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HomeMy WebLinkAboutVan Lant & Fankhanel, LLP 2015-05-12CONTRACT #1415197 AGREEMENT FOR AUDITING SERVICES This Agreement, made and entered into this 12th day of May, 2015 ( "Effective Date "), by and between CITY OF UKIAH, CALIFORNIA, hereinafter referred to as "City" and Van Lant & Fankhanel, a limited liability partnership organized and in good standing under the laws of the state of California, hereinafter referred to as "Consultant ". RECITALS This Agreement is predicated on the following facts: a. City requires consulting services related to providing auditing services. b. Consultant represents that it has the qualifications, skills, experience and properly licensed to provide these services, and is willing to provide them according to the terms of this Agreement. c. City and Consultant agree upon the Scope -of -Work and Work Schedule attached hereto as Attachment "A" and Attachment "C ", describing contract provisions for the project and setting forth the completion dates for the various services to be provided pursuant to this Agreement. TERMS OF AGREEMENT 1.0 DESCRIPTION OF PROJECT 1.1 The Project is described in detail in the attached Scope -of -Work (Attachment "A "). 2.0 SCOPE OF SERVICES 2.1 As set forth in Attachment "A" and Attachment "C" — Attachment "C" may be revised annually, in writing, signed by both parties. 2.2. Additional Services. Additional services, if any, shall only proceed upon written agreement between City and Consultant. The written Agreement shall be in the form of an Amendment to this Agreement. 3.0 CONDUCT OF WORK 3.1 Time of Completion. Consultant shall commence performance of services as required by the Scope -of -Work upon receipt of a Notice to Proceed from City. Auditing services are to be performed for fiscal years ending 2015, 2016, 2017, 2018 and 2019. Consultant shall complete the work to the City's reasonable satisfaction; even if contract disputes arise or Consultant contends it is entitled to further compensation. 4.0 COMPENSATION FOR SERVICES 4.1 Basis for Compensation. For the performance of the professional services of this Agreement, Consultant shall be compensated on a time and expense basis not to exceed a guaranteed maximum dollar amount of $175,100. Labor charges shall be based upon hourly billing rates for the various classifications of personnel employed by Std — ProtSvcsAgreement- November 20, 2008 PAGE 1 OF 7 CONTRACT #1415197 Consultant to perform the Scope of Work as set forth in the attached Attachment "B ", which shall include all indirect costs and expenses of every kind or nature, except direct expenses. The direct expenses and the fees to be charged for same shall be as set forth in Attachment "B ". Consultant shall complete the Scope of Work for the not -to- exceed guaranteed maximum, even if actual time and expenses exceed that amount. 4.2 Changes. Should changes in compensation be required because of changes to the Scope -of -Work of this Agreement, the parties shall agree in writing to any changes in compensation. "Changes to the Scope -of- Work" means different activities than those described in Attachment "A" and "C ", and not additional time to complete those activities than the parties anticipated on the date they entered this Agreement. 4.3 Sub - contractor Payment. The use of sub - consultants or other services to perform a portion of the work of this Agreement shall be approved by City prior to commencement of work. The cost of sub - consultants shall be included within guaranteed not -to- exceed amount set forth in Section 4.1. 4.4 Terms of Payment. Payment to Consultant for services rendered in accordance with this contract shall be based upon submission of monthly invoices for the work satisfactorily performed prior to the date of the invoice less any amount already paid to Consultant, which amounts shall be due and payable thirty (30) days after receipt by City. The invoices shall provide a description of each item of work performed, the time expended to perform each task, the fees charged for that task, and the direct expenses incurred and billed for. Invoices shall be accompanied by documentation sufficient to enable City to determine progress made and to support the expenses claimed. 5.0 ASSURANCES OF CONSULTANT 5.1 Independent Contractor. Consultant is an independent contractor and is solely responsible for its acts or omissions. Consultant (including its agents, servants, and employees) is not the City's agent, employee, or representative for any purpose. It is the express intention of the parties hereto that Consultant is an independent contractor and not an employee, joint venturer, or partner of City for any purpose whatsoever. City shall have no right to, and shall not control the manner or prescribe the method of accomplishing those services contracted to and performed by Consultant under this Agreement, and the general public and all governmental agencies regulating such activity shall be so informed. Those provisions of this Agreement that reserve ultimate authority in City have been inserted solely to achieve compliance with federal and state laws, rules, regulations, and interpretations thereof. No such provisions and no other provisions of this Agreement shall be interpreted or construed as creating or establishing the relationship of employer and employee between Consultant and City. Consultant shall pay all estimated and actual federal and state income and self - employment taxes that are due the state and federal government and shall furnish and pay worker's compensation insurance, unemployment insurance and any other benefits required by law for himself and his employees, if any. Consultant agrees to indemnify and hold City and its officers, agents and employees harmless from and against any claims or demands by federal, state or local government agencies for any such taxes or benefits due but not paid by Consultant, including the legal costs associated with defending against any audit, claim, demand or law suit. Std — ProfSvcsAgreement- November 20, 2008 PAGE 2 OF 7 CONTRACT #1415197 Consultant warrants and represents that it is a properly licensed professional or professional organization with a substantial investment in its business and that it maintains its own offices and staff which it will use in performing under this Agreement. 5.2 Conflict of Interest. Consultant understands that its professional responsibility is solely to City. Consultant has no interest and will not acquire any direct or indirect interest that would conflict with its performance of the Agreement. Consultant shall not in the performance of this Agreement employ a person having such an interest. If the City Manager determines that the Consultant has a disclosure obligation under the City's local conflict of interest code, the Consultant shall file the required disclosure form with the City Clerk within 10 days of being notified of the City Manager's determination. 6.0 INDEMNIFICATION 6.1 Insurance Liability. Without limiting Consultant's obligations arising under Paragraph 6.2 Consultant shall not begin work under this Agreement until it procures and maintains for the full period of time allowed by law, surviving the termination of this Agreement insurance against claims for injuries to persons or damages to property, which may arise from or in connection with its performance under this Agreement. A. Minimum Scope of Insurance Coverage shall be at least as broad as: 1. Insurance Services Office ( "ISO) Commercial General Liability Coverage Form No. CG 20 10 10 01 and Commercial General Liability Coverage — Completed Operations Form No. CG 20 37 10 01. 2. ISO Form No. CA 0001 (Ed. 1/87) covering Automobile Liability, Code 1 any auto" or Code 8, 9 if no owned autos and endorsement CA 0025. 3. Worker's Compensation Insurance as required by the Labor Code of the State of California and Employers Liability Insurance. 4. Errors and Omissions liability insurance appropriate to the consultant's profession. Architects' and engineers' coverage is to be endorsed to include contractual liability. B. Minimum Limits of Insurance Consultant shall maintain limits no less than: 1. General Liability: $1,000,000 combined single limit per occurrence for bodily injury, personal injury and property damage including operations, products and completed operations. If Commercial General Liability Insurance or other form with a general aggregate limit is used, the general aggregate limit shall apply separately to the work performed under this Agreement, or the aggregate limit shall be twice the prescribed per occurrence limit. 2. Automobile Liability: $1,000,000 combined single limit per accident for bodily injury and property damage. Std — ProfSvcsAgreement- November 20, 2008 PAGE 3 OF 7 CONTRACT #1415197 3. Workers Compensation and Employers Liability: Worker's compensation limits as required by the Labor Code of the State of California and Employers Liability limits of $1,000,000 per accident. 4. Errors and Omissions liability: $1,000,000 per occurrence. C. Deductibles and Self- Insured Retentions Any deductibles or self- insured retentions must be declared to and approved by the City. At the option of the City, either the insurer shall reduce or eliminate such deductibles or self- insured retentions as respects to the City, its officers, officials, employees and volunteers; or the Consultant shall procure a bond guaranteeing payment of losses and related investigations, claim administration and defense expenses. D. Other Insurance Provisions The policies are to contain, or be endorsed to contain, the following provisions: 1. General Liability and Automobile Liability Coverages a. The City, it officers, officials, employees and volunteers are to be covered as additional insureds as respects; liability arising out of activities performed by or on behalf of the Consultant, products and completed operations of the Consultant, premises owned, occupied or used by the Consultant, or automobiles owned, hired or borrowed by the Consultant for the full period of time allowed by law, surviving the termination of this Agreement. The coverage shall contain no special limitations on the scope -of- protection afforded to the City, its officers, officials, employees or volunteers. b. The Consultant's insurance coverage shall be primary insurance as respects to the City, its officers, officials, employees and volunteers. Any insurance or self- insurance maintained by the City, its officers, officials, employees or volunteers shall be in excess of the Consultants insurance and shall not contribute with it. c. Any failure to comply with reporting provisions of the policies shall not affect coverage provided to the City, its officers, officials, employees or volunteers. d. The Consultant's insurance shall apply separately to each insured against whom claim is made or suit is brought, except with respect to the limits of the insurer's liability. 2. Workers Compensation and Employers Liability Coverage The insurer shall agree to waive all rights of subrogation against the City, its officers, officials, employees and volunteers for losses arising from Consultants performance of the work, pursuant to this Agreement. Std - ProtSvcsAgreement- November 20, 2008 PAGE 4 OF 7 CONTRACT #1415197 3. Professional Liability Coverage If written on a claims -made basis, the retroactivity date shall be the effective date of this Agreement. The policy period shall extend one year from completion of services. 4. All Coverages Each Insurance policy required by this clause shall be endorsed to state that coverage shall not be suspended, voided, canceled by either party, reduced in coverage or in limits except after thirty (30) days prior written notice by certified mail, return receipt requested, has been given to the City. E. Acceptability of Insurers Insurance is to be placed with admitted California insurers with an A.M. Best's rating of no less than A- for financial strength, AA for long -term credit rating and AMB -1 for short-term credit rating. F. Verification of Coverage Consultant shall furnish the City with Certificates of Insurance and with original Endorsements effecting coverage required by this Agreement. The Certificates and Endorsements for each insurance policy are to be signed by a person authorized by that insurer to bind coverage on its behalf. The Certificates and Endorsements are to be on forms provided or approved by the City. Where by statute, the City's Workers' Compensation - related forms cannot be used, equivalent forms approved by the Insurance Commissioner are to be substituted. All Certificates and Endorsements are to be received and approved by the City before Consultant begins the work of this Agreement. The City reserves the right to require complete, certified copies of all required insurance policies, at any time. If Consultant fails to provide the coverages required herein, the City shall have the right, but not the obligation, to purchase any or all of them. In that event, the cost of insurance becomes part of the compensation due the contractor after notice to Consultant that City has paid the premium. G. Subcontractors Consultant shall include all subcontractors or sub - consultants as insured under its policies or shall furnish separate certificates and endorsements for each sub- contractor or sub - consultant. All coverage for sub - contractors or sub - consultants shall be subject to all insurance requirements set forth in this Paragraph 6.1. 6.2 Indemnification. Notwithstanding the foregoing insurance requirements, and in addition thereto, Consultant agrees, for the full period of time allowed by law, surviving the termination of this Agreement, to indemnify the City for any claim, cost or liability that arises out of, or pertains to, or relates to any negligent act or omission or the willful misconduct of Consultant in the performance of services under this contract by Consultant, but this indemnity does not apply to liability for damages for death or bodily injury to persons, injury to property, or other loss, arising from the sole negligence, willful Std — ProtSvcsArreement- November 20, 2008 PAGE 5 OF 7 CONTRACT #1415197 misconduct or defects in design by the City, or arising from the active negligence of the City. "Indemnify," as used herein includes the expenses of defending against a claim and the payment of any settlement or judgment arising out of the claim. Defense costs include all costs associated with defending the claim, including, but not limited to, the fees of attorneys, investigators, consultants, experts and expert witnesses, and litigation expenses. References in this paragraph to City or Consultant, include their officers, employees, agents, and subcontractors. 7.0 CONTRACT PROVISIONS 7.1 Ownership of Work. All documents furnished to Consultant by City and all documents or reports and supportive data prepared by Consultant under this Agreement are owned and become the property of the City upon their creation and shall be given to City immediately upon demand and at the completion of Consultant's services at no additional cost to City. Deliverables are identified in the Scope -of -Work, Attachment "A ". All documents produced by Consultant shall be furnished to City in digital format and hardcopy. Consultant shall produce the digital format, using software and media approved by City. 7.2 Governing Law. Consultant shall comply with the laws and regulations of the United States, the State of California, and all local governments having jurisdiction over this Agreement. The interpretation and enforcement of this Agreement shall be governed by California law and any action arising under or in connection with this Agreement must be filed in a Court of competent jurisdiction in Mendocino County. 7.3 Entire Agreement. This Agreement plus its Attachment(s) and executed Amendments set forth the entire understanding between the parties. 7.4 Severability. If any term of this Agreement is held invalid by a court of competent jurisdiction, the remainder of this Agreement shall remain in effect. 7.5 Modification. No modification of this Agreement is valid unless made with the agreement of both parties in writing. 7.6 Assignment. Consultant's services are considered unique and personal. Consultant shall not assign, transfer, or sub - contract its interest or obligation under all or any portion of this Agreement without City's prior written consent. 7.7 Waiver. No waiver of a breach of any covenant, term, or condition of this Agreement shall be a waiver of any other or subsequent breach of the same or any other covenant, term or condition or a waiver of the covenant, term or condition itself. 7.8 Termination. This Agreement may only be terminated by either party: 1) for breach of the Agreement; 2) because funds are no longer available to pay Consultant for services provided under this Agreement; or 3) City has abandoned and does not wish to complete the project for which Consultant was retained. A party shall notify the other party of any alleged breach of the Agreement and of the action required to cure the breach. If the breaching party fails to cure the breach within the time specified in the notice, the contract shall be terminated as of that time. If terminated for lack of funds or Std - ProfSvcsAgreement- November 20, 2008 PAGE 6 OF 7 CONTRACT #1415197 abandonment of the project, the contract shall terminate on the date notice of termination is given to Consultant. City shall pay the Consultant only for services performed and expenses incurred as of the effective termination date. In such event, as a condition to payment, Consultant shall provide to City all finished or unfinished documents, data, studies, surveys, drawings, maps, models, photographs and reports prepared by the Consultant under this Agreement. Consultant shall be entitled to receive just and equitable compensation for any work satisfactorily completed hereunder, subject to off -set for any direct or consequential damages City may incur as a result of Consultant's breach of contract. 7.9 Execution of Agreement. This Agreement may be executed in duplicate originals, each bearing the original signature of the parties. Alternatively, this Agreement may be executed and delivered by facsimile or other electronic transmission, and in more than one counterpart, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. When executed using either alternative, the executed agreement shall be deemed an original admissible as evidence in any administrative or judicial proceeding to prove the terms and content of this Agreement. 8.0 NOTICES Any notice given under this Agreement shall be in writing and deemed given when personally delivered or deposited in the mail (certified or registered) addressed to the parties as follows: CITY OF UKIAH DEPT. OF FINANCE 300 SEMINARY AVENUE UKIAH, CALIFORNIA 95482 -5400 VAN LANT & FANKHANEL, LLP GREG W. FANKHANEL 25901 KELLOGG STREET LOMA LINDA, CALIFORNIA 92354 9.0 SIGNATURES IN WITNESS WHEREOF, the parties have executed this Agreement the Effective Date: VAN LANT & FANKHANEL, LLP Digitally signed by Greg Fankhanel Greg Fa n k h a n e l ou, a n =Greg Fankhanel, o =Van Lant & Fankhanel, LLP, mail= gfankhanel @vlfcpa.com, c =05 BY: Date: 2015.05.21 08:41:23 - 07'00' PRINT NAME: Greg Fankhanel 46- 1814856 IRS IDN Number CITY OF UKIAH BY: CITY MA AGER ATTEST Std — ProfSvcsAgreement- November 20, 2008 PAGE 7 OF 7 Date May 21, 2015 Date 7-k9 r. Std — ProtSvcsAgreement- November 20, 2008 PAGE 8 OF 7 7/W/ Date CONTRACT #1415197 ATTACHMENT A - SCOPE OF SERVICES The scope of services shall include tasks described below, as well as other elements or modifications, which may be suggested by firms presenting proposals to better meet the needs of the City. All services shall be provided in accordance with the City's standard Professional Services Agreement. Services shall include the audit of the financial statements of the City of Ukiah (City) for the fiscal year ending June 30, 2015 and the subsequent four (4) fiscal years ending June 2016, 2017, 2018 and 2019. These audits are to be performed in accordance with auditing standards generally accepted in the United States of America, Government Auditing Standards, issued by the Comptroller General of the United States and U.S. Office of Management and Budget (OMB) Circular A -133, Audits of States, Local Governments, and Non - Profit Organi <ations. These standards include generally accepted auditing standards as adopted by the membership of the American Institute of Certified Public Accountants (AICPA). The City finance staff will provide normal cooperation and assistance during the audit, including typing of confirmation requests, pulling and refilling of supporting documents and reconciliations of major asset and liability balances. Tasks to also include: 1. Perform an audit of basic financial statements of the City of Ukiah as of and for the year ended June 30, 2015 and the subsequent four (4) years. The audit will be conducted in accordance with generally accepted auditing standards; the standards for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and (if required) the Single Audit Act Amendments of 1996; and the provisions of OMB Circular A -133. 2. The audit must include tests of the accounting records of the City as well as the determination of the major program(s) in accordance with Circular A -133 and other procedures deemed necessary for the audit team to express an unmodified opinion that the financial statements are fairly presented in all material respects, in conformity with generally accepted accounting principles and to report on the schedule of expenditures of federal awards and on the City's compliance with laws and regulations and their internal control procedures. 3. The audit firm shall provide non - attest services, and shall compile the following reports from data that the City shall provide: a. Annual Report of Financial Transactions to the State Controller of the City of Ukiah. b. Annual Street Report of the City of Ukiah c. Annual Schedule of Qualifying Liability Premium Expenditures to be submitted to the Redwood Empire Municipal Insurance Fund. d. The Annual Street Report (in electronic form) shall be ready for submission to the State Controller no less than one week before the September 30 filing date each fiscal year. The City shall be provided with a hard copy of the report for review and approval prior to the electronic submission. e. The Annual Report of Financial Transactions (in electronic form) shall be ready for submission no later than one week before the statutory filing deadline. The audit for shall provide the City with a hard copy for review before the electronic submission. f. The Schedule of Qualifying Liability Premium Expenditures shall be submitted to the City by December 15 of each fiscal year. g. Draft the basic financial statements for the Comprehensive Annual Financial Report (CAFR). The City will be responsible for the preparation of the statistical section of the report. 4. Working Paper Retention - All working papers and reports must be retained at the auditor's expense for a minimum of seven years, unless the firm is notified in writing by the City of Ukiah of the need to extend the retention period. The auditor will be required to make working papers available to the City of Ukiah or any government agencies included in the audit of federal grants. In addition, the firm shall respond to the reasonable inquiries of successor auditors and allow successor auditors to review working papers relating to matters of continuing accounting significance. 5. Work Timetable Due Date Task June Audit Planning and Interim Audit Work - Preliminary Audit work should take place during June. Documentation of systems of internal control and compliance and transaction testing should be completed during the interim stage. One week before statutory filing deadline. Annual Report of Financial Transactions submitted. September 23 Annual Street Report submitted. October 31 Final Audit - The audit fieldwork should be completed no later than this date. November 30 Draft Reports - Draft copies of the audit reports and management recommendations and any other relevant documentation should be prepared and issued. December 15 Final Reports submitted. City of Ukiah Attachment A - Contract 1415197 Page 2 Van Lant& Fankhanel, LP Certified Public Accountants I--- March 23, 2015 City of Ukiah Attn: Mary Horger, Purchasing Supervisor 411 West Clay Street Ukiah, California 95482 ATTACHMENT B We are pleased to present this audit cost proposal. We have provided you with a significant amount of information about our firm, our service approach to auditing and the individuals who will serve you. We are committed to provide the highest level of service to the City of Ukiah at a reasonable cost. Our proposed audit fees are presented as follows: Total Not -To- Exceed Audit Fees Service Fiscal Year Ending June 30, 2015 2016 2017 2018 2019 City Audit and CAFR GANN Limit Review Single Audit Sched. of Qualifying Liab. Premium Exp. State Controller's Report Street Report $ 27,000 $ 27,000 $ 27,000 $ 27,500 $ 27,500 3,200 1,500 2,000 1,000 3,200 1,500 2,000 1,000 3,200 1,500 2,000 1.000 3,300 1,500 2,100 1,100 3,300 1,500 2,100 1,100 Total Maximum Cost $ 34,700 $ 34,700 $ 34,700 $ 35,500 $ 35,500 This proposal is based on the current audit scope, and is made with the assumption that the City's books and records will be in a reasonably balanced condition and reconciled at the start of the audit and that the representations made to us during this proposal process will remain effective throughout our engagement. The above fees for Single Audit are based on the assumption that the Single Audit will include no more than two major programs, in accordance with OMB Circular A -133. Van Lant & Fankhanel, LLP 25901 Kellogg Street Loma Linda, CA 92354 909.856.6879 VLF agrees that the City may broaden the scope of our engagement and we agree to hold ourselves available to perform such additional work as the City may desire. A progress billing will be submitted following our preliminary audit procedures. Interim billings will cover a period of not less than a calendar month. A final billing will be submitted upon delivery of all required reports. No billings will be made for out -of- pocket expenses or any other expenses such as typing, clerical, printing or travel costs. We estimate approximately 365 hours each fiscal year to perform the engagements. The following represents our proposed hourly rates for the first three fiscal years. Hourly rates for subsequent fiscal years would increase by approximately 3% to 5 %: Hourly Level of Staff Rates Partners $ 160 Managers 140 Supervisory Staff 110 Professional Staff 95 Thank you for providing us the opportunity to present our proposal for audit services. We certify that Greg Fankhanel is authorized to represent VLF, empowered to submit this bid, and authorized to sign a contract with the City of Ukiah. Should you have any questions regarding our proposal or desire additional information, please call Greg Fankhanel, Partner at (909) 856 -6879. Respectfully Presented, 11n, 4at r T�,11J VAN LANT & FANKHANEL, LLP Greg W. Fankhanel, CPA, CFE VE Van Lunt& Fankhanel, LLP —I Certified Public Accountants F— May 14, 2015 To Management and City Council City of Ukiah 300 Seminary Avenue Ukiah, CA 95482 -5400 ATTACHMENT "C" We are pleased to confirm our understanding of the services we are to provide the City of Ukiah for the year ending June 30, 2015. We will audit the financial statements of the governmental activities, the business -type activities, each major fund and the aggregate remaining fund information, including the related notes to the financial statements, which collectively comprise the basic financial statements of the City of Ukiah as of and for the year ending June 30, 2015. Accounting standards generally accepted in the United States of America provide for certain required supplementary information (RSI), such as management's discussion and analysis (MD &A), to supplement the City of Ukiah's basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board 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 generally accepted accounting principles and will be subjected to certain limited procedures, but will not be audited: Management's Discussion and Analysis Budgetary Comparison Schedules Schedule of Funding Progress We have also been engaged to report on supplementary information other than RSI that accompanies the City of Ukiah'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 procedures in accordance with auditing standards generally accepted in the United States of America and will provide an opinion on it in relation to the financial statements as a whole: Van Lant & Fankhanel, LLP 25901 Kellogg Street Loma Linda, CA 92354 909.856.6879 Schedule of Expenditures of Federal Awards Combining Statements Individual Fund Statements Audit Objective 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 U.S. generally accepted accounting principles and to report on the fairness of the additional information referred to in the second paragraph when considered in relation to the basic financial statements taken as a whole. The objective also includes reporting on- • Internal control related to the financial statements and compliance with the provisions of applicable 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 Govemment 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 in accordance with the Single Audit Act Amendments of 1996 and OMB Circular A -133, Audits of States, Local Governments, and Non -Profit Organizations. The reports on internal control and compliance will each include a statement that the report is intended for the information and use of management, the body or individuals charged with governance, others within the entity, 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. We will also provide a report on agreed upon procedures performed on the City's calculation of its annual appropriations limit as required by Article XIII B of the California State Constitution. We will perform the procedures in the Article XIII B Appropriations Limit Uniform Guidelines as published by the League of California Cities. This report will include a statement that the report is intended solely for the information and use of management, City Council and specific legislative or regulatory bodies and is not intended to be and should not be used by anyone other than these specified parties. Our audit will be conducted in accordance with auditing standards generally accepted in the United States of America; the standards for financial audits contained in Govemment 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, and will include tests of accounting records, a determination of major program(s) in accordance with OMB Circular A -133, and other procedures we consider necessary to enable us to express such opinions and to render the required reports. If our opinions on the financial statements or the Single Audit compliance opinions are 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 opinions, we may decline to express opinions or to issue a report as a result of this engagement. Management Responsibilities Management is responsible for the basic financial statements and all accompanying information as well as all representations contained therein. Management is also responsible for identifying government award programs and understanding and complying with the compliance requirements, and for preparation of the schedule of expenditures of federal awards in accordance with the requirements of OMB Circular A -133. As part of the audit, we will assist with the preparation of your financial statements, schedule of expenditures of federal awards, and related notes. You are responsible for making all management decisions and performing all management functions relating to the financial statements, schedule of expenditures of federal awards, and related notes and for accepting full responsibility for such decisions. You will be required to acknowledge in the management representation letter our assistance with preparation of the financial statements and the schedule of expenditures of federal awards and that you have reviewed and approved the financial statements, schedule of expenditures of federal awards, and related notes prior to their issuance and have accepted responsibility for them. Further, you are required to designate an individual with suitable skill, knowledge, or experience to oversee any non -audit services we provide and for evaluating the adequacy and results of those services and accepting responsibility for them. Management is responsible for establishing and maintaining effective internal controls, including internal controls over compliance, and for monitoring ongoing activities, to help ensure that appropriate goals and objectives are met. You are also responsible for the selection and application of accounting principles; for the fair presentation in the financial statements of the respective financial position of the governmental activities, business -type activities, each major fund, and the aggregate remaining fund information of the City of Ukiah and the respective changes in financial position and, where applicable, cash flows in conformity with U.S. generally accepted accounting principles; and for compliance with applicable laws and regulations and the provisions of contracts and grant agreements. Management is also responsible for making all financial records and related information available to us and for the accuracy and completeness of that information. Your responsibilities include adjusting the financial statements to correct material misstatements and 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. Your responsibilities also include identifying significant vendor relationships in which the vendor has responsibility for program compliance and for the accuracy and completeness of that information. Your responsibilities include adjusting the financial statements to correct material misstatements and 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 City complies with applicable laws, regulations, contracts, agreements, and grants. Additionally, as required by OMB Circular A -133, 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. The summary schedule of prior audit findings should be available for our review during interim fieldwork. You are responsible for preparation of the schedule of expenditures of federal awards in conformity with OMB Circular A -133. You agree to include our report on the schedule of expenditures of federal awards in any document that contains and indicates that we have reported on the schedule of expenditures of federal awards. You also agree to include the audited financial statements with any presentation of the schedule of expenditures of federal awards that includes our report thereon OR make the audited financial statements readily available to intended users of the schedule of expenditures of federal awards no later than the date the schedule of expenditures of federal awards 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 schedule of expenditures of federal awards in accordance with OMB Circular A -133; (2) that you believe the schedule of expenditures of federal awards, including its form and content, is fairly presented in accordance with OMB Circular A -133; (3) that 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 schedule of expenditures of federal awards. You are also responsible for the preparation of the supplementary information in conformity with U.S. generally accepted accounting principles. 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 present certain supplementary information with the audited financial statements 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 GAAP; (2) that you believe the supplementary information, including its form and content, is fairly presented in accordance with GAAP; (3) that 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 for us 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 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. 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. 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. 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 or noncompliance may exist and not be detected by us, even though the audit is properly planned and performed in accordance with U.S. generally accepted auditing standards 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 or major programs. However, we will inform the appropriate level of 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 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. 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 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, 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 also require certain written representations from you about the financial statements and related matters. Audit Procedures - Internal Controls Our audit will include obtaining an understanding of the entity 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. As required by OMB Circular A -133, 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. An audit is not designed to provide assurance on internal control or to identify significant deficiencies. However, during the audit, we will communicate to management and those charged with governance internal control related matters that are required to be communicated under AICPA professional standards, Government Auditing Standards, and OMB Circular A- 133. 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 of Ukiah'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 requires 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. Our procedures will consist of the applicable procedures described in the OMB Circular A -133 Compliance Supplement for the types of compliance requirements that could have a direct and material effect on each of the City of Ukiah's major programs. The purpose of these procedures will be to express an opinion on the City of Ukiah's compliance with requirements applicable to each of its major programs in our report on compliance issued pursuant to OMB Circular A -133. Engagement 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 that summarizes our audit findings. 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 federal clearinghouse. We will coordinate with you the electronic submission and certification. If applicable, we will provide copies of our report for you to include with the reporting package you will submit 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 auditor' 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 Van Lant & Fankhanel, 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 federal cognizant and grantor agencies, 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 our firm. 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. In such cases, Van Lant & Fankhanel, LLP is not responsible for the distribution of the copies or information contained therein. 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 federal cognizant and grantor agencies. If we are aware that a federal 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. Our fees for these services will be in accordance with our audit proposal dated March 23, 2015. Our invoices for these fees will be rendered each month as work progresses and are payable on presentation. These fees are 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 necessary, we will discuss it with you and arrive at a new fee estimate before we incur the additional costs. In accordance with firm policies, work may be suspended if your account becomes 30 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 termination, even if we have not completed our reports. 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. We appreciate the opportunity to be of service to the City of Ukiah 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 a copy and return it to us. Very truly yours, VAN LANT & FANKHANEL, LLP 7/14"' 47t .1wvi i1, Greg W. Fankhanel Certified Public Accountant Response: This letter correctly sets forth the understanding of the City of Ukiah. By: � f ap, Title: h cam, o Date: 7 //o/ f 5