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HomeMy WebLinkAbout1999 S Finance - Deloitte & Touche Audit Contract 06-01-1999 - 8mCONTRACT TO AUDIT ACCOUNTS ~-~ 7 l t care. of Orange County, ~„~ ' ~" ' " 9 1999 Governmental Ui JUN RETURN THIS COPY TO THE CLERK'S OFFICE FOR THE PERMANENT AGENDA FILE On his 6 h day of __April , 19 99 Deloitte & TouchP r.r.p Auditor Post Office Box 2778, Raleigh, North Carolina 27hn~-2778 C•tailing Address hereinafter referred to as 0 oun y the Auditor, and Commissioners of Orange County ,hereinafter referred Governing board to as the Governmental Unit, agree as follows: Govemmental Unit I. The Auditor shall audit -all statcmcnts and disclosures required h)' generally accepted accounting principles and additional reyuircd IcE•ul statcmcnu :md disclosures of all funds and/or divisions of the Govcnuncntal Unit for the pcrind beginning July 1, , 19 98 ,and ending June 30, , 19s~. The combining, individual fund, and account group financial statements and schedules shall be subjected to the auditing procedures applied in the audit of the combined fittaneial statcmcnts and an opinion ~~ ill be rendered in relation to the combined financial statements taken as'a whole. 2. At a minimum. the Auditor shall conduct his audit and render his report in accordance with gcncralh• accepted auditing standards. "I he auditor shall perform the audit in accordance with Gm~crnment Auditine Standards if rcquircJ by the State Single Audit Implementation Act, as codified in G.S. 159-3d. If .rcquircd by O~tD Circular A-133 and the State Single Audit Implcmcntation Act, tltc auditor shall perform a Single Audit. 3. T/ris conrrncr contemplates nn unynolified opinion being rendered. If financial statements arc not prepared in accordance with centrally accepted accrnnuinc principles (GAAP). or the statcmcnts fail to include all disclosures rcquircd by GAAI', csplain th:u Jeparwrc liom GAAI' in tht >pucc hduty: ~ 7hrs c-untruct contemplates an urryuabjcd opinion being rendered. The audit shall include such tests of the accounting records and such other auditing procedures as are eonsidtrcd by the Auditor to he nccessan• in the circumstances...lnr limitations or rc~trictions in scope trlrich uordd lend ro n yualrficonon should be jdh• e.rplairted in mr artncluuen! ro dris conb•act. The audit ~~ ill have no scope limitations e~cepC 5. If this audit engagement is suhjtct to the standards for audit as defined in the Gm•crnmcnt Auditine Standards. issued by the Comptroller Gtntral of the llnittd States. then the Auditor ~uurants h)' accepting this rngagentcnt that ht/she has met the reyuircnttnts for a pttr rc~ ie~~ and continuing education as sptcifitd in the Goccnunent Auditine Standards. The Auditor agrees to provide a cop) ul'their must recent peer review rtpurt to the Govcrnmcntal Unit and tht Stcreurq• of tht Local Guctrnment Cummis>iun riot u. tht tnetutiun ul'the ;urdit cuntracl. (Set Item 2U.) G. It is a_ree.l that time is of tht tsstntt in this contract. All audits arc to he pcrl'onned and tht report of audit suhmitted h)• October 31, , {q 99• 7. It is a rred that generally acctpttd auditine standards include a review of the Govcrnmcntal Unit's s) stem of internal control and accounting as same rclatts to accountahiliq of funds and adhtrcnec to budget and law requirements applicable lhcrcto: shat the Auditor will make a written report, which may or may not ht a pan of the written report of audit, to the Governing Qoard setting funh hi: lindings, utgtthcr with his recmnnundations for improvement. That written report must include all matters dclincd as "reportahlt conditions" in AU 325 of the AICPA Professional Standards. The Auditor shall tilt a com• of that tenon with the ~ecrctan• of the Local Government Commission. S. All local govcrttntcnt and public authorit)• contracts for annual or special audits, bookkeeping or other assistance necessary to prepare the Unit's records for audit, financial statement preparation, an)• finance-related investigations, or any other audit-related work in the State of Konh Carolina require the approval of the Sccrelaq• of the Local Govcnuncnt Commission. Invoices for stn ices rendered under_these contracts shall not be paid by the Gm•ernmental Unit until the im•oice has been annroved by the Stcrctan of the Local Govemmcnt Commission. (This also includes anv nroeress billines.) All invoices should be submitted in triplicate to the Sccrctar)• of the Local Government Commission. The original and one copy will be returned to the Auditor. :\pproval is nut rcquircd on contracts and invoices for system improvements and similar services of anon-auditing nature. H. In consideration of the sa~islactoq pcrfonnance of the provisions of this agreement, the Governmental Unit shall pa) to the :\uditor, upon approval by the Secretan• of the Local Government Commission, the followine fee which includes any cost the Auditor may incur from work paper or pert reviews or any other quality assurance program rcquircd by third parties (Faleral and Stag agencies or other organizations) as Yquircd under the Federal and State Single Audit Acts: l'car-end bookkec{tingassistance- N/A Audit- Sc` .,~~,..ti,,,-~ s+,.s.nir~+--,.i--~-'-~-..r ~ $60.300_ 7 7 Preparation of the financial statcmcnts -- - - - - - - N/A (Crnuinucd on Reverse) * -The independent auditors' report of Deloitte &Touche LLP should not be included or incorporated by reference in any client prepared document without the express written permission of Deloitte &Touche LLP. 10. After completing his audit, the Auditor shall submit to the Goveming Board a +vritten report of audit. This report shall include, at least. the financial statements of the govemmental unit and all of its component units and notes thereto prepared in accordance ++ith generally accepted accounting principles, combining and supplcntentaq• information requested by the client or required for full disclosure under the la++•, and the auditor's opinion on the material presented. The Auditor shall fumislt the rcquircd number of copies of the report of audit to the Goveming Board as soon as practical oiler the close of the accounting period. I I. Tltc Auditor shall file +citlt the Local Govcmmcnt Commission t++•o copies of the report of audit, including one copy of the federal Data Collection Form, if a federal single audit is conducted. T++•o copies of the report of audit should be submitted if an audit is required to be performed only under the requirements of the State Single Audit Implcmcntation Act or a financial audit is required to be performed in accordance with Govcmmcnt Auditine Standards. Otherwise, one copy shall be submitted. Copies of the report shall be filed ++•ith the Local Govcmmcnt Commission t+•hen (or prior to) submitting the invoice for the sen•ices rendered. All topics of the report submitted must be bound. The report of audit, as filed ++•ith the Secretar}• of tltc Local Government Commission. becomes a matter of public record for inspection and review in the offices of the Secretary by am' interested panics. Any subsequent revisions to these reports must be sent to the Secretary of the Local Govcmmcnt Commission. These audited financial statements are used in the preparation of Official Statements for debt offerings, by municipal bond rating services, and to fulfill sccondaq• market disclosure requirements of the Securities and E~ehange Commission. 12. Should circumstances disclosed b~• the audit call for a more detailed investigation by the Auditor than neccssap• under ordinap~ circumstances, the Auditor shall inforn the Goveming Board in writing of the need for such additional investigation and the additional compensation rcquircd therefor. Upon approval by the Secretary of the Local Government Commission. this agreement may be varied or changed to indudc the increased time and/or compensation as may bt agreed upon by the Governing Board and the Auditor. 13. If an approved contract needs to be varied or changed for any reason, the change must be reduced to ++•riting, signed by both panics, preaudited if neccssap•, and submitted to the Secretary of the Local Govcmmcnt Commission for approval. No chance chatl he effective unle« annrm•ed h+• the Secret•tn• of the Local Government Commission, the Governine floarA. and the Auditor. I~. N'hcnevcr the Auditor uses an engagement letter +~ith the client, Items 9 and IS ma~• he completed by referencing the engagement Icttcr and attaching a copy of the engagement letter to the contract to incorporate the engagement Icttcr into the contract. In case of conflict between the terms of the engagement Icttcr and the terms of this contract, the terms of this contract sill control. f:n_a<<ment Icucr tcnns arc deemed to hr +oid unless the conflicting terms of chi. contract arc spccilicall~• deleted in hem 21 of this contract. Gtgagcmem lettcn containing indenmilication elauses+vill not be approved by the Local Gm•crnment Commission. I S. Tltcrc are nn special provisions cr;cept: See attached engagement letter IG A separate contract should not be made for each di+ision to he audited or report to be submitted. A separate contract nntsl be estxuted for cash component unit ++hich is a local government and for +chich a separate audit report is issued. 17. l~hc contract should be esecutcd and submimcd in trinlicatc to the Sccrctap• of the Local Go+•ernmcnt Commission. 325 North Salishun• Street. Raleigh. Noah Carolina 27603•I3RS. I S. Upon approval, the original contract ++ill be returned to the Governmental lJnit, a copy +cill be foro•arded to the Auditor, and a cope retained by the Seeretan• of the Local Gnvcrnmcnt Commission. The audit should not he started hefnre the rnntract is annmved. 19. 1'hsc arc no ahcr a~recmcnts hca~ccn the panics hereto and no other agreements relative hereto that shall he cnforceahlc unless entered into in accordance ~+ith the procedure xt out herein and appro+cd b~ the Scerctary of the Local Go+enuncnl Commission. ?0. U this audit ena^rm+•nt is not sut?jeet to Gmernntent Auditing StmtdarAs. then hem S shall he listed as a delded provision in hem 21. ~\n e~planatiat must h. given lift deleting this pro+ision. 21. All of the oho+e paragraphs arc understood and shall apply to this acrccment. eccept the following numbered paragraphs shall be delete.l: (tiee hem I~.) Deloitte & Touche LLP / Atdit lion -~/// a+ K. Alan Lonbom, Partner tl9taet not or prim name) Date ~4T~7 Orange County, North Carolina Gm•crnmcntal Unit It)• Alice M. Gordon, Chair ~1 Please type or print ,n(a_me and tide (Sign(a~ture~of Ali or or Chai rsprnt oGf go.•eming board) Date 7LG~G 3. ~ ( ( J Approved by the Sarctan~ of the Local Govcmmcnt Commission as provided in Aniclc 3. Chapter 159 of Ute General Statutes or Aniclc 31. Part 3. Chapter I 1 SC of the TER~eSA BORDEAUX __ _ _ F the Secnrctan~, laxal Goy tment Con sston ~~„{~ I>atc This instrument Itaz been preaudited in the manner rcquircd by The Local Govcmmcnt Budget and Fiscal Control Act or b+• the School Dudget and Fiscal Control Act. Kenneth T. Chavious Go+•emmental Uttit Finance Onicer (1'I a~typc or print name) J//~~'~ / /~'~ (Signature) Dave `^~/~/ ~~ -T'icaud'n- Ccni~~u Iw J:neJ.l _ ~ Deloitte & Touche ~~ Apri126, 1999 The Boazd of County Commissioners Orange County, North Cazolina Deaz Ladies and Gentlemen: rte: 9 ,:: ~ .... _.. . .._ .. ~ , z Deloitte & Tou~he LLP . _,Te4epho+~~{ 19) 546-8000 Suite 1800 Telex: 4995716 First Union Capital Center Facsimile: (919) 833-3276 150 Fayetteville Street Mall P.O. Box 2778 Raleigh, North Carolina 27602-2778 We aze pleased to serve as independent accountants and auditors for Orange County (the "County") for the yeaz ended June 30, 1999. This letter reaffirms our contract with you dated Apri126, 1999 Mr. K. Alan Lonbom will be responsible for the services that we perform for the County. It will be the responsibility of Mr. Lonbom to ensure that the County receives quality service. He will be assisted by Mr. Thomas Moore, audit manager. Mr. Lonbom will, as he considers necessary, call on other individuals with specialized knowledge, either in this office or elsewhere in our Firm, to assist in the performance of our services. While auditing and reporting on the County's general purpose financial statements for the year ending June 30, 1999, is the service that we aze to provide under this engagement letter, we would also be pleased to assist the County on issues as they arise throughout the yeaz. Hence, we hope that the County will call Mr. Lonbom whenever management believes he can be of assistance. It is our usual practice to have a second partner act as a consulting partner on each client assignment. The purpose of this arrangement is to have another partner, known to you, who is familiaz with your operations and who can substitute for Alan in his absence or work with him when a second viewpoint is desired. Mr. Sam McNairy will be consulting partner for your engagement. This letter sets forth our understanding of the terms and objectives of our engagement, the nature and scope of the services we will provide, and the related fee arrangements. DeloitteTouche Tohmatsu Apri126, 1999 Orange County, North Cazolina Page 2 Audit of General Purpose Financial Statements We will audit the County's general purpose financial statements as of and for the yeaz ending June 30, 1999. In addition, we will audit the County's compliance with laws and regulations related to federal and state awazds; and report on the County's Schedule of Expenditures of Federal and State Awards. Our audits will be conducted in accordance with Government Auditing Standards, issued by the Comptroller General of the United States, Office of Management and Budget ("OMB") Circular A-133, Audits of States, Local Governments and Non profit Institutions, and the State Single Audit Implementation Act. We will plan and perform our audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement, whether caused by error or fraud, and we will perform tests of the County's compliance with certain provisions of laws, regulations, contracts and grants. However, because of the characteristics of fraud, particulazly those involving concealment and falsified documentation (including forgery), a properly planned and performed audit may not detect a material misstatement. Therefore, an audit conducted in accordance with generally accepted auditing sandazds is designed to obtain reasonable, rather than absolute, assurance that the general purpose financial statements aze free of material misstatement. An audit is not designed to detect error or fraud that is immaterial to the general purpose financial statements or to detect immaterial instances of noncompliance. As part of our audit, we will consider the County's internal control and assess control risk, as required by generally accepted auditing sandazds and Government Auditing Standards, for the purpose of establishing a basis for determining the nature, timing, and extent of auditing procedures necessary for expressing an opinion on the general purpose financial statements, and not to provide assurance on the County's internal control or to identify reportable conditions. 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 azeas to be tested. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. April 26, 1999 Orange County, North Cazolina Page 3 Our auditing 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 make audit inquiries and request written responses from the County's attorneys as part of the engagement, and they may bill the County for responding to this inquiry. As part of our audit of compliance with the requirements of major federal programs, we will obtain an understanding of the County's internal control related to administering major federal programs and we will assess risk as required by OMB Circulaz A-133 for the purpose of establishing the nature, timing, and extent of auditing procedures necessary' for expressing an opinion concerning compliance with laws and regulations related to major federal and state award programs. As required by OMB Circulaz A-133 and the State Single Audit Implementation Act, our audit of compliance will also include tests of transactions related to federal and state award programs for compliance with applicable laws and regulations. However, because of the concept of reasonable assurance and because we will not perform a detailed examination of all transactions, there is a risk that material errors, fraud or illegal acts may exist and not be detected by us. We will advise you, however, of any matters of that nature that come to our attention, and will include such matters in the reports required for an audit in accordance with OMB Circulaz A-133. Our responsibility as auditors is limited to the period covered by our audit and does not extend to matters that arise during any subsequent periods for which we have not been engaged as auditors or for which we have performed no substantive auditing procedures. The report on our understanding of the County's internal control and the assessment of control risk made as part of the County's general purpose financial statement audit will include (1) the scope of our work in obtaining an understanding of the County's internal control and in assessing the control risk and (2) the reportable conditions, including the identification of material weaknesses identified as a result of our work in understanding and assessing the control risk. In addition, we will render a report on illegal acts, as required, depending on the results of our audit procedures. We will complete and sign one copy of the auditor's information section of the Data Collection Form. County management must prepaze all other sections of the form and sign the form prior to its submission to the Federal Bureau of the Census. April 26, 1999 Orange County, North Cazolina Page 4 The objective of an audit carried out in accordance with the standards described above is (1) the expression of an opinion concerning whether the general purpose financial statements present fairly, in all material respects the financial position, results of operations, and cash flows of the County in conformity with generally accepted accounting principles, (2) reporting on the internal control relevant to an audit of the financial statements, (3) reporting on the County's compliance with laws and regulations, which could have a material effect on the financial statements, (4) reporting on whether the schedule of expenditures of federal and state awazds is fairly stated in all material respects when considered in relation to the basic financial statements taken as a whole, (5) the reporting on our determination as to whether the County's internal control provides reasonable assurance of compliance with federal laws and other laws and regulations, (6) the expression of an opinion on whether the County complied with specific terms and conditions of its major federal and state programs and (7) prepazation of a schedule of findings and questioned costs to summarize the results of the audit in accordance with the requirements of OMB Circulaz A-133. Our ability to express that opinion and render those reports, and the wording of our opinion and reports, will, of course, be dependent on the facts and circumstances at the date of such reports. If we are unable to complete our audit or if our auditors' reports require modification, the reasons therefor will be discussed with County management and the Board of Commissioners. Neither our audit of the County's general purpose financial statements for the year ending June 30, 1999, nor any other services provided pursuant to this engagement letter, will provide any assurances, nor will we express any opinion, that the County's systems or any other systems, such as those of the County's vendors, service providers, customers, component units, unconsolidated subsidiaries or joint ventures in which the County has an investment or other third parties, aze year 2000 compliant. In addition, we aze not engaged to perform, nor will we perform as part of this engagement, any procedures to test whether the County's systems or any other systems aze year 2000 compliant or whether the plans and activities of the County or any third parties aze sufficient to address and correct system or any other problems that might arise because of the yeaz 2000, nor will we express any opinion or provide any other assurances with respect to these matters. We understand that our reports on the County's internal control, as part of the general purpose financial statement audit and on compliance with laws and regulations, are intended for the information of the County Manager, members of the Boazd of County Commissioners (the "Board"), management and officials of federal and state awazding agencies and pass-through entities and the Local Government Commission. Apri126, 1999 Orange County, North Carolina Page 5 Management's Responsibility The general purpose financial statements aze the responsibility of management. In this regazd, management has the responsibility for, among other things, establishing and maintaining effective internal control over financial reporting, identifying and ensuring compliance with laws, regulations, contracts and grants and establishing and maintaining effective internal control to assure such compliance with those requirements applicable to its activities for properly recording transactions in the accounting records, for making appropriate accounting estimates, for safeguazding assets, for the overall accuracy of the financial statements and their conformity with generally accepted accounting principles and for making all financial records and related information available to us. In addition, management is responsible for implementing the requirements of any applicable Government Accounting Standazds Boazd ("GASB") Statements effective this fiscal yeaz. We will advise you about accounting principles and their application and will assist in the prepazation of your general purpose financial statements, but the responsibility for the general purpose financial statements remains with you. We will make specific inquiries of management about the representations embodied in the general purpose financial statements. As part of our audit procedures, we will request that management provide us with a representation letter acknowledging management's responsibility for the prepazation of the general purpose financial statements and for compliance with laws and regulations applicable to federal and state award programs, and confirming certain representations made to us during our audit. The responses to those inquiries and related written representations of management required by generally accepted auditing standazds are part of the evidential matter that we will rely on as auditors in forming our opinion on the County's general purpose financial statements. Because of the importance of management's representations, the County agrees to release and indemnify Deloitte & Touche LLP and its personnel from all claims, liabilities and expenses relating to our services under this engagement letter attributable to any misrepresentation by management. If the County intends to publish or otherwise reproduce in any document our report on the County's general purpose financial statements, or otherwise make reference to Deloitte & Touche LLP in a document that contains other information in addition to the audited financial statements (e.g., in a debt or equity offering circulaz or in a private placement memorandum), the County agrees that prior to making any such use of our report, or reference to Deloitte & Touche LLP, Orange County management will provide us with a draft of the document to read and obtain our approval for the inclusion or incorporation by reference of our report, or the April 26, 1999 Orange County, North Cazolina Page 6 reference to Deloitte &Touche LLP, in such document before the document is printed and distributed. The inclusion or incorporation by reference of our report in any such document would constitute the reissuance of our report and any request by the County to reissue our report or to consent to its inclusion or incorporation by reference in an offering or other document will be considered based on the facts and circumstances existing at the time of such request. The estimated fees outlined herein do not include any services that would need to be performed in connection with any such request to make use of our report, or reference to Deloitte &Touche LLP; fees for such services (and their scope) would be subject to our mutual agreement at such time and would be described in a sepazate engagement letter. Other Communications Arising From the Audit In connection with the planning and the performance of our audit, generally accepted auditing sandazds and Government Auditing Standards require that we ensure that certain matters are communicated to management and members of the Board. We will report directly to the members of the Boazd any fraud of which we become aware that involves senior management, and any fraud (whether caused by senior management or other employees) of which we become awaze that causes a material misstatement of the general purpose financial statements. We will report to senior management any fraud perpetrated by lower level employees of which we become aware that does not cause a material misstatement of the general purpose financial statements; however, we will not report such matters directly to the Boazd, unless otherwise directed by the Boazd. We will inform the appropriate level of management of the County and ensure that the Board is adequately informed with respect to illegal acts that have been detected or have otherwise come to our attention in the course of our audit, unless the illegal act is cleazly inconsequential. If, after determining that the Boazd has been adequately informed of an illegal act that has been detected or which has otherwise come to our attention in the course of our audit, we conclude that (1) the illegal act has a material effect on the general purpose financial statements; (2) senior management has not taken, and the Boazd has not caused senior management to take, timely and appropriate remedial actions with respect to the illegal act; and (3) the failure to take appropriate remedial actions is likely to result in a departure from the standazd auditors' report or warrant our resignation from the audit engagement, we will directly report our conclusions to the Boazd and take such actions as aze required by state or federal law to report such matters to funding agencies and appropriate legal authorities. April 26, 1999 Orange County, North Cazolina Page 7 We will also report directly to County management and the Boazd matters coming to our attention during the course of our audit that we believe aze reportable conditions. Reportable conditions aze significant deficiencies in the design or operation of internal control that could adversely affect the County's ability to record, process, summarize and report financial data consistent with the assertions of management in the general purpose financial statements. In addition we will communicate to the Board certain other matters relating to the conduct of our audit, including, when applicable: • Our responsibility as auditors under generally accepted auditing sandazds, Government Auditing Standards and OMB Circulaz A-133 • Significant accounting policies • Management judgments and accounting estimates • Significant audit adjustments (recorded and unrecorded) • Other information in documents containing audited financial statements • Disagreements with management • Consultation by management with other accountants on significant matters • Difficulties encountered in performing the audit • Major issues discussed with management prior to our retention as auditors. We may also have other comments for management on matters we have observed and possible ways to improve the efficiency of the County's operations or other recommendations concerning internal control. With respect to these other communications, it is our practice to discuss all comments, if appropriate, with the level of management responsible for the matters, prior to their communication to senior management and/or the Members of the Boazd. Apri126, 1999 Orange County, North Carolina Page 8 Coordination of the Audit Our audit is scheduled for performance and completion as follows: Begin Audit Performance Schedule: Planning August 1999 Yeaz-end September 1999 Audit Communications - Report on audit of financial statements Other Communications: Report of reportable conditions, if any Other management comments Schedule for Completion August 1999 October 1999 November 15, 1999 November 15, 1999 November 15, 1999 We understand that the County's employees will type all cash or other co~rmations that we request and will locate any invoices selected by us for testing. Assistance to be supplied by your personnel, including prepazation of schedules and analyses of accounts as will be coordinated with Ken Chavious, Finance Director. Other assistance to be supplied by your personnel, including prepazation of schedules and analyses of accounts, is described in a sepazate attachment. Timely completion of this work will facilitate the conclusion of our audit. We are, of course, available to assist you in other areas that might arise. Record Retention We will maintain the working papers for a minimum of three yeazs from the date of the audit report. These working papers will be made available to representatives of the United States General Accounting Office or other government audit staffs upon their request and after they have properly notified you of their request to review the working papers. Apri126, 1999 Orange County, North Cazolina Page 9 Access to Working Papers by Regulators In accordance with the requirements of Government Auditing Standards, we aze required to provide access to our working papers and photocopies thereof to a federal agency or the Comptroller General of the United States upon their request for their regulatory oversight purposes. If such a request is made, we will inform you prior to providing such access. The working papers for this engagement aze the property of Deloitte &Touche LLP and constitute confidential information. Access to the requested working papers will be provided to representatives of the United States General Accounting OfFice or other appropriate government audit staffs under the supervision of Deloitte &Touche LLP audit personnel and at a location designated by our Firm. If photocopies aze requested, we will mazk all information as confidential and maintain control over the duplication of all information. All professional and administrative services relating to such access (including photocopying) will be chazged as an additional expense to the engagement. Professional Fees Our fees for these services will be based on the actual time spent at various levels of responsibility, plus travel and other expense (e.g., report production, typing, communication and postage). We estimate that our total fees for this audit will be $60,300 (for the general audit and the single audit), including expenses. This 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 necessary, we will discuss it with you and arrive at a new fee estimate before we incur the additional costs. Fees for additional services including implementation of new accounting pronouncements, not outlined above will be mutually agreed upon prior to beginning such work. We appreciate this opportunity to be of service to Orange County, and we believe this letter accurately summarizes the significant terms of our engagement. If you have any questions, please let us know. Apri126, 1999 Orange County, North Cazolina Page 10 If the above terms aze acceptable to Orange County and the services outlined aze in accordance with your understanding, please sign the enclosed copy of this letter in the space provided and return it to us, Yours truly, Responses This letter correctly sets forth the understanding of Orange County: By: Title: Date: ~~ ERNST & YOUNG LLP • 787 Seventh Avenue • Phone: 212 773 3000 ' New York, New York 10019 Deloitte &Touche LLP We have reviewed the system of quality control for the accounting and auditing practice of Deloitte &Touche LLP (the Firm) in effect for the yeaz ended March 31, 1996. Our review was conducted in conformity with standazds for peer reviews promulgated by the Peer Review Committee of the SEC Practice Section of the AICPA Division for CPA Firms (the Section). We tested compliance with the Firm's quality control policies and procedures at the Firm's National office and at selected practice offices in the United States and with the membership requirements of the Section to the extent we considered appropriate. These tests included the application of the Firm's policies and procedures on selected accounting and auditing engagements. We tested the supervision and control of portions of engagements performed outside the United States. In performing our review, we have given consideration to the general characteristics of a system of quality control as described in quality control standards issued by the AICPA. Such a system should be appropriately comprehensive and suitably designed in relation to the firm's organizational structure, its policies, and the nature of its practice. Variance in individual performance can affect the degree of compliance with a firm's prescribed quality control policies and procedures. Therefore, adherence to all policies and procedures in every case may not be possible. As is customary in a peer review, we aze issuing a letter under this date that sets forth comments relating to certain policies and procedures or compliance with them. These matters were not considered to be of sufficient significance to affect the opinion expressed in this report. In our opinion, the system of quality control for the accounting and auditing practice of Deloitte &Touche LLP in effect for the year ended Mazch 3l, 1996 met the objectives of quality control standards established by the AICPA, and was being complied with during the yeaz then ended to provide the Firm with reasonable assurance of conforming with professional standards. Also, in our opinion, the Firm was in conformity with the membership requirements of the Section in all material respects. ~~ t t« New York, New York November 25, 1996 Ernst &Young uP is a member of Ernst &Young International, Ltd.