HomeMy Public PortalAbout2005 Sevices for the FY ending 2005, 2006 and 2007.tifCohen
&Holtz
Accountants Advisors
June 6, 2005
Ms. Jacqueline Menendez, Village Manager
Village of Key Biscayne
88 West McIntyre Street
Key Biscayne, Florida 33149
Dear Ms. Menendez:
We are pleased to confirm our understanding of the services we are to provide to the Village of Key
Biscayne, Florida (the Village) for the fiscal year ended September 30, 2005, 2006 and 2007. 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 entity's basic financial
statements, of the Village of Key Biscayne as of and for the fiscal year ended September 30, 2005, 2006
and 2007. The document we submit to you will include the following additional information required by
generally accepted accounting principles 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:
1. Management's Discussion and Analysis.
2. Schedule of expenditures of federal awards and state financial assistance, as applicable.
3. Combining and individual fund statements and schedules.
4. Required supplementary information.
Also, the document will also include the following additional information that will not be subject to the
auditing procedures applied in our audit of the financial statements, and for which our auditor's report
will disclaim an opinion.
1. Statistical section.
2. Introductory section.
Audit Objectives
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 U.S. generally accepted accounting principles
and to report on the fairness of the additional information referred to in the first paragraph when
considered in relation to the financial statements taken as a whole. The objective also includes reporting
on—
Rachlin Cohen & Holtz LLP
One Southeast Third Avenue • Tenth Floor • Miami, Florida 33131 • Phone 305.377.4228 • Fax 305.377.8331 • www.rachlin.com
An Independent Member of Baker Tilly International
M I A M I ■ FO RT LAU DERDA LE • WEST PALM BEAC H • STUART
Ms. Jacqueline Menendez, Village Manager
Village of Key Biscayne
June 6, 2005
Page 2
• 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 in accordance with Government Auditing Standards.
• Internal control related to major programs and an opinion (or disclaimer of opinion) on compliance
with laws, regulations, and the provisions of contracts or grant agreements that could have a direct
and material effect on each major program, as applicable, in accordance with the Single Audit Act
Amendments of 1996 and OMB Circular A-133, Audits of States, Local Governments, and Non -Profit
Organizations and the Florida Single Audit Act and Chapter 10.550, Rules of the Auditor General of
the State of Florida.
The reports on internal control and compliance will each include a statement that the report is intended for
the information and use of the audit committee, management, specific legislative or regulatory bodies,
federal awarding agencies, and if applicable, pass -through entities and is not intended to be and should
not be used by anyone other than these specified parties.
As applicable, our audit will be conducted in accordance with U.S. generally accepted auditing standards;
the standards for financial audits contained in Government Auditing Standards, issued by the Comptroller
General of the United States; the Single Audit Act Amendments of 1996; and the provisions of OMB
Circular A-133, the Florida Single Audit Act and Chapter 10.550, Rules of the Auditor General of the
State of Florida, and will include tests of accounting records, a determination of major program(s) in
accordance with Circular A-133, and the Florida Single Audit Act, and other procedures we consider
necessary to enable us to express such an opinion and to render the required reports. If our opinion on the
financial statements or the Single Audit compliance opinion is other than unqualified, we will 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 an opinion, we may decline to express an opinion or to issue a report
as a result of this engagement.
Management Responsibilities
Management is responsible for establishing and maintaining effective internal control and for compliance
with the provisions of applicable laws, regulations, contracts, agreements, and grants. 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 internal 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 generally accepted
accounting principles, and that federal award programs are managed in compliance with applicable laws
and regulations and the provisions of contracts and grant agreements.
Cohen
&Holtz
Accountants Advisors
Ms. Jacqueline Menendez, Village Manager
Village of Key Biscayne
June 6, 2005
Page 3
Management is responsible for making all financial records and related information available to us,
including any significant vendor relationships in which the vendor has the responsibility for program
compliance. 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 assist in the preparation of your financial
statements, including the schedule of expenditures of federal awards and state financial assistance, 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 and compliance, 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 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 or illegal acts affecting the government
involving (1) management, (2) employees who have significant roles in internal control, and (3) others
where the fraud or illegal acts 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. Additionally, as
required by OMB Circular A-133 and Chapter 10.550 rules of the Auditor General, it is management's
responsibility to follow up and take corrective action on reported audit findings and to prepare a summary
schedule of prior audit findings and a corrective action plan.
As part of the audit, we will prepare a draft of your financial statements, schedule of expenditures of
federal awards and state financial assistance, and related notes. In accordance with Government Auditing
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 qualified management -level individual
to be responsible and accountable for overseeing our services.
Cohen
&Holtz
Accountants Advisors
Ms. Jacqueline Menendez, Village Manager
Village of Key Biscayne
June 6, 2005
Page 4
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
(1) errors, (2) fraudulent financial reporting, (3) misappropriation of assets, or (4) 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. As required by the Single
Audit Act Amendments of 1996 and OMB Circular A-133, and the Florida Single Audit Act and Chapter
10.550 Rules of the Auditor General, our audit will include tests of transactions related to major federal
award programs for compliance with applicable laws and regulations and the provisions of contracts and
grant agreements. 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 or noncompliance 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 or major programs. However, we will inform you of
any material errors and 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. We will include such matters in the reports required for a Single
Audit. 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 liabilities
for this engagement are limited to the fees paid for the work performed. Our liabilities for this
engagement are limited to the fees paid for the work performed.
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.
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 opinions on the Village of Key Biscayne's financial statements and on its compliance with
requirements applicable to major programs.
Cohen
&Holtz
Accountants Advisors
Ms. Jacqueline Menendez, Village Manager
Village of Key Biscayne
June 6, 2005
Page 5
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 relative to the financial statements 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 will be expressed in our report on internal control
issued pursuant to Government Auditing Standards.
As applicable, as required by OMB Circular A-133 and Chapter 10.550 Rules of the Auditor General, we
will perform tests of controls over compliance to evaluate the effectiveness of the design and operation of
controls that we consider relevant to preventing or detecting material noncompliance with compliance
requirements applicable to each major federal award program. However, our tests will be less in scope
than would be necessary to render an opinion on those controls and, accordingly, no opinion will be
expressed in our report on internal control issued pursuant to OMB Circular A-133 and Chapter 10.550
Rules of the Auditor General.
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 Accountants. 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 nonreportable conditions or other matters involving internal control, if any, as required by
Government Auditing Standards, OMB Circular A-133, and Chapter 10.550 Rules of the Auditor General.
Audit Procedures —Compliance
Our audit will be conducted in accordance with the standards referred to in the section titled Audit
Objectives. As part of obtaining reasonable assurance about whether the financial statements are free of
material misstatement, we will perform tests of the Village's compliance with applicable laws and
regulations and the provisions of contracts and agreements, including grant agreements. However, the
objective of those procedures 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.
OMB Circular A-133 and Chapter 10.550 Rules of the Auditor General require that we also plan and
perform the audit to obtain reasonable assurance about whether the auditee has complied with applicable
laws and regulations and the provisions of contracts and grant agreements applicable to major programs.
Cohen
&Holtz
Accountants Advisors
Ms. Jacqueline Menendez, Village Manager
Village of Key Biscayne
June 6, 2005
Page 6
As applicable, our procedures will consist of the applicable procedures described in the OMB Circular A-
133 Compliance Supplement and the State Compliance Supplement for the types of compliance
requirements that could have a direct and material effect on each of the Village's major programs. The
purpose of those procedures will be to express an opinion on the Village's compliance with requirements
applicable to each of its major programs in our report on compliance issued pursuant to OMB Circular A-
133 and the Florida Single Audit Act.
Audit Administration, Fees, and Other
We understand that your employees will prepare all cash, accounts receivable, or other confirmations we
request and will locate any documents selected by us for testing.
At the conclusion of the engagement, we will complete the appropriate sections of and sign the Data
Collection Form (required under the Federal Single Audit Act only) that summarizes our audit findings.
We will provide our reports to the Village of Key Biscayne; however, it is management's responsibility to
submit the reporting package (including financial statements, schedule of expenditures of federal awards,
summary schedule of prior audit findings, auditors' reports, and a corrective action plan) along with the
Data Collection Form to the designated federal clearinghouse and, if appropriate, to pass -through entities.
The Data Collection Form and the reporting package must be submitted within the earlier of 30 days after
receipt of the auditors' reports or nine months after the end of the audit period, unless a longer period is
agreed to in advance by the cognizant or oversight agency for audits. At the conclusion of the
engagement, we will provide information to management as to where the reporting packages should be
submitted and the number to submit.
The audit documentation for this engagement is the property of Rachlin Cohen & Holtz LLP and
constitutes confidential information. However, pursuant to authority given by law or regulation, we may
be requested to make certain audit documentation available to an oversight entity 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 carry out oversight responsibilities. We
will notify you of any such request. If requested, access to such audit documentation will be provided
under the supervision of Rachlin Cohen & Holtz LLP 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 three years after the date
the auditors' report is issued or for any additional period requested by the Village of Key Biscayne or any
oversight entity. If we are aware that a federal or state awarding agency, pass -through entity, 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.
Cohen
&Ioltz
Accountants Advisors
Ms. Jacqueline Menendez, Village Manager
Village of Key Biscayne
June 6, 2005
Page 7
We estimate the audit fees for the financial audit (excluding single audit fees — see below) for the fiscal
year ended September 30, 2005 to be $42,000; $43,000 for the fiscal year ended September 30, 2006; and
$44,000 for the fiscal year ended September 30, 2007. Our hourly rates vary according to the degree of
responsibility involved and the experience level of the personnel assigned to the audit. 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 significant additional time is required, we will discuss these
circumstances with you and arrive at a new fee estimate before we incur the additional costs.
In addition, if during any year of this contract, the Village of Key Biscayne is required to undergo an
audit in accordance with the Federal Single Audit Act and OMB Circular A-133, Audits of States, Local
Governments, and Not -for -Profit Organizations Receiving Federal Awards, the additional fee will be
$6,500. This fee is dependent on the number of federal programs that have to be tested as a major
program in accordance with the requirements of the Federal Single Audit Act and OMB Circular A-133.
If the Village of Key Biscayne is subject to the Florida Single Audit Act and Chapter 10.550 Rules of the
Auditor General in any year during this contract, the additional fee will be $6,500. This fee is dependent
on the number of state programs that have to be tested as a major program in accordance with the
requirements of the Florida Single Audit Act and the Rules of the Auditor General, Chapter 10.550.
Our invoices for these fees will be rendered as the work progresses, and are payable on presentation. In
accordance with our firm policies, should any invoices remain unpaid for more than thirty days, we
reserve the right to defer providing any additional services until all outstanding invoices are paid. A late
payment charge of 1% per month will be added to all unpaid balances after thirty days. You agree that
we are not responsible for the impact on the Village of any delay that results from such non-payment by
you.
We acknowledge your right to terminate our services at any time, and you acknowledge our right to
resign at any time (including instances where in our judgment, our independence has been impaired or we
can no longer rely on the integrity of management), subject in either case to our right to payment for
charges incurred to the date of termination or resignation.
In the event that we determine to resign, and you seek damages allegedly resulting from such resignation,
our maximum liability to you in the event we are held liable because of such resignation shall be limited
to the fees actually paid to us to the date of resignation.
In accordance with our firm's policy, the terms of this engagement letter are subject to approval by our
internal Risk Acceptance Committee.
Cohen
&Holtz
Accountants Advisors
Ms. Jacqueline Menendez, Village Manager
Village of Key Biscayne
June 6, 2005
Page 8
Government Auditing Standards require that we provide you with a copy of our most recent quality
control review report. Our most recent (dated 2004) peer review report has been provided to you.
This contract is renewable at the option of the Village. We appreciate the opportunity to be of continued
service to the Village of Key Biscayne 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,
74041
Michael D. Futterman, CPA
Partner
RESPONSE:
This letter correctly sets forth the understanding of the Village of Key Biscayne.
By:
Tie
Date:
Cohen
&Holtz
Accountants Advisors