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<br /> <br />City of Hugo <br />Page 2 <br />Our Responsibility in Relation to the Financial Statement Audit and Single Audit <br />(continued) <br />Because of the inherent limitations of an audit, together with the inherent limitations of internal <br />control, an unavoidable risk that some material misstatements or material noncompliance may <br />not be detected exists, even though the audit is properly planned and performed in accordance <br />with U.S. GAAS, Government Auditing Standards of the Comptroller General of the United States <br />of America, the requirements of the Single Audit Act, as amended; and the provisions of the <br />Uniform Guidance. <br />We are also responsible for communicating significant matters related to the audit that are, in our <br />professional judgment, relevant to your responsibilities in overseeing the financial reporting <br />process. However, we are not required to design procedures for the purpose of identifying other <br />matters to communicate to you. <br />Planned Scope and Timing of the Audit <br />We conducted our audit consistent with the planned scope and timing we previously <br />communicated to you. <br />Compliance with All Ethics Requirements Regarding Independence <br />The engagement team, others in our firm, as appropriate, our firm, and our network firms have <br />complied with all relevant ethical requirements regarding independence. <br />Significant Risks Identified <br />We have identified the following significant risks: <br />Management override of controls, which requires special audit consideration due to the <br />potential magnitude of misstatement. <br />Qualitative Aspects of the Entity’s Significant Accounting Practices <br />Significant Accounting Policies <br />Management has the responsibility to select and use appropriate accounting policies. A summary <br />of the significant accounting policies adopted by the District is included in Note 1 to the financial <br />statements. As discussed in Note 1 to the financial statements, the City implemented <br />Governmental Accounting Standards Board (GASB) Statement No. 96, Subscription-Based <br />Information Technology Arrangements, during the year ended December 31, 2023. No matters <br />have come to our attention that would require us, under professional standards, to inform you <br />about (1) the methods used to account for significant unusual transactions and (2) the effect of <br />significant accounting policies in controversial or emerging areas for which there is a lack of <br />authoritative guidance or consensus.