Telephone: 9>2-345-0424 • Telefax: 95?-545-0569 • mww.mmkr.com
City of Mounds View
October 20, ?005
Audit Objectives
Page 2
The objective of our audit is the expression of an opinion as to whether your financial statements are
fairly presented, in all material respects, in conformity with accounting principles generally accepted in
the United States of America and to report on the fairness of the additional information referred to in the
first paragraph when considered in relation to the basic financial statements taken as a whole. Our audit
will be conducted in accordance with auditing standards generally accepted in the United States of
America and the standards for financial audits contained in Gover~rzmerzt Auditing Standards, issued by the
Comptroller General of the United States, and will include tests of accounting records of the City and
other procedures we consider necessary to enable us to express such an opinion. If our opinion on the
financial statements is other than unqualified, we wi1I fully 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 and opinion,
we may decline to express an opinion or to issue a report as a result of the engagement.
We will also provide a report (that does not include an opinion) on internal control related to the financial
statements and compliance with laws, regulations, and the provisions of contracts or grant agreements,
noncompliance with which could have a material effect on the financial statements as required by
Government Auditing Standards. This report will include a statement that the report is intended solely for
the information and use of the audit committee, management, and specific legislative or regulatory
bodies, and is not intended to be, and should not be, used by anyone other than these specified parties.
Management Responsibilities
Management is responsible for establishing and maintaining internal control and for compliance with
• laws, regulations, contracts, and agreements. In fulfilling this responsibility, estimates and judgments by
management are required to assess the expected benefits and related costs of the controls. The objectives
of mterna] control are to provide management with reasonable, but not absolute, assurance that assets are
safeguarded against loss from unauthorized use or disposition, that transactions are executed in
accordance with management's authorizations and recorded properly to permit the preparation of
financial statements in accordance with accounting principles generally accepted in the United States of
America.
Management is responsible for making all financial records and related information available to us. We
understand that you will provide us with such information required for our audit and that you are
responsible for the accuracy and completeness of that information. We will advise you about appropriate
accounting principles and their application and will advise you in the preparation of your financial
statements, but the responsibility for the financial statements remains with you. As part of our
engagement, we may propose standard, adjusting, or correcting journal entries to your financial
statements. You are responsible for reviewing the entries and understanding the nature of any proposed
entries and the impact they have on the. financial statements. That responsibility includes the
establishment and maintenance of adequate records and effective internal control over financial reporting,
the selection and application of accounting principles, and the safeguarding of assets. Management is
responsible for adjusting the financial statements to correct material misstatements and for confirming to
us in the representation letter that the effects of any uncon-ected 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 basic financial statements taken as a whole.
City of Mounds View Page 3
October 20, 2005
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 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, or illegal acts affecting the
government 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 and regulations and for taking timely and appropriate steps to remedy any fraud, illegal
acts, violations of contracts or grant agreements, or abuse that we may report.
We may prepare a general ledger trial balance for use during the audit. Our preparation of the trial
balance will be limited to formatting information in the City's general ledger into a working trial balance.
As part of the audit, we may prepare a draft of your financial statements and related notes. In accordance
with Government Auditi~zg Standards, you will be required to review and approve those financial
statements prior to their issuance and have a responsibility to be in a position in fact and appearance to
make an informed judgment on those financial statements. Further, you are required to designate a
qualif ed management-level individual to be responsible and accountable for overseeing our services.
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. 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 errors, fraudulent financial reporting, misappropriation of assets, or 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 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 misstatements may exist and not be detected by us. 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.
However, we will inform you of any material errors that come to our attention, and we will inform you of
any fraudulent financial reporting or misappropriation of assets that comes to our attention. We will also
inform you of any violations of laws or governmental regulations that come to our attention, unless
clearly inconsequential. Our responsibility as auditors is limited to the period covered by our audit and
does not extend to matters that might arise during any 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, 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.
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City of Mounds View Page 4
October 20, 2005
Identifying and ensuring that the City complies with laws, regulations, contracts; and agreements is the
responsibility of management. 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
applicable laws and regulations and the provisions of contracts and agreements. However, the objective
of our audit will not be to provide an opinion on overall compliance and we will not express such an
opinion.
Audit Procedures -Internal Controls
In planning and performing our audit, we will consider the internal control sufficient to plan the audit in
order to determine the nature, timing, and extent of our auditing procedures for the purpose of expressing
our opinion on the City's financial statements.
We will obtain an understanding of the design of the relevant controls and whether they have been placed
in operation, and we will assess control risk. 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. Tests of
controls are required only if control risk is assessed below the maximum level. Our tests, if performed,
will be less in scope than would be necessary to render an opinion on internal control and, accordingly, no
opinion wilt be expressed in our report on intemal control issued pursuant to Government Auditing
Standards.
An audit is not designed to provide assurance on internal control or to identify reportable conditions.
However, we will inform the governing body or audit committee of any matters involving internal control
and its operation that we consider to be reportable conditions under standards established by the
American Institute of Certified Public Accounts. Reportable conditions involve matters coming to our
attention relating to significant deficiencies in the design or operation of the internal control that, in our
judgment, could adversely affect the entity's ability to record, process, summarize, and report financial
data consistent with the assertions of management in the financial statements. We will also inform you of
any non-reportable conditions or other matters involving intemal control, if any, as required by
Government Auditing Standards.
Audit Administration, Fees, and Other
The assistance to be supplied by your personnel, including the preparation of schedules and analysis of
accounts, typing all cash or other confirmations we request, and locating any invoices selected by us for
testing, will be discussed and coordinated with you.
The workpapers for this engagement are the property of Malloy, Montague, Karnowski, Radosevich &
Co., P.A. {IvIIvIKK.R) and constitute confidential information. However, pursuant to authority given by law
or regulation, we may be requested to make certain workpapers available to a regulatory agency or its
designee, a federal agency providing direct or indirect funding, or the U.S. Government Accountability
Office for the 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 workpapers will be
provided under the supervision of MMKR personnel. Furthermore, upon request, we may provide
photocopies of selected workpapers to the aforementioned parties. These parties may intend, or decide, to
distribute the photocopies or information contained therein to others, including other governmental
agencies.
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City of Mounds View Page 5
October 20, 2005
The workpapers for this engagement will be retained for a minimum of three years after the date the
auditors' report is issued.
Our fees for these services will be based on the actual time spent at our standard hourly rates. We will
also bill you for travel and other out-of-pocket costs such as report production, typing, postage, etc. Our
standard hourly rates vary according to the degree of responsibility involved and the experience level of
the personnel assigned to your audit. Our invoices for these fees will be rendered each month as work
progresses and are payable upon presentation. Unless additional work is requested, or circumstances
require additional work, we estimate that the basic audit fees (including the preparation of a management
report) will be as follows:
Annual audit of the City $ 26,300 plus direct expenses
Optional -Auditor draft, type, proof,
print, and bind the financial statements $ 5,000
The above fee is based on anticipated cooperation from your personnel and the assumption that
unexpected circumstances will not be encountered during the audit. If we find that additional audit
procedures are required, or if additional services are requested by the City, those services will be billed at
our standard hourly rates. Additional audit procedures might be required for certain accounting issues or
events such as new contractual agreements, transactions and legal requirements of new bond issues, new
funds, major capital projects, new tax increment districts, or if there is an indication of misappropriation
or misuse of public funds. 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.
With regard to the electronic dissemination of audited financial statements, including financial statements
published electronically on your Internet website, you understand that electronic sites are a means to
distribute information and, therefore, we are not required to read the information contained in these sites
or to consider the consistency of other information in the electronic -site with the original document.
If you intend to publish or otherwise reproduce the frnancial statements, such as in a bond statement, and
make reference to our firm name, you agree to provide us with printers' proofs or masters for our review
and approval before printing. You also agree to provide us with a copy of the final reproduced material
for our approval before it is distributed.
Government Auditing Staruiar-ds require that we provide you with a copy of our most recent external peer
review report and any letter of comment, and any subsequent peer review reports and letters of continent
received during the period of the contract. Our most recent peer review report accompanies this letter.
We appreciate the opportunity to be of service to the City 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 the enclosed copy and return it to us.
Sincerely,
MALLOY, MONTAGUE, KARNOWSKI, RADOSEVICH & CO., P.A.
~' -' ~'",j '~,
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Kenneth W. Malloy, CCPA
Principal
City of Mounds View
October 20, 2005
KVJM:kch
Response:
This letter correct]~j ets forth the understanding of the City of Mounds View.
t% / s~
By: ~i
Title: __ ~~~~~
Date: II~~U . ~ T . ~~~'
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