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HomeMy WebLinkAbout2008-025 Finance - McGladrey & PullenM McGladrey & Pullen • Certified Public Accountants April 23, 2007 The Honorable Manager and Members of the County Commissioners Orange County, North Carolina P.O. Box 8181 Hillsborough, North Carolina 27278 Attention: Mr. Kenneth T. Chavious, Finance Director RECEIVED MAY 14 2007 i.43CAL OOVERNMEN~ ';OMMISSION s -3•~ ~ ~/ c McGladrey 6 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 336.2742519 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 ("County") for the year ending June 30, 2007. We ask that you either confirm or amend this understanding. We will perform an audit of the County's governmental activities, business-type activities, discretely presented component unit, each major fund, and aggregate remaining fund information as of and for the year ending June 30, 2007 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 will also perform the audit of the County as of June 30, 2007 so as to satisfy 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 of North Carolina Single Audit Implementation Act. 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, supplements 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, fraudulent financial reporting, or misappropriation of assets. Accordingly, a material misstatement, whether caused by error, fraudulent financial reporting,, or misappropriation of assets, may remain undetected. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. As a result, an audit is not designed to detect errors or fraud that are immaterial to the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit will provide a reasonable basis for our reports. to addition to our reports 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, 2007. Reports on intemal control related to the financial statements, and major programs. These reports will describe the scope of testing of intemal control and the results of our tests of intemal controls. • McGladrey fi Pullen, LLP is a member firm of RSM International - an affiliation of separate and independent legal entities. Orange County, North Carolina April 23, 2007 Page 2 • 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 costs. Communication with the County's Board relating to the conduct of the audit as required by Govemmenf Auditing Standards. The funds that you have told us are maintained by the County and that are to be included as part of our audit are listed below: General fund Special revenue funds Capital projects funds Proprietary funds Fiduciary funds The federal and state financial 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 listed in Attachment A. The component unit 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. 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 intemal control and performing tests of intemal control consistent with requirements of the standards and circular identified above. Our reports on compliance will address material errors, fraud, 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 or loan program questioned costs of which we become aware, consistent with requirements of the standards and circulars identified above. tf circumstances arise relating to the condition of the County's records, the availability of sufficient, competent evidential matter, 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. As you know, management is responsible for (1) the preparation of the County's financial statements and the schedule of Federal and State awards, (2) establishing and maintaining effective intemal control over financial reporting and safeguarding assets and intemal control over compliance, including monitoring ongoing activities, and for informing us of all significant defciencies in the design or operation of such controls of which it has knowledge (3) properly recording transactions in the records, (4) identifying and ensuring that the County complies with the laws and regulations applicable to its activities, and for informing us about all known material violations of such laws or regulations, (5) 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 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, (6) informing us of its knowledge of any allegations of fraud or suspected fraud affecting the entity Orange County, North Carolina April 23, 2007 • Page 3 received in communications from employees, regulators, or others, (7) making all financial records and related information available to us, (8) for adjusting the financial statements to correct material misstatements, (9) 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 (if any), and (10) report distribution including submitting the reporting package. At the conclusion of our audit, we will request certain written representations from management about the financial statements and matters related thereto. We will also require that management affirm to us 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. The Board is 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. We will also determine that certain matters related to the conduct of the audit are communicated to the Board, including (1) fraud involving senior management and fraud (whether caused by senior management or other employees) that causes a material misstatement of the financial statements, (2) illegal acts that come to our attention (unless they are clearly inconsequential), (3) disagreements with management and other serious difficulties encountered in performing the audit, and (4) various matters related to the entity's accounting policies and financial statements. You have informed us that you intend to prepare a comprehensive annual financial report ("CAFRA) and submit it for evaluation by the Govemment Finance Officers Association's Certificate of Achievement for Excellence in Financial Reporting. Our participation in the preparation 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. • The working papers for this engagement are the property of McGladrey & Pullen, LLP. However, you acknowledge and grant your assent that representatives of the cognizant or oversight agency or their designee, other government audit staffs and the U.S. Govemment 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 five 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. We will provide basic accounting assistance limited to preparing draft financial statements that are based on management's chart of accounts and trial balance and any adjusting, correcting and closing entries that have been approved by management, and preparing draft notes to the financial statements based on information determined and approved by management. We will assist in drafting the County's financial statements and the separate financial statements for the SportsPlex Enterprise Fund, propose adjustments to the trial balance and preparation of schedules of properly tax receivables for the Towns of Chapel Hill, Carrboro and Hillsborough, all of which are reviewed and approved by management. The draft and the adjustments are the responsibility of management. The two overarching principles of the independence standards of the GovemmenfAuditing 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: 7. Mr. Ken T. Chavious, Finance Director, will be accountable and responsible for overseeing the draft of the . County's financial statements and the draft separate financial statements for the SportsPlex Enterprise Fund, propose adjustments to the trial balance and preparation of schedules of property tax receivables for the Towns of Chapel Hill, Carrboro and Hillsborough. Orange County, North Carolina April 23, 2007 • Page 4 2. The County will establish and monitor the performance of the draft of the County's financial statements and the draft separate financial statements for the SportsPlex Enterprise Fund, propose adjustments to the trial balance and preparafion of schedules of property tax receivables for the Towns of Chapel Hill, Carrboro and Hillsborough to ensure that they meet managements objectives. 3. The County will make any decisions that involve management functions related to the draft of the County's financial statements and the draft separate financial statements for the SportsPlex Enterprise Fund, propose adjustments to the trial balance 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. 4. The County will evaluate the adequacy of services performed and any findings that result. During the course of our engagement, we may accumulate records containing data which should be reflected in your books and records. The County will determine that all such data, if necessary, will be so reflected. Accordingly, the County will not expect us to maintain copies of such records in our possession. From time-to-time and depending upon the circumstances, we may use third-parry 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-parry service providers and we are satisfied that they have appropriate procedures in place to prevent the unauthorized release of your confidential information to others. The assistance to be supplied by County personnel, including the preparation of schedules and analyses of • accounts, will be discussed and coordinated with Mr. Ken T. Chavious, Finance Director. The timely completion of this work is an essential condition to our completion of the audit and issuance of our audit report. Our fees are based on the time required by the individuals assigned to the engagement, plus direct expenses. Interim billings will be submitted as work progresses and as expenses are incurred. We will submit our final bill for these services promptly upon delivering the reports. Our fee for the services described in this letter will not exceed $69,000 for the County audit, $5,000 for the SportsPlex audit and $4,500 for the preparation of schedules of property tax receivables for the Towns of Chapel Hill, Carrboro and Hillsborough. If the assistance to which the County has agreed to furnish is not provided, or unexpected conditions are encountered, we will discuss the situation with you before proceeding, if agreed to by the County by an amendment to the Contract. Any services performed in addition to normal audit procedures will be charged at standard rates less 20%. All other provisions of this letter will survive any fee adjustment. Any additional major programs above four (4) major programs will be billed at $4,000 each. Our professional standards require that we perform certain additional procedures, on current and previous years engagements, whenever a partner or professional employee leaves the firm and is subsequently employed by or associated with a client. Accordingly, the County agrees it will compensate McGladrey & Pullen, LLP as a result of the County's employment of a partner or professional employee of McGladrey & 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 documents or our personnel as witnesses with respect to our engagements for the County, the County will, so long as we are not a parry to the proceeding in which the information is sought, reimburse us for our professional time and expenses, provided that acceptable documentation is provided to the County, the County will pay reasonable fees and expenses of our counsel, incurred in responding to such requests provided that sufficient reasonable documentation is provided to the County. • Orange County, North Carolina April 23, 2007 • Page 5 Professional standards and our firm policies require that we perform certain additional procedures whenever our reports are included, or we are named as accountants, auditors, or'experts" in a document used in a public or private offering of equity or debt securities. Accordingly, the County agrees that it will not include our reports, or otherwise make reference to us, in any public or private securities offering without first obtaining our consent. Any request to consent is also a matter for which separate arrangements will be necessary. After obtaining our consent, the County also agrees to provide us with printer's proofs or masters of such offering documents for our review and approval before printing and with a copy of the final reproduced material for our approval before it is distributed. In the event our auditor/client relationship has been terminated when the County seeks such consent, we will be under no obligation to grant such consent or approval. This letter constitutes the complete and exclusive statement of agreement between McGladrey & Pullen, LLP and the County, superseding all proposals oral or written and all other communication, with respect to the terms of the engagement between the parties. In accordance with GovemmentAuditing Standards a copy of our most recent peer review report has been provided to you in Section 1 of our proposal for audit services, dated March 28, 2007, for your information. If this letter defines the arrangements as the County understands them, please sign the enclosed copy and return it to us. We appreciate your business.' McGladrey & Pullen, LLP • ohn J. Gilberto, Partner Enclosure Confirmed on behalf of the addressee: County Manager This instrument has been preaudited in the manner required by the Local Government Budget and Fiscal Control Act. ~~ Finance Director • Orange County, North Carolina April 23, 2007 • Page 6 ATTACHMENT A CFDA Numbed Gran[ Na®ber lredeTat 6rrraer/3'rvBraaa'17da ~`Oea~r tar Haderod ~ [~9ervtc PYsgraes• A~ Ae6oa RsSOed$enter'Valmreaer ProBesm 90.[i0R U.6. Deea~an~lloub3 aad L.. De~arnrrrr DPeae[ P Lower tvkooca fiowtaH 1udalesoe $eCl10p a Yourbas 18.IR Home ~vaibaear Pa~ererddp 35rograre 14.2?s Caopeeauve Pala lfoae6ra A:sistmrx Pmgam 18.801 ?euI U:S. Dcparmraat odHoumrg wd UrUea De+elopiarae Local Law Fafocaemeal Bock (Lear 16.592 CUPS Idt~ F6.7I0 CGPS b Ssbool 16.710 CGr'S Dtivrdrae Prograeo Gau 16.710 QREA.'t. Prrrpw~ Prmds 16.737 Taal us. Depattinerr e83eadoa U_ 3. QyylafHemeraedSecurirv L•+ssod-7'hro9ah 1si.C. r7kpar~neY ud'CrLare Control and PoLGc Srfety Eaaeegency hfine0neeal Parrbemeaa Gaastt 97.082 Toml U.S. of Homeland Secuiry [JS_ DsnroirestofHeotd~y~,Hnrnara Sarin. Parud•Tbeau~r 11.C. DepmhaeW mf Haaith end llarner Sarvlea or Tt9anak J Couaw[ of Govcwmreau m Admoditvdoa prrChildma aad PanWec t)Ivlslaa arSaclal a~t~ Sodal Scrrieas Hloda Gtaal 93.667 lrr Haan Scrvkcs 93.667 Adalt Daypee 93.667' TAlBF - Dommdo Ylnfaeoa 93.55a TAMP-Tae,FaeletCmr 93.351 TAMP-VYoalt F7neAdrabe 93ssa TANFF - W4fft PJnr SteNer ~ 9xsst TA1+EF. Peymeoae J! PeaelSes 93.SSa 7A1iP-19P' 93.SSa AFDC Paymearsll: Pduldar gt.566 Adsk Cars Home ibae Mae~emearc 93.77a htedledd Eeponrisa 93.771 hte~ed Aeeiwax Amsiaieaalion 93.771 hledfeal 7reoyrorrubn Admbn(aealiaa 93.771 MoHed 'Itanspartrsiaa Sersieea 73.771 FrLil~~rt~ Adoanna Gloater lY-E CPS 93.651 N•E Fomer (3te8~Tne 99~ia N•E waivo 93,641 N•6 Admin Coamity Paid m CCi 43.656 tW"-E Fosan Care o3,GS/ Faster Gera 93.631 LYS 93.651 N•E PoalerC'are b Purxm 93.6dtti N•l3 war,~r FmterGae 93.64s lv-E GPrfenal Adaptlae 93,649 CWfiAdapt Gserdle6ship 93.659 1V•EAdaptSo'bsldy~ Vendor 93.659 Tavel Poetr Core and Adepwt C/ugot • Orange County, North Carolina April 23, 2007 • Page 7 dins faearvenaar n l.t-e+I ine:ariea cif` Adieeln Aarhtrme PaJmeat iidgaa Ainisteimr Fayaenr Adicleuem 8eereating Permuneircy Planaiag . 3kg Penriemeeeey Plmaritti -Spec CWS Adapiian See6r4dy and Vendor NC Haulele Ckaict fodkpendentLerlag; !.J>;t1CS iV-'d AdeetiebtrwlFon IY-I? 004at Ems- FAC (V•D OJf+sM Fees-Feib~at AdiniAirtratiirn tm ApaQ Di»rime of Agiai and Adall $emitxs Spetlet Propiunr ~ dk At6i6~ 7felt UI B CrQarem fac Supportive Servieer mid SeairtrCesieea U3 I]ept of iiemlde and Nemmw Ssrvieas Aelirtiairaradwt far Children raid Femme Raasw4ttoou~ Nie N,C. Dope etf Aemlvh twd Jiaman Services Sohridianed Child Caec {Dote ~ Child Cart Oeveli~pmcae Ftmd Clustttr. 6lvfslon af5aclal Strvicer: Child Caner Deraiopomnt Fund-Adurirw~lredun Dtvleleae of ChOd Uavaietpmipst Sttflisldl>oed CiUlel. Care Ciiutuet: CMId Cara etrd ibeatlapeiaeuet Faud -- l~~,.,,,y~n~ersy tZiiG4 Can and ikvahpenaw Faud -- i"""'°""l Cbitd Care eaed t7evnlapriau ~ - Mstedb Tae+i ChAd Cme Fund Clieaear Saaial Servitet tllack (iraad Trmp;anay Aenistemce far?Ymdy Femei6es Sovemt Suet Sewn: ApPmpri+atioec TANF-htOE Taal Smhsidized CJiik! Cate Clesztes Dlririon td' Meiiiaal Arskmnce Direr=f Benefit Pa}mtaar. Medical Aesitarnx Pralrtim l3iviseir of Fublk iioaldt 1'stjeexfiiceeia mdCdopenttlirec.4greeaieais ~r Tubenuibblti Coatmi Fwpy~is t~mlly Clmu'ng 1^auauiufrew Praeteiaihiid bo Comiey Fenrdireg Dlo~erorinin Giiint Temporary Asaismsee &o Ntuiiy Fam5les HI V gem Ftmdr-5+iaielfy Tram Dirtrearr Ceii>>wuedeahle biseare f~tpraslan liadlot Sviss,r4de }Gtnhh Froraatioir trogmm ddatemol and CIrBd [Ienlde Servicea Block Owu TeNI Diaisiori of Pr64a Nwltli foul U.S. C+apimuncnr of Heoleh vied Hrman Serrixs U.l£ Regnreeranc r~{ J~S~g Paetsd-Througfi N_C.. Cleperawent of C1~ane CoMml a4d Pubiic Sa&tY • Crfealrnl Justice P.vaiasielo Pnaarmtr Total U.S. Ctpeumiemt of lusiiex CFDA 34imLtA GreeaJOnn6er 43.565 9i3.A66 93.545 9]_369 97.645 41.645 47.W5 73 6aS 43.767 93.674 43.563 99.563 49.583 99.OL4 93596 43.375 4]396 43596 99.667 97.538 ?CX?RC KJC`D+: XX}(Ji 93.7:8 43.] l6 93.217 43,366 93.211 43.538 43.94'0 93.941 4].994 16574 Orange County, North Carolina April 23, 2007 Page 8 aemeNuael Diw¢t ~~ soil Ann wsaer cm~mia 10.902 Flom eod Rm~ Lads ProlecfCOU troitibn 10,913 Pweed-T1ra~r N.C. Depeoerreaa aFRedeb ssd Hmoa Servicm D[visbeof of SedeE Seesiaea Faed $eentu Adml~ 10.56[ ZNterY Benefit p"~ ~~ 10.Sfi1 Toeal tJ.S. DeyuelAat ofAgr~ou6ree Pncad-T4oaF6 N.C bepmmmdc a[Tleompormdar Oo+aoore S~ 20.f00 Taei ULS. Da~e~afTean~aeae6ew Saner Gronlmil'toiprom Tills l1.C. Depumraat of Hnkth aad Hmnea Ssrvices Division ofSxid 5erviaec AFDC lneent<Peng lnar6rity TANF 6rccnui~ror'Itne~ily SmeoC'oumy $peoial Assiepoae C7arrieillary Cen: Pymu FI'C m gist cedar Same Fewer lioue Saioe A;d m Ceendes Toml Dh3sioa oFSoetiel seavdus eMifce otJeoraelle 1mAfee cnenm~ Hesod A1eee.edbes 36920 o ~~ Geote.! com~dorete n>seo~ ramie derilopoonteF Endar~n Csmen Rhdc ELtidnctkWHonld~ Frasodtw TS Iledknt Sen~ices Toad lYirieim~ of PvbNc Ncddi 7btal N.C. Depmt+neru dFlmKhen) H~ 9erviom N.C. 17ennruocnratTranranrudoo Rrral Opradn3 Aeedwmoe Pnegnm Clomar Humeri 5neyfeee 7Ysmpaeulian AdeimQemeert Prapsm Bard Cap6a1 m Tagil N C Depe a~t'7ao N.C..Zlmorlment ot~lkesaaces Sale Arez Gremt OO1P410 Division of Seeee G`6rmy Pawed-'Cluwgb Hywaiieecixs Repona! 4ibray Seale Aid 10• Patbfia Lsbrvies Told N.G. naimm~eor of Csdsnra) Rermsees N.C. Ueamimetq W'Crime Caetrol md~y 8ioeersaeims Same Flails 5~645i: 45 i4d$ t7 N.C. Dhdslae nl"itksal0s Senirie Oou:ssaeism Seine Esosas ' PuiBe Sexed Hd~ Cey3td Pond T+~TAL E7iYETldFRIRES OiF FEDERAL AND (5TAT8 AWARDS