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HomeMy Public PortalAbout050_011_Baird Memorandum aird o m pa n J CPAs, LL C, John P.Gillion,Jr.. CPA,PFS,CFS,CVA,CF; 1 Rep E. Whiddon,CP ,CVA CERTIFIED PUBLIC ACCOUNTANTS&FINANCIAL ADVISORS Brenda F.Carroll,CPA,CFE,CIA,CICA,FCPA,CZEUPFS / ,Af Mayor and City Council City of Tybee Island, Georgia P. O. Box 2749 Tybee Island, Georgia 31328 I have been asked to present a time line for completing the audit of the financial statements for City of Tybee Island, Georgia to instill confidence in our firm. We performed the audit of the financial statements for the year ended June 30, 2012, on a time line consistent with the requests of the Finance Department of the City of Tybee Island. We discussed the timing of the audit of the financial statements with Mary Hogan and determined that the best time to perform field work was during the week of August 13, 2012. We arrived at the scheduled time and were presented with audited financial statements for the year ended June 30, 2011, that did not include changes in fund balance as well as other adjustments made by the prior auditor. At arrival, we were presented with a trial balance that was not balanced and a capital asset schedule that did not agree to the audited financial statements. We completed fieldwork by the end of August, 2012, based on information that was supplied by your Finance Department and City Administrator. At the end of August, we required an adjustment to record your property tax accrual and had questions regarding the reporting of the River's End RV Park. We felt that the RV Park should be reported as an enterprise fund. It is reported as an enterprise fund in the June 30, 2012 financial statements. During fieldwork, we met with the audit committee and expressed our concerns regarding the accuracy of the accounting records. Subsequent to primary fieldwork, and after we had completed input of substantially all of the data for the financial statements, we were informed by Angela Hudson, that she had employed a consultant to determine the adjustment to properly classify and report the RV Park as an enterprise fund. She also informed us that prior period adjustments would be required for the SPLOST funds. Since these entries were not provided during primary fieldwork, and were not a part of the period that we were engaged to audit, additional testing was required during April,2013 after our meeting with the consultant. We provided periodic updates to management and the audit committee, keeping them informed about the status of the engagement. We provided a rough draft of the financial statements prior to May 31, 2013 so that management could prepare its MD&A. We informed management that this was a draft and the "DRAFT" watermark was inserted on each page. Drafts of the financial statements should not be distributed. Generally Accepted Audit Standards require that we receive a "Management Representation Letter" to document certain management assertions and for the dating of our opinion letters. Your "Management Representation Letter" is dated July, 24, 2013. 4210 Columbia Road,Building 10,Augusta,Georgia 30907/Telephone(706)855-9500/Telefax(706)855-2900(www.bairdcpas.com) "Management's Discussion and Analysis" is to be prepared by management and is not to be prepared by the auditor. We did not receive the MD&A until July 22, 2013.. Our firm meets all the qualifications that you require for an audit and has served as the independent auditor for entities far larger than the City of Tybee Island. Our staff is large enough to meet the fieldwork and preparation requirements to perform the audit. We have a full time audit staff that is committed to meeting client deadlines and working with the client to make improvements in internal control and operating efficiency. We met with Tom Groover, Dick Smith, Angela Hudson and Diane Schleicher to discuss the upcoming audit of the financial statements for the year ended June 30, 2013. During this meeting we were asked to present a time line for completing the audit. Prior to the meeting, we were informed by Angela Hudson that she was almost finished with the closing entries for the audit and that she has employed the same consultant to assist with preparing for the audit and a draft of the financial statements. Mr. Groover, asked that we submit a time line for the audit. I prepared a rough draft and submitted it to Angela Hudson for approval and modification if necessary. Her reply made undue demands on the audit, such as not providing information prior to being onsite. Generally Accepted Auditing Procedures require that the audit be planned and significant audit areas be identified. We are also required to perform preliminary analytical reviews to determine the appropriate levels of testing. If we cannot receive a draft of the financial statements or a balanced trial balance prior to beginning fieldwork, how do we know what to audit? We must also have the full cooperation of your management and staff,to prevent the delay in issuing our reports. We set a October 14, 2013 as the start date of fieldwork. Last year it took one week of fieldwork to complete work needed for us to issue our opinions, with the exception of the accrual for property taxes and the reclassification of the River's End RV Park. We had almost completed a draft of the financial statements when we were asked by your management to wait until your consultant completed his work. The financial statements had to be completely redone after this work by the consultant. Tentative Time Line Start of field work October 14,2013 Complete of fieldwork October 25,2013 Complete review of work papers November 1, 2013 Draft of the financial statements November 19,2013 Receive MD&A from management November 29, 2013 Receive Management Representation Letter November 29, 2013 Issue our report and financial statements December 16, 2013 Generally Accepted Auditing Standards do not allow us to issue our reports without having received the "Management Representation Letter"and the "Attorney Letter" as well as any outstanding confirmations. The problems with the late issuance of the financial statements were not caused by the audit firm but were caused by internal problems of the City of Tybee Island. Our assuredbymor this engagement and the in excess of$120000 with your audit fee being $14,100. We charges e that we would be compensated for our additional work. We don't expected to be reimbursed for our full time charges, but do expect to be compensated for the additional time required for us to get adequate documentation to support the amount and disclosures made in the financial statements. 4210 Columbia Road,Building 10,Augusta,Georgia 30907/Telephone(706)855-9500/Telefax(706)855-2900(www.bairdcpas.com) The future engagement can be performed for our quoted fees, if management and staff provides the necessary assistance to the auditor, management provides a balanced trial balance for each fund in a timely manner. We are committed to meeting your reporting deadlines and want to continue as the independent auditor for the City of Tybee Island but you must have confidence in our ability to meet your objectives. BAIRD& COMPANY, CPAS, LLC Certified Public Accountants August 22, 2013 4210 Columbia Road,Building 10,Augusta,Georgia 30907/Telephone(706)855-9500/Telefax(706)855-2900(wtiwv.bairdcpas.com)