HomeMy WebLinkAboutResolution 8941RESOLUTION NO. 8941
CITY OF MOUNDS VIEW
COUNTY OF RAMSEY
STATE OF MINNESOTA
RESOLUTION APPOINTING MMKR TO PROVIDE AUDITING SERVICES FOR
THE YEARS ENDED DECEMBER 31, 2018, 2019, 2020
WHEREAS, Minnesota Statue 471.697 requires all cities with a population over
2,500 to have an annual audit and submit an audited financial report to the state auditor
office; and
WHEREAS, Malloy, Montague, Karnowski, Radosevich, & Co., P.A. (MMKR)
has provided the City of Mounds View with financial auditing services that have been
beneficial to the City at a cost of $33,400 for 2017; 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
requirements, and the fraud audit requirements for an estimated total of $34,065 plus
direct expenses for 2018, $34,745 plus direct expenses for 2019, and $35,440 plus
direct expenses for 2020.
NOW, THEREFORE, BE IT RESOLVED, that the City Council of the City of
Mounds View does hereby authorize the Mayor to sign an engagement letter with
MMKR for the provision of auditing services for the years ended December 31, 2018,
2019, 2020.
Adopted this 23th day of April, 2018.
&V1 �Z�
Carol A. Mueller, M6yor
ATTEST:
u
Nyle Zikniund, ity Administrator
(SEAL.)
PRINCIPALS
Thomas A. Karnowski, CPA
Paul A. Radosevich, CPA
MMKRWilliam J. Lauer, CPA
James H. Eickten, CPA
C E RT I F I E D PUBLIC Aaron J. Nielsen, CPA
ACCOUNTANTS Victoria L. Holinka, CPA/CMA
April 6, 2018
To the City Council and Management
of the City of Mounds View
2401 Mounds View Boulevard
Mounds View, MN 55112-1499
Dear Councilmembers and Management:
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, 2018. We will audit the financial statements of the governmental
activities, the business -type activities, each major fund, the aggregate remaining fund information, and the
budgetary comparison for the General Fund and major special revenue funds, including the related notes to
the financial statements, which collectively comprise the basic financial statements of the City as of and for
the year ended December 31, 2018. Accounting standards generally accepted in the United States of
America provide for certain required supplementary information (RSI), such as the management's
discussion and analysis, to supplement the City's basic financial statements. Such information, although
not a part of the basic financial statements, is required by the Governmental Accounting Standards Board
(GASB) who considers it to be an essential part of financial reporting for placing the basic financial
statements in an appropriate operational, economic, or 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. The following RSI is required by accounting principles generally
accepted in the United States of America and will be subjected to certain limited procedures, but will not
be audited:
1) Management's Discussion and Analysis
2) GASB -required supplementary pension and other post -employment benefits information
(as needed)
We have also been engaged to report on supplementary information other than RSI that accompanies the
City's financial statements. We will subject the following supplementary information 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 to 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, in a separate written report
accompanying our auditor's report on the financial statements OR in a report combined with our auditor's
report on the financial statements:
1) Combining and individual fund statements and schedules (as needed), presented as supplemental
information.
Malloy, Montague, Karnowski, Radosevich & Co., P.A.
5353 Wayzata Boulevard • Suite 410 • Minneapolis, MN 55416 • Phone: 952-545-0424 - Fax: 952-545-0569 • www.mmkr.com
City of Mounds View Page 2
April 6, 2018
The following other information accompanying the financial statements will not be subjected to the auditing
procedures applied in our audit of the financial statements, and our auditor's report will not provide an
opinion or any assurance on that other information:
1) Introductory information
2) Statistical section or other supplemental information (as applicable)
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 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
Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost
Principles, and Audit Requirements for Federal Awards (Uniform Guidance), which would only be required
if the City expended $750,000 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.
Audit Objectives
The objective of our audit is the expression of opinions 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 supplementary information referred to in the second
paragraph when considered in relation to the financial statements 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 Government Auditing Standards, issued by the Comptroller General of the
United States, and will include tests of the accounting records of the City and other procedures we consider
necessary to enable us to express such opinions. We will make reference to another auditor's audit of
required components if necessary in our report on your financial statements. We will issue a written report
upon completion of our audit of the City's financial statements. Our report will be addressed to management
and the City Council of the City. 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 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 issue reports, or may withdraw
from this engagement.
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April 6, 2018
We will also provide a report (that does not include an opinion) 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 as required by
Government Auditing Standards. The report on internal control and on compliance and other matters will
include a paragraph that states (1) that the purpose of the report is solely to describe the scope of testing of
internal control and compliance, and the results of that testing, and not to provide an opinion on the
effectiveness of the entity's internal control on compliance, and (2) that the report is an integral part of an
audit performed in accordance with Government Auditing Standards in considering the entity's internal
control and compliance. The paragraph will also state that the report is not suitable for any other purpose.
If during our audit we become aware that the City is subject to an audit requirement that is not encompassed
in the terms of this engagement, we will communicate to management and those charged with governance
that an audit in accordance with auditing standards generally accepted in the United States of America and
the standards for financial audits contained in Government Auditing Standards may not satisfy the relevant
legal, regulatory, or contractual requirements.
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 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 government or to acts by management or employees
acting on behalf of the government. 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 may exist and not be detected by us, even though the audit is properly planned and performed
in accordance with auditing standards generally accepted in the United States of America 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.
However, we will inform the appropriate level of city or group management of any material errors, any
fraudulent financial reporting, or misappropriation of assets that come to our attention. We will also inform
the appropriate level of city or group management of any violations of laws or governmental regulations
that come to our attention, unless clearly inconsequential, and of any material abuse that comes to our
attention. 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 require certain written representations from you about your responsibilities for the financial
statements; compliance with laws, regulations, contracts, and grant agreements; and other responsibilities
required by auditing standards generally accepted in the United States of America.
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April 6, 2018
If information from a component unit is required to be included in the City's financial statements, we will
not audit the financial statements of components of which we were not engaged as auditors as of and for
the year ended December 31, 2018. Those financial statements will be audited by other auditors whose
reports thereon will be furnished to us. We will communicate with the other auditors and reference their
audit of the component(s) as necessary. Information from the group component audit will be included in
the City's financial statements based on materiality, significance to the audit, and auditor judgement.
Audit Procedures — Internal Control
Our audit will include obtaining an understanding of the government 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 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.
An audit is not designed to provide assurance on internal control or to identify significant deficiencies or
material weaknesses. However, during the audit, we will communicate to city or group management and
those charged with governance of the city or group, internal control -related matters that are required to be
communicated under American Institute of Certified Public Accountants (AICPA) professional standards
and Government Auditing Standards.
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 the provisions of applicable laws,
regulations, contracts, agreements, and grants. However, the objective of our audit 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.
Management Responsibilities
Management is responsible for designing, implementing, and maintaining effective internal controls,
including evaluating and monitoring ongoing activities, to help ensure that appropriate goals and objectives
are met; following laws and regulations; and ensuring that management and financial information is reliable
and properly reported. Management is also responsible for implementing systems designed to achieve
compliance with applicable laws, regulations, contracts, and grant agreements. You are also responsible for
the selection and application of accounting principles, for the preparation and fair presentation of the
financial statements and all accompanying information in conformity with accounting principles general
accepted in the United States of America, and for compliance with applicable laws and regulations and the
provisions of contracts and grant agreements.
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April 6, 2018
Management is also responsible for making all financial records and related information available to us and
for the accuracy and completeness of that information. You are also responsible for providing us with
(1) access to all information of which you are aware that is relevant to the preparation and fair presentation
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 include adjusting the financial statements to correct material misstatements and for
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 affecting the government involving
(1) management, (2) employees who have significant roles in internal control, and (3) others where the
fraud could have a material effect on the financial statements. Your responsibilities include informing us
of your knowledge of any allegations of fraud or suspected fraud 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 government complies with applicable laws, regulations,
contracts, agreements, and grants and for taking timely and appropriate steps to remedy fraud and
noncompliance with provisions of laws, regulations, contracts or grant agreements, or abuse that we report.
You are responsible for the preparation of the supplementary information, which we have been engaged to
report on, in conformity with accounting principles generally accepted in the United States of America.
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
OR make the audited financial statements readily available to users of the supplementary information no
later than the date the supplementary information is issued with 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 accounting principles generally accepted in the United
States of America; (2) you believe the supplementary information, including its form and content, is fairly
presented in accordance with accounting principles generally accepted in the United States of America;
(3) 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 and providing report copies
of 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 other 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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April 6, 2018
You agree to assume all management responsibilities relating to the financial statements and related notes
and any other nonaudit services we provide. You will be required to acknowledge in the management
representation letter our assistance with preparation of the financial statements and related notes and that
you have reviewed and approved the financial statements and related notes prior to their issuance and have
accepted responsibility for them. Further, you agree to oversee the nonaudit services by designating an
individual, preferably from senior management, with suitable skill, knowledge, or experience; evaluate the
adequacy and results of those services; and accept responsibility for them.
Engagement Administration, Fees, and Other
We understand that your employees will prepare all cash or other confirmations we request and will locate
any documents selected by us for testing.
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.
We will provide copies of our reports to the City; however, management is responsible for distribution of
the reports and the financial statements. Unless restricted by law or regulation, or containing privileged and
confidential information, copies of our reports are to be made available for public inspection.
The audit documentation for this engagement is the property of Malloy, Montague, Kamowski, Radosevich
& Co., P.A. (MMKR) and constitutes confidential information. However, subject to applicable laws and
regulations, audit documentation and appropriate individuals will be made available upon request and in a
timely manner to a regulatory agency 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 carryout oversight responsibilities. We will notify you of any such request. If requested,
access to such audit documentation will be provided under the supervision of MMKR 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 the regulatory agency. 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 shortly after the end of your fiscal year and to issue our reports prior to June 30,
2019. Aaron J. Nielsen, CPA, is the engagement partner and is 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 basic
audit fee, will not exceed $34,065. 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 on presentation.
In accordance with our firm policies, work may be suspended if your account becomes 60 days or more
overdue and may not be resumed until your account is paid in full. If we elect to terminate our services for
nonpayment, our engagement will be deemed to have been completed upon written notification of
temaination, even if we have not completed our report. You will be obligated to compensate us for all time
expended and to reimburse us for all out-of-pocket costs through the date of termination.
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April 6, 2018
These fees are 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, if there is an indication of misappropriation or misuse of public
funds, or if significant difficulties are encountered due to the lack of accounting records, incomplete records,
or turnover in the City's staff. 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 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 financial 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.
During the year, you might request additional services such as routine advice, assistance in implementing
audit recommendations, review of your projections or budgets, and other similar projects. Independence
standards allow us to perform these routine services; however, it is important that you understand that we
are not allowed to make management decisions, perform management functions, nor can we audit our own
work or provide nonaudit services that are significant to the subject matter of the audit.
Please be aware that e-mail is not a secure method of transmitting data. It can be intercepted, read, and
possibly changed. Due to the large volume of e-mails sent daily, the likelihood of someone intercepting
your e-mail is relatively small, but it does exist. We will communicate with you via e-mail, if you are willing
to accept this risk.
To ensure that MMKR's independence is not impaired under the AICPA Code of Professional Conduct,
you agree to inform the engagement partner before entering into any substantive employment discussions
with any of our personnel.
If a dispute occurs related in any way to our services, our firm and the City agree to discuss the dispute and,
if necessary, to promptly mediate in a good faith effort to resolve it. We will agree on a mediator, but if we
cannot, either of us may apply to a court having personal jurisdiction over the parties for appointment of a
mediator. We will share the mediator's fees and expenses equally, but otherwise will bear our own attorney
fees and costs of the mediation. Participation in such mediation shall be a condition to either of us initiating
litigation. To allow time for the mediation, any applicable statute of limitations shall be tolled for a period
not to exceed 120 days from the date either of us first requests in writing to mediate the dispute.
The mediation shall be confidential in all respects, as allowed or required by law, except that our final
settlement positions at mediation shall be admissible in litigation solely to determine the identity of the
prevailing party for purposes of the awarding of attorney fees.
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April 6, 2018
We both recognize the importance of performing our obligations under this agreement in a timely way and
fully cooperating with the other. In the event that either of us fails to timely perform or fully cooperate, the
other party may, in its sole discretion, elect to suspend performance or terminate the agreement regardless
of the prejudice to the other person. We agree we will give 10 days' written notice of an intent to suspend
or terminate, specifying the grounds for our decision, and will give the other an opportunity to cure the
circumstances cited as grounds for that decision. In the event of suspension or terniination, all fees and
costs are immediately due on billing.
We agree that it is important that disputes be discussed and resolved promptly. For that reason, we agree
that, notwithstanding any other statutes of limitations or court decisions concerning them, all claims either
of us may have will be barred unless brought within one year of the date the complaining party first incurs
any damage of any kind, whether discovered or not, related in any way to acts or omissions of the other
party, whether or not the complaining party seeks recovery for that first damage and whether or not we
have continued to maintain a business relationship after the first damage occurred. Notwithstanding
anything in this letter to the contrary, we agree that regardless of where the City is located, or where this
agreement is physically signed, this agreement shall have been deemed to have been entered into at our
office in Hennepin County, Minnesota, and Hennepin County shall be the exclusive venue and jurisdiction
for resolving disputes related to this agreement. This agreement shall be interpreted and governed under the
laws of Minnesota.
When requested, Government Auditing Standards 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 comment 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.
Aaron J. Nielsen, CPA
Principal
AJN:Imb
Response:
This letter correctly" se-- ts forth the understanding of the City of Mounds View.
By: Aez LCE. '
Title: lna-606✓
Date: J// Z 6 l