HomeMy WebLinkAbout2009-019 Finance - McGladrey & PullenMcGladrey& Pullen
Certified Public Accountants
May 12, 2009
The Members of the County Commissioners
Orange County, North Carolina
200 South Cameron Street
P.O. Box 8181
Hillsborough, North Carolina 27278
Attention: Ms. Valerie P. Foushee, County Commissioner Chair
McGladrey & Pullen, LLP
230 North Elm St., Ste. 1100, Greensboro, NC 27401-2436
P.O. Box 2470, Greensboro, NC 27402-2470
0 336.273.4461 F 336.274.2519
www.mcgladrey.com
We are pleased to submit the following information about our June 30, 2009 audit plan, including the planned scope
and timing of our audit, and overall audit approach for the Orange County, North Carolina (the "County"). We believe
our audit plan will satisfy our primary objective of rendering a report on the financial statements of the County as of
June 30, 2009 and for the year then ended.
Communication
Effective two-way communication between our firm and the members of the County Commissioners is important to
understanding matters related to the audit and in developing a constructive working relationship.
Your insights may assist us in understanding the County and its environment, in identifying appropriate sources of
audit evidence, and in providing information about specific transactions or events. We will discuss with you your
oversight of the effectiveness of internal control and any areas where you request additional procedures to be
undertaken. We expect that you will timely communicate with us any matters you consider relevant to the audit.
Such matters might include strategic decisions that may significantly affect the nature, timing and extent of audit
procedures, your suspicion or detection of fraud, or any concerns you may have about the integrity or competence of
senior management.
We will timely communicate to you any fraud involving senior management and other fraud that causes a material
misstatement of the financial statements, illegal acts that come to our attention (unless they are clearly
inconsequential), and disagreements with management and other serious difficulties encountered in performing the
audit. We also will communicate to you and to management any significant deficiencies or material weaknesses in
internal control that become known to us during the course of the audit. Other matters arising from the audit that are,
in our professional judgment, significant and relevant to you in your oversight of the financial reporting process will be
communicated to you in writing after the audit.
Independence
Our independence policies and procedures are designed to provide reasonable assurance that our firm and its
personnel comply with applicable professional independence standards. Our policies address financial interests,
business and family relationships, and nonaudit services that may be thought to bear on independence. For
example, without our permission, no partner or professional employee of McGladrey & Pullen, LLP or RSM
McGladrey, Inc. is permitted to own any direct financial interest or a material indirect financial interest in a client or
any affiliates of a client. Also, if an immediate family member or close relative of a partner or professional employee
is employed by a client in a key position, the incident must be reported and resolved in accordance with firm policy.
In addition, our policies restrict certain nonaudit services that may be provided by RSM McGladrey, tnc. and require
audit clients to accept certain responsibilities in connection with the provision of permitted nonattest services.
~J•
McGladrey & Pullen, LLP is a member firm of RSM International -
anaffiliation of separate and independent legal entities.
Engagement Objectives
Our primary objective is to conduct our audit in accordance with auditing standards generally accepted in the United
States of America which may enable us to express an opinion as to whether the financial statements are fairly
presented, in all material respects, in accordance with accounting principles generally accepted in the United States
of America. Our audit is planned to provide reasonable, not absolute, assurance that the financial statements are
free of material misstatement, whether caused by error, fraudulent financial reporting or misappropriation of assets.
Because the determination of abuse is subjective, Government Auditing Standards do not expect us to provide
reasonable assurance of detecting abuse. We will also conduct an audit so as to satisfy the requirements of
Government Auditing Standards issued by the Comptroller General of the United States as well as the audit
requirements imposed by the Single Audit Act and the U.S. Office of Management and Budget ("OMB") Circular No.
A-133 and the State Single Audit Implementation Act of North Carolina. We have provided you with a copy of our
arrangement letter and the Local Government Commission "Contract to Audit Accounts" with the County, which are
enclosed.
Audit Planning Process
Our audit approach places a strong emphasis on obtaining an understanding of how your entity functions. This
enables us to identify key audit components and tailor our procedures to the unique aspects of your entity. The
development of a specific audit plan will begin by meeting with you and with management to obtain an understanding
of business objectives, strategies, risks and performance.
We will obtain an understanding of internal control to assess the impact of internal control on determining the nature,
timing and extent of audit procedures, and we will establish an overall materiality limit for audit purposes. We will
conduct formal discussions among engagement team members to consider how and where your financial statements
might be susceptible to material misstatement due to fraud or error.
We will use this knowledge and understanding, together with other factors, to first assess the risk that errors or fraud
may cause a material misstatement at the financial statement level. The assessment of the risks of material
misstatement at the financial statement level provides us with parameters within which to design the audit procedures
for specific account balances and classes of transactions. Our risk assessment process at the account-balance or
class-of-transactions level consists of:
An assessment of inherent risk (the susceptibility of an assertion relating to an account balance or class of
transactions to a material misstatement, assuming there are no related controls); and
An evaluation of the design effectiveness of internal control over financial reporting and our assessment of control
risk (the risk that a material misstatement could occur in an assertion and not be prevented or detected on a timely
basis by the County's internal control).
We will then determine the nature, timing and extent of tests of controls and substantive procedures necessary given
the risks identified and the controls as we understand them.
The Concept of Materiality in Planning and Executing the Audit
In planning the audit, the materiality limit is viewed as the maximum aggregate amount of misstatements, which if
detected and not corrected, would cause us to modify our opinion on the financial statements. The materiality limit is
an allowance not only for misstatements that will be detected and not corrected but also for misstatements that may
not be detected by the audit. Our assessment of materiality throughout the audit will be based on both quantitative
and qualitative considerations. Because of the interaction of quantitative and qualitative considerations,
misstatements of a relatively small amount could have a material effect on the current financial statements as well as
financial statements of future periods. At the end of the audit, we will inform you of all individual unrecorded
misstatements aggregated by us in connection with our evaluation of our audit test results.
2
Audit Approach
Our audit approach includes obtaining an understanding of:
The County's operations. This understanding allows us to concentrate audit efforts on those aspects of the
County that are significant to the financial statements and major federal and State programs.
Internal control and its component elements. We have made a preliminary assessment of control risk and plan
to assess control risk below the maximum for the following transaction cycles: Tax revenue and receivables,
Payroll and Expenditures other than Payroll and Capital Assets as well as the applicable requirements of major
federal and State programs.
Changes to the County's significant information systems during the last year.
Fraud risk factors within the County which may be indicative of either fraudulent financial reporting,
noncompliance or misappropriation of assets.
The cumulative audit knowledge we have gained from previous years' audits.
New technical accounting and financial reporting requirements that will impact recognition, measurement or
disclosure in the June 30, 2009 financial statements.
Internal Control and Compliance
Our review and understanding of the County's system of internal control is not undertaken for the purpose of
expressing an opinion on the effectiveness of its internal control. Rather, it is to assess the impact of internal control
on determining the nature, timing and extent of auditing procedures. Recommendations for improving internal control
that come to our attention will be summarized for discussion with management and the audit committee.
We will issue report(s) on internal control related to the financial statements and major programs. These report(s)
describe the scope of testing of internal control and the results of our tests of internal controls. Our reports on
internal control will include any significant deficiencies and material weaknesses in the system of which we become
aware as a result of obtaining an understanding of internal control and performing tests of internal control consistent
with the requirements of the standards and circular identified above.
We will issue report(s) on compliance with laws, regulations, and the provisions of contracts or grant agreements.
We will report on any noncompliance which could have a material effect on the financial statements and any
noncompliance which could have a direct and material effect on each major program. Our report(s) on compliance
will address material errors, fraud, abuse, violations of compliance requirements and other responsibilities imposed
by state and Federal statutes and regulations and assumed contracts; and any state or Federal grant, entitlement or
loan program questioned costs of which we become aware, consistent with the requirements of the standards and
circular identified above.
Timing of Procedures
We have scheduled preliminary audit fieldwork for May 26 to June 5 and single audit work for the week of June 22
with final fieldwork commencing the week of September 8. Management's adherence to its closing schedule and
timely completion of information used by us in performance of the audit is essential to meeting this schedule and
completing our audit on a timely basis.
3
Engagement Team
John J. Gilberto, Partner and Michael Schertzinger, Director, will continue to be responsible for coordination of audit
and other services to the County. Michael Schertzinger, Director will be supported by an engagement team
consisting of:
David Murphy, In-Charge
Closing
This letter is intended solely for the information and use of the members of the County Commissioners of the Orange
County, North Carolina and is not intended to be and should not be used by anyone other than the specified parties.
We will be pleased to respond to any questions you have about the foregoing. We appreciate the opportunity to be
of service to the Orange County, North Carolina.
Sincerely,
McGladrey & Pullen, LLP
John J. Gilberto, Partner
w,(~,v
W. Michael Schertzinger, Director
4
McGladrey & Pullen
Certified Public Accountants
March 16, 2009
The Honorable Manager and Members
of the County Commissioners
Orange County, North Carolina
Hillsborough, North Carolina
Attention: Mr. Gary Humphreys, Financial Services Director
tt:
McGladrey b Pullen, LLP
230 North Elm St., Ste. 1100, Greensboro, NC 27401-2436
P.O. Box 2470, Greensboro, NC 27402-2470
0 336.273.4461 F 3362741519
www.mcgladrey.com
This letter is to explain our understanding of the arrangements for the services we are to perform for the Orange
County, North Carolina (the "County") for the year ending June 30, 2009. We ask that you either confine or amend
this understanding.
Audit Services
We will perform an audit of the County's governmental activities, business-type activities, aggregate discretely
presented component unit, each major fund, aggregate remaining fund information and budgetary comparison for the
general fund as of and for the year ending June 30, 2009 which collectively comprise the basic financial statements.
We understand that these financial statements will be prepared in accordance with accounting principles generally
accepted in the United States of America. The objective of an audit of financial statements is to express an opinion
on those statements.
We an: responsible for forming and expressing an opinion about whether the financial statements that have been
prepared by management with the oversight of the Board of County Commissioners are presented fairly, in all
material respects, inconformity with accounting principles generally accepted in the United States of America.
We will also perform the audit of the County as of June 30, 2009 so as to satisfy the audit requirements imposed by
the Single Audit Act, the U.S. Office of Management and Budget ("OMB")Circular No. A-133 and the State Single
Audit Implementation Act of North Carolina.
We will conduct the audit 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; the provisions of the
Single Audit Act, OMB Circular A-133 and OMB's Compliance Supplement; and, the State Single Audit
Implementation Act. Those standards, circulars, supplemenbs or guides require that we plan and perform the audit to
obtain reasonable rather than absolute, assurance about whether the financial statements are free of material
misstatement whether caused by error or fraud. Accordingly, a material misstatement may remain undetected. Also,
an audit is not designed to detect errors or fraud that are immaterial to the financial statements. The determination of
abuse is subjective; therefore, Government Auditing Standards do not expect us to provide reasonable assurance of
detecting abuse.
McGladrey & Pullen, LLP is a member firm of RSM International -
anaffiliation of separate and independent legal entities.
,. ,
Orange Courrty, North Carolina
March 1fi, 2009
Page 2
An audit of financial statements also includes obtaining an understanding of the entity and its environment, including
its inthmal control, suffiaent to assess the risks of material misstatement of the financial statements, and to design
the nature, timing, and extent of further audit procedures. An audit is not designed to provide assurance on internal
control or to identify significant deficiencies or material weaknesses. However, we will communicate to management
and the audit committee, any significant deficiencies or material weaknesses that become known to us during the
course of the audit.
We will also communicate to the Board of County Commissioners (a) any fraud involving senior management and
fraud (whether caused by senior management or other empbyees) that causes a material misstatement of the
financial statementh, (b) any fraud, illegal acts, violations of provisions of contracts or grant agreements and abuse
that come to our attention (unless they are clearly inconsequential), (c) any disagreements with management and
other serious difficulties encountered in performing the audit, and (d) various matters related to the entity's
acxounting policies and financial statements.
1n addition to our report on the County's financial statements, we will also issue the following reports or types of
reports:
A report on the fairness of the presentation of the County's schedule of expenditures of Federal and State awards
for the year ending June 30, 2009.
Reports on internal control related to the financial statements, and major programs. These reports will describe
the scope of testing of internal control and the results of our tests of internal controls.
Reports on compliance with laws, regulations, and the provision of contracts or grant agreements. We will report
on any noncompliance which could have a material effect on the financial statements and any noncompliance
which could have a direct and material effect on each major program.
A schedule of findings and questioned cats. .
The funds that you have told us are maintained by the County and that are to be included as part of our audit are the
same as in the CouMy's June 30, 2008 CAFR and are listed here:
• General fund
• Special revenue funds
• Caprtal project funds
• Enterprise funds
• Internal service fund
• Fiduciary funds
The federal and state financi~ assistance programs that you have told us that the County participates in and that are
to be included as part of the single audit compliance examination are the same as the ones in the Schedule of
Federal and State Awards and ifie Slate Single Audit Implementation Act for the year ended June 30, 2008, included
in the County's June 30, 2008 CAFR.
The component units whose financial statements you have told us are to be combined with and included as part of
the County's basic financial statements is the Orange County ABC Board. The Orange County ABC Board will be
disclosed through discrete presentation as a component unit, as required by Governmental Accounting Standards
Board ("GASB")14. Another CPA Firm will audit the Orange County ABC Board.
Orange County, North Carolina
March 16, 2009
Page 3
Our reports on intemal control will include any significant deficiencies and material weaknesses in the system of
which we become aware as a result of obtaining an understanding of intemal control and performing tests of intemal
control consistent with requirements of the standards and arcular identified above. Our reports on compliance will
address material errors, fraud, abuse, violations of compliance requirements, and other responsibilities imposed by
state and federal statutes and regulations and assumed by contracts; and any state or federal grant, entitlement of
loan program questioned costs of which we become aware, consistent with requirements of the standards and
circulars identifred above.
Orange Counly, North Carolina's Responsibilities
Management is responsible for the financial statements, including the selection and application of accounting
policies, adjusting the financial statements to correct material misstatements, and for making all financial records and
related information available to us. Management is responsib~ for providing us with a written management
representation letter confirming certain representations made during the course of our audit of the financial
statements and affirming to us that it believes the effects of any uncorrected misstatementh aggregated by us during
the current engagement and pertaining to the latest period presented are immathrial, both individually and in the
aggregate, to the financial statements taken as a whole and to the opinion units of the financial statements.
Management is responsible for establishing and maintaining effective intemal control over financial reporting and for
informing us of all significant deficiencies and material weaknesses in the design or operation of such controls of
which it has knowledge.
Management is responsible for identifying and ensuring that the entity complies with the laws and regulations
applicable to its activities, and for informing us about all known material violations of such laws or regulations. In
addition, management is responsible for the design and implementation of programs and controls to prevent and
detect fraud, and for informing us about alt known or suspected fraud affecting the entity involving management,
employees who have significant roles in intemal control, and others where the fraud could have a material effect on
the financial statements. Management is also responsible for informing us of its knowledge of any allegations of
fraud or suspected fraud affecting the entity received in communications from employees, fom~er employees,
analysts, regulators, or others.
Management is also responsible for (a) making us aware of significant vendor relationships where the vender is
responsible for program compliance, (b) following up and taking corrective action on audit findings, including the
preparation of a summary schedule of prior audit findings, and a corrective action plan, and (c) report distribution
including submitting the reporting packages.
The Board of County Commissioners are responsible for informing us of its views about the risks of fraud within the
entity, and its knowledge of any fraud or suspected fraud affecting the entity.
The County agrees that our report on the financial statements will not be included in an official statement or other
document involved with the sale of debt instruments without our prior consent. Additionally, if the County intends to
publish or otherwise reproduce the financial sthtementh and/or make reference to us or our audit, you agree to
provide us with printer's proofs or a master for our review and consent before reproduction and/or release occurs.
You also agree to provide us with a copy of the final reproduced material for our consent before it is distributed or
released. Our fees for any additional services that may be required under our quality assurance systems as a result
of the above will be established with you at the time such services are determined to be necessary. In the event our
auditor/client relationship has been terminated when the Organization seeks such consent, we will be under no
obligation to grant such consent or approval.
Orange County, North Carolina
March 16, 2009
Page 4
Our professional standards require that we perform certain additbnal procedures, on current and previous years
engagements, whenever a partner or professional employee leaves the firm and is subsequently empbyed by or
associated with a client. Accordingly, the County agrees it will compensate McGladrey & Pullen, LLP for any
additional costs incurred as a result of the employment of a partner or professional employee of McGladrey & Pullen,
LLP.
During the course of our engagement, we may accumulate reconis containing data which should be reflected in your
books and records. The County wiN determine that all such data, if necessary, will be so reflected. Accordingly, you
will not expect us in maintain copies of such records in our possession.
The assistance to be supplied by organization personnel, including the preparation of schedules and analyses of
accounts, has been discussed and coordinated with Mr. Gary Humphreys, Financial Services Dirrrctor. The timely
and accurate completon of this work is an essential condition to our completion of the audit and issuance of our audit
report.
Other Terms of Our Engagement
Our fees arB based on the time required by the individuals assigned to the engagement, plus direct expenses.
Interim billings will be submitted as work progresses and ~ expenses are incurred. Billings are due upon
submission. Our fee for the services described in this lettbr and in the LGC-205 Contract to Audit Acxounts issued by
the Local Government Commission will not exceed $92,700 and $5,250 for the preparation of schedules of property
tax receivables for the Towns of Chapel Hill, Carrboro and Hillsborough, unless the scope of the engagement is
changed, the assistance which the County has agreed to furnish is not provided, turnover of key personnel before the
audit is completed, or unexpected conditions are encountered, in which case we will discuss the situation with you
before proceeding. Any services performed in addition to normal audit procedures will be charged at standard rates.
Any additional major programs above the four (4) major programs will be billed at $4,200 each. All other provisions
of this letter wfil survive any fee adjustment.
Any claim arising out of services rendered pursuant to this agreement shall be resolved in accordance with the laws
of the State of North Carolina. It is agreed by the County and McGladrey & Pullen, LLP or any successors in interest
that no claim arising out of services rendered pursuant to this agreement by or on behaff of the County shall be
asserted more than two years after the date of the last audit report issued by McGlairey & Pullen, LLP.
In the event we are requested or authorized by the County or are required by government regulation, subpoena, or
other legal process to produce our dowments or our personnel as witnesses with respect to our engagements for the
County, the County will, so bng as we are not a party th the proceeding in which the information is sought, reimburse
us for our professional time and expenses, as well as the fees and expenses of our counsel, incurned in responding
to such r+equesLs.
The working papers for this engagement are the property of McGladrey & Pullen, LLP. However, you ackrrowledge
and grant your assent that representatives of the cognizant or oversight agency or their designee, other government
audit staffs, and the U.S. Government Accountability Office shall have access to the audit working papers upon their
request; and that we shall maintain the working papers for a period of at least three years after the date of the report,
or for a longer period if we are requested to do so by the cognizant or oversight agency. Access to requested
workpapers will be provided under the supervision of McGladrey & Pullen, LLP audit personnel and at a location
designated by our Firm.
Orange County, North Carolina
March 16, 2009
Page 5
C
From time to time and depending upon the circumstances, we may use third-party service providers to assist us in
providing professional services to you. In such circumstances, it may be necessary for us to disclose confidential
client information to them. We enter into confidentiality agreements with all third-party service providers and we are
satisfied that they have appropriate procedures in place to prevent the unauthorized release of your confidential
information to others.
If circumstances arise relating to the conditions of your records, the availability of appropriate audit evidence, or
indications of a significant risk of material misstatement of the financial statements because of error, fraudulent
financial reporting, misappropriation of assets, or noncompliance which in our professional judgment prevent us from
completing the audit or forming an opinion, we retain the unilateral right to take any course of action permitted by
professional standards, including declining to express an opinion or issue a report, or withdrawal from the
engagement.
You have informed us that you intend to prepare a comprehensive annual financial report ("CAFR°) and submit it for
evaluation by the Government Finance Officers Association's Certificate of Achievement for Excellence in Financial
Reporting Program. Our participation in the review of the CAFR is to consist of having the financial statement report
reviewed by a person who is also a reviewer for the GFOA Certificate Program and have him involved in the
resolution of any accounting or reporting questions that arise during the engagement.
We will assist in drafting the County's financial statements and preparation of schedules of property tax receivables
for the Towns of Chapel Hill, Carrboro and Hillsborough, all of which are reviewed and approved by management.
The draft and schedules are the responsibility of management.
The two overarching principles of the independence standards of the Government Auditing Standards issued by the
Comptroller General of the United States provide that management is responsible for the substantive outcomes of
the work, and therefore, has a responsibility and is able to make any informed judgment on the results of the services
described above. Accordingly, the County agrees to the following:
Mr. Gary Humphreys, Financial Services Director, will be accountable and responsible for overseeing the draft of
the County's financial statements and preparation of schedules of property tax receivables for the Towns of
Chapel Hill, Carrboro and Hillsborough.
The County will establish and monitor the performance of the draft of the County's financial statements and
preparation of schedules of property tax receivables for the Towns of Chapel Hill, Carrboro and Hillsborough to
ensure that they meet management's objectives.
The County will make any decisions that involve management functions related to the draft of the County's
financial statements and preparation of schedules of property tax receivables for the Towns of Chapel Hill,
Carrboro and Hillsborough and will accept full responsibility for such decisions.
The County will evaluate the adequacy of services performed and any findings that result.
This letter together with form LGC-205 Contracf to Audit Accounts constitutes the complete and exclusive statement
of agreement between McGladrey & Pullen, LLP and The Orange County, North Carolina, superseding all proposals
oral or written and all other communication, with respect to the terms of the engagement between the parties.
r. ~ `•t , ~
Orange County, North Carolina
March 16, 2009
Page 6
In accordance with GovemmentAuditing Standards, a copy of our most recent peer review report and applicable
letter of comment was provided to you in the previous year, for your information.
If this letter together with form LGC-205 Contract to AuditAccounts defines the arrangements as you understand
them, please sign and date the enclosed copy, and return it to us. We appreciate your business.
McGladrey & Pullen, LLP
~~'/~
Jo n G' berto, Partner
Confirmed on behalf of Orange County, North Carolina:
~Q
Michael Schertzing r, Director
This instrument has been preaudited in the manner required by the Local Government Budget and Fiscal Control Act.
~~`
County Manager
G~~i .~~- _, 2009
`j ~ RECEIVED
i-GC-2os (Itev. lnnoos) CONTRACT TO AUDIT ACCOUNTS MAY 0 4 2009
File in Triplicate
'~ of Orange County, North Cazolina I_oc OMM SSIONE~
Governmental Unit
On this _l6th day of March 2009 McGladrev & Pullen, I_L,P
Auditor
P.O. Box 2470. Greensboro. NC 27402-2470
Mailing Address
hereinafter referred to as the
Auditor, and the Commissioners of Orange County ,hereinafter referred to as the
Governing Board Governmental Unit
Governmental Unit, agree as follows:
1. The Auditor shall audit all statements and disclosures required by generally accepted accounting principles and additional-,
required legal statements and disclosures of all funds and/or divisions of the Governmental Unit for the period beginning
July 1 2008 ,and ending June 30 2009 .The non-major combining, and individual fund
statements and schedules shall be subjected to the auditing procedures applied in the audit of the basic financial statements
and an opinion will be rendered in relation to (as applicable) the governmental activities, the business-type activities, the
aggregate discretely presented component units, each major governmental and enterprise fund, and the aggregate remaining
fund infomtation (nonmajor govemment and enterprise funds, the internal service fund type, and the fiduciary fund types).
2. At a minimum, the Auditor shall conduct his/her audit and render hisflter report in accordance with generally accepted auditing
standards. The Auditor shall perform the audit in accordance with Government Auditin¢ Standards if required by the State
Single Audit Implementation Act, as codified in G.S. 159-34. If required by OMB Circular A-133 and the State Single Audit
Implementation Act, the auditor shall perform a Single Audit. This audit and all associated workpapers may be subjected to
review by Federal and State agencies in accordance with Federal and State laws, including the staffs of the Office of State
Auditor (OSA) and the LGC. If the audit and/or workpapers are Found in this review to be substandard, the results of the
review may be forwarded to the North Carolina State Board of CPA Examiners.
3. This contract contemplates an unqualified opinion being rendered. If financial statements are not prepared in accordance with
generally accepted accounting principles (GAAP), or the statements fail to include all disclosures required by GAAP, explain
that departure from GAAP in the space below: No departures contemplated.
4. This contract contemplates an unqualifted opinion being rendered. The audit shall include such tests of the accounting records
and such other auditing procedures as are considered by the Auditor to be necessary in the circumstances. Any limitations or
restrictions in scope which would lead to a qualification should be fully explained in an attachment to this contract. The
audit will have no scope limitations except: No limitations are contemplated.
5. If this audit engagement is subject to the standards for audit as defined in Government Auditin¢ Standards, July 2007
revisions, issued by the Comptroller General of the United States, then the Auditor warrants by accepting this engagement
that he has met the requirements for a peer review and continuing education as specified in Government Auditin¢ Standards.
The Auditor agrees to provide a copy of their most recent peer review report to the Governmental Unit and the Secretary of
the Local Government Commission prior to the execution of the audit contract. (See Item 21.)
6. It is agreed that time is of the essence in this contract. All audits are to be performed and the report of audit submitted by
-October 31 2009
7. It is agreed that generally accepted auditing standards include a review of the Governmental Unit's system of internal control
and accounting as same relates to accountability of funds and adherence to budget and law requirements applicable thereto;
that the Auditor will make a written report, which may or may not be a part of the written report of audit, to the Governing
Board setting forth his findings, together with his recommendations for improvement. That written report must include all
matters defined as "significant deficiencies and material weaknesses" in AU 325 of the AICPA Professional Standards.
Auditor shall file a coov of that report with the Secretarv of the Local Government Commission.
8. All local govemment and public authority contracts for annual or special audits, bookkeeping or other assistance necessary to
prepare the Unit's records for audit, financial statement preparation, any finance-related investigations, or any other audit-
related work in the State of North Carolina require the approval of the Secretary of the Local Government Commission.
Invoices for services rendered under these contracts shall not be paid by the Governmental Unit until the invoice has been
approved by the Secretary of the Local Government Commission. (This also includes any progress billings.) [G.S. 159-34
and 115C-447] All invoices should be submitted in triplicate to the Secretary of the Local Government Commission. The
original and one copy will be returned to the Auditor. Approval is not required on contracts and invoices for system
improvements and similar services of anon-auditing nature.
9. [n consideration of the satisfactory performance of the provisions of this agreement, the Governmental Unit shall pay to the
Auditor, upon approval by the Secretary of the Local Government Commission, the followin¢ fee which includes any cost the
Auditor may incur from work paper or peer reviews or any other quality assurance program required by third parties (Federal
and State grantor and oversight agencies or other organizations) as required under the Federal and State Single Audit Acts:
Year-end bookkeeping assistance - [For audits subject to Government Auditing Standards, this is limited to
bookkeeping services permitted by revised Independence Standards] -NONE ANTICIPATED. Anv services
ierformed in addition to normal audit procedures will be cLar¢ed at standard rates
Audit - X92 700 for the audit unless the scoce of the engagement is changed. the aedstanoe which the Cnu
__ Preparation o[ the tlnancial statements -_SS.ZSO for the preparation of the schedules of property tax recdvables [or
the Towa4 0[ Chapel IBB. Carrboro and Hillsbo h-
10. After completing his audit, the Auditor shall submit to the Governing Board a written report of audit. This report shall
include, at least, Management's Discussion and Analysis, the financial statements of the governmental unit and all of its
component units and notes thereto prepared in accordance with generally accepted accounting principles, combining and
supplementary information requested by the client or required for full disclosure under the law, and the Auditor's opinion on
the material presented. The Auditor shall famish the required number of copies of the report of audit to the Governing Board
as soon as practical after the close of the accounting period.
11. The Auditor shall File with the Local Govemment Commission two copies of the report of audit, including one copy of the
federal Data Collection Form, if a federal single audit is conducted. In addition, if the North Carolina Office of the State
Auditor designates certain programs to be audited u major programs, a one page turnaround document and a representation
letter addressed to the State Auditor shall be submitted to the Local Government Commission. Two copies of the report of
audit should be submitted if the audit is performed only under the provisions of the State Single Audit Implementation Act or
a financial audit is required to be performed in accordance with Govemnent Auditin¢ Standards. Three copies of the audit
should be submitted for Councils of Governments. Two copies of the audit should be submitted for tax levying
Municipalities. Otherwise, one copy shall be submitted. Copies of the report shall be filed with the Local Government
Commission when (or prior to) submitting the invoice for the services rendered. All copies of the report submitted must
boon .The report of audit, as filed with the Secretary of the Local Government Commission, becomes a matter of public
record for inspection and review in the offices of the Secretary by any interested parties. Any subsequent revisions to these
reports must be sent to the Secretary of the Local Government Commission. These audited financial statements ate used in
the prepazation of Official Statements for debt offerings (the auditors' opinion is not included), by municipal bond rating
services, to fulfill secondary mazket disclosure requirements of the Securities and Exchange Commission, and other lawful
purposes of the government, without subsequent consent of the auditor. _ ..
12. Should circumstances disclosed by the audit call for a more detailed investigation by the Auditor than necessary under
ordinary circumstances, the Auditor shall inform the Governing Board in writing of the need for such additional investigation
and the additional compensation required therefore. Upon approval by the Secretary of the Local Government Commission,
this agreement may be varied or changed to include the increased time and/or compensation as may be 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 writing, signed by both
parties, preaudited if necessary, and submitted to the Secretary of the Local Government Commission for approval. No
change shall be effective unless approved by the Secretary of the Local Government Commission, the Governing Board, and
the Auditor.
14. Item IS may be completed by referencing the engagement letter to the contract to incorporate the engagement letter into the
contract. In case of conflict between the terms of the engagement letter and the terms of this contract, the terms of this
contract will control. Engagement letter terms are deemed to be void unless the conflicting terms of this contract are
specifically deleted in Item 21 of this contract. Engagement letters containing indemnification clauses will not be approved
by the Local Government Commission.
15. There are no special provisions except: The attached arrangement letter is an integral part of this contract and should be read in its
entirety when reading this contract.
16. A separate contract should not be made for each division to be audited or report to be submitted. A separate contract must be
executed for each component unit which is a local govemtrxnt and for which a separate audit report is issued.
17. The contract should be executed and submitted in triplicate to the Secretary of the Local Govemrrtent Commission. The
mailing address is 325 North Salisbury Street, Raleigh, North Carolina 27603-1385. The physical address is 4505 Fair
Meadow Lane, Suite 102, Raleigh, North Carolina 27607-6449.
I8. Upon approval, the original contract will be returned to the Governmental Unit, a copy will be forwarded to the Auditor, and
a copy retained by the Secretary of the Local Government Commission. The audit should not be stetted before the contract is
apnroved.
19. There are no other agreements between the parties hereto and no other agreements relative hereto that shall be enforceable
unless entered into in accordance with the procedure set out herein and approved by the Secretary of the Local Government
Commission.
20. If this audit engagement is not subject to Government Auditin¢ Standards, then Item 5 shall be listed as a deleted provision in
Item 22. An explanation must be given for deleting this provision.
21. All of the above paragraphs are understood and shall apply to this engagemen pt for the f Mowing numbered pazagraphs
shall be deleted: (See Item l6)
Firm McGladre &Pullen LLP By f- ~"--``
(Please type or print and title)
By lohn J. Gilberto Partner ~~-DfiLC.~ ! us ~ • /^/_ ~ _ ~~
Ple a t~e) `tD (,~ S
(Signature of Mayor a Chaitperaoa of govern' g board)
(Si lure of thorized audit firm representative) DateT~ ~~(~ 9
Date 3 ~.~ 9/~7 ~ sy tlt A-
(Chairperson of Audi[ ommittee (Please type or print name)
Approved by the Secretary of the Local Government N~(1
Commission as provided in Article 3, Chapter 159 of the
General Statutes or Article 31, Part 3, Chapter 115C of the (Signature of Audi[ Committee Chairperson)
cenaadstatr~#{ARON EDMUNDSON
For the Secretary, Local Government Commission
Date MAY ~'S'~b~
pf unit dope not have an audit committaa,-drie section slrould be
marked "N/A.")
This inshum~t has been prearrdited in the manna required
by The Local Government Bridget and Fiscal Control Act or
by the School Brdget and fiscal Ccetrol Act.
GRAY Nlmph/Reys
Governmental Un' 'nor O aer (Pkase type a print Dame)
Date _ _ (S gpajure~ ~~
(1'aEaudit Certificate tdust be dated)