HomeMy WebLinkAboutAgenda - 05-16-2006-5iORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: May 16, 2006
Action Age ~ a a
Item No. -L
SUBJECT: Audit Contract for the June 30, 2006 Fiscal Year
DEPARTMENT: Finance PUBLIC HEARING: (Y/N) No
ATTACHMENT(S):
Contracts and Engagement Letters
INFORMATION CONTACT:
Ken Chavious, 919-245-2453
PURPOSE: To consider awarding contracts to Cherry, Bekaert & Holland, Certified Public
Accountants, for the provision of audit services for the fiscal year ending June 30, 2006.
BACKGROUND: "The Local Government Budget and Fiscal Control Act" requires all units of
government in the State to undergo an annual audit. During the spring of 2001, County staff
pursued the most recent request for proposal (RFP) process for financial audit services, Staff
recommended, and the Board approved, the proposal submitted by Cherry, Bekaert & Holland,
Certified Public Accounts. The RFP stated that the County would contract with the successful
firm for a period of three to five years. The 2005 audit marked the fifth year of working with this
firm.
Staff has been very pleased with the work performed on the audits for the past fiscal years.
The auditors performed their work in professional and timely manner and worked extremely well
with staff in the completion of the audit and production of the Comprehensive Annual Financial
Report (CAFR). In addition, a significant amount of service and advice has been provided
outside of the audit process aver the years, The overall audit casts paid by the County for the
past five years have been very competitive. The cost proposed for the 2006 audit remain
competitive and comparable to governments similar in size to the County. Cherry, Bekaert &
Holland has proposed a contract for the 2006 audit that reflects an increase of 3,3% over the
previous year, This increase is mainly the result of additional audit work required in the area of
compliance auditing or the "single audit" related to Federal and State grants and increased
travel costs.
In addition to the County's required audit, staff proposes to engage the firm to perform an audit
of the SportsPlex in accordance with the management agreement approved by the Board in
December 2005, Cherry, Bekaert & Holland has met with SportsPlex management and have
proposed to perform this audit at a cost of $17,500. The proposed amount is actually less than
the amount paid for the previous audit of the facility's financial operations ($20,000), While this
audit will be conducted in concert with the County's audit, separate audit reports (including
opinion letters) will be issued,
In light of excellent prior service from this auditing firm, staff recommend that the County
continue the relationship with Cherry Bekaert & Holland for the 2006 fiscal year audit and re-
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evaluate the contract next spring with the possibility of pursuing a request for proposal process
at that time.
FINANCIAL IMPACT: The fee prapased for 2006 is $76,500 for the County audit, including
single audit work. Funds to cover the audit casts for the County will be included in the 2006-
2007 Manager's Recommended Budget
As noted above, the fee proposed for the audit of the SportsPlex is $17,500. Funds to cover
the SportsPlex audit are included in the proposed 2006-07 operating budget for the facility, as
provided for in the Management Agreement.
RECOMMENDATION(S): The Manager recommends that the Board approve both audit
contracts with Cherry, Bekaert & Holland for 2006 audit services, and authorize the Chair to
sign them.
Cherry, ~ek~erl; & ~d®lflaa~d, L.~,.P
The Firm of Choice.
April 3, 2006
Mr. Kenneth T. Chavious, Finance Director
Orange County
208 South Cameron Street
Hillsborough, North Carolina 27278
Dear Ken:
3
www.ebh.cem
2650 Village Drive-Suite 207
Fayettevlile. North Carolina 28304
phone 970 463.7731
faz 910 323.0672
This letter of arrangement between Orange County, North Carolina (the "County") and Cherry,
Bekaert & Holland, L,L.P. sets forth the nature and scope of the services we will provide, the
County's required involvement and assistance in support of our services, the related fee
arrangements and other terms and conditions designed to assure that our professional services are
performed to achieve the mutually agreed upon objectives of the County
SUMMARY OF SERVICES
We will audit the financial statements of the governmental activities, the business-type activities,
each major fund, and the aggregate remaining fund information, which collectively comprise the
basic financial statements of the County as of and for the year ended June 30, 2006.
We will also audit the schedules of property taxes receivable for the Towns of Hillsborough, Chapel
Hill, and Garrboro as of June 30, 2006, and the related schedules of 2005 tax levy and collections
for the years then ended.
Our audit will be conducted in accordance with auditing standards generally accepted in the United
States of America; GovemmentAuditing Standards, issued bythe Comptroller General of the United
States; the Single Audit Act Amendments of 1996; the provisions of OMB Circular A-133; and the
State Single Audit Implementation Act, and will include tests of accounting records, a determination
of major programs in accordance with Circular A-133, the State Single Audit Implementation Act,
and other procedures as deemed necessary to enable us to express such an opinion and to render
the required reports.. The objective of an audit is the expression of our opinion concerning whether
the basic financial statements are fairly presented, in all material respects, in conformity with
accounting principles generally accepted in the United States of America.
In connection with our audit, we will report on the fairness of presentation of the schedules of federal
and State financial assistance in relation to the financial statements taken as a whole. We will also
perform tests of compliance as required by GovemmentAuditing Standards, the provisions of OMB
Circular A-133, the Audit Manual for Local Governmental Units and Recipients of Grant Funds, and
the Audit Manual for Governmental Auditors in North Carolina, and issue our reports thereon,.
If any of our opinions resulting from the procedures described above are other than unqualified, we
will fully discuss the reasons with you in advance.
~AKER~TILLY
INTERNATIONAL
The reports on internal control and compliance will each include a statement that the report is A
intended solely for the information and use of the audit committee, management, specific legislative "T
or regulatory bodies, federal and State awarding agencies, and if applicable, pass-through entities
and is not intended to be and should not be used by anyone other than these specified parties,
As part of our engagement, we will prepare the financial statements and note disclosures from
individual fund trial balances that you will provide. However, management is responsible for the
financial statements and note disclosures, In your representation to us, you will be asked to
acknowledge our role in this regard, and your review, approval, and responsibility for the financial
statements and note disclosures. Further, you are responsible for designating a qualified
management-level individual to be responsible and accountable for overseeing these services,
Also, as part of our engagement, we will assist the County in preparing the schedule of federal and
State financial assistance (the "schedule") for the year ended June 30, 2006, This schedule is
required to be included as part of the basic financial statements for the year ending June 30, 2006,
in accordance with the provisions of OMB CircularA-133, "Audits of States, Local Governments and
Non-Profit Organizations;" and the State Single Audit Implementation Act. However, management is
responsible for the schedule. In your representation to us, you will be asked to acknowledge our role
in this regard, and your review, approval, and responsibility for the schedule, Further, you are
responsible for designating a qualified management-level individual to be responsible and
accountable for overseeing these services,
Any additional services that you may request, and that we agree to provide, will be the subject of
separate written arrangements. Should the entity wish to include or incorporate by reference these
financial statements and our report thereon into any official statement or any other document related
to the offering of debt securities at some future date, we would consider our consent to the inclusion
of our report into another such document at that time. However, we are required by auditing
standards generally accepted in the United States of America to perform certain procedures before
we can give our permission as to the inclusion of our report into another such document. You agree
that you will not include or incorporate by reference these financial statements and our report
thereon into any other document without our prior written consent,
I will be responsible for assuring the overall quality, value, and timeliness of our services to you, and
will lead the engagement..
YOUR EXPECTATIONS
As part of our planning process, we will discuss with you your expectations of Cherry, Bekaert &
Holland, L.L.P., changes that occurred during the year, your views on risks facing you, any
relationship issues with Cherry, Bekaert & Holland, L.L..P„ and specific engagement arrangements
and timing, Our service plan, which includes our audit plan, is designed to provide a foundation for
an effective, efficient, and quality-focused approach to accomplish the engagement objectives ahd
to meet or exceed your expectations. Ourservice plan will be reviewed with you periodically and will
serve as a benchmark against which you will be able to measure our performance.
TERMS AND CONDITIONS SUPPORTING FEE
As a result of our planning process, the County and Cherry, Bekaert & Holland, L.L.P. have agreed
to a fee, subject to the following conditions.
To facilitate meeting our mutual objectives, the County will provide in a timely manner audit
schedules and supporting information, including timely communication of all significant accounting
and financial reporting matters, as well as working space and clerical assistance as mutually agreed
upon and as is normal and reasonable in the circumstances..
When and if for any reason the County is unable to provide such schedules, information and
assistance, Cherry, Bekaert & Holland, L.L.P, and the County will mutually revise the fee to reflect 5
additional services, if any, required of us to achieve these objectives.
In providing our services, we will consult with the County with respect to matters of accounting,
financial reporting, or other significant business issues, Accordingly, time necessary to effect a
reasonable amount of such consultation is reflected in our fee.. However, should a matter require
research, consultation, or audit work beyond that amount, Cherry, Bekaert & Holland, L.L,P. and the
County will agree to an appropriate revision in services and fee,
Except for any changes in fees, which may result from the circumstances described above, ourfees
will be limited to those set forth below.
FEE
Financial Audit -Our fees for these services will be based upon our customary billing practices at
the time of the engagement. Bills for services will be rendered as work progresses and are due
within 15 days from invoice date. A service charge will be added to past due accounts equal to 1 %:%
per month (18% annual rate) on the previous month's balance less payments received during the
month, with a minimum charge of $2.00 per month, The fee for our audit as described in this letter
will not exceed the amounts scheduled below. 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 newfee
estimate before we incur the additional costs. Any modification to the fee shall be in writing and
signed by both parties. You agree to pay all costs of collection (including reasonable attorneys' fees)
that we may incur in connection with the collection of unpaid invoices.
Our fees for the above outlined services will not exceed the amounts as presented below.
Service
Fees Not
to Exceed
Financial and Compliance Audit $63,500
Preparation of the financial statements and
note disclosures 10,000
Assistance in preparing the schedule of federal
and State financial assistance 3,000
Total
$76 500
The fees set forth are based on auditing standards effective as ofthe date of this engagement letter
and do not contemplate research and/or implementation of FIN46R, Consolidation of Variable
Interest Entities, if applicable. If new auditing standards are issued and are effective forthe period
under audit or it is determined the County must implement the provisions of FIN46R, either of which
may require additional audit procedures that were not known at the date of this engagement letter,
we will estimate the impact of any new such standard on the nature, timing and extent of our
planned audit procedures and will communicate with you concerning the scope of the additional
procedures and the estimated fees.
Any additional accounting matters which maybe necessary to complete the accounting for the year
ended June 30, 2006 will be performed in addition to the audit services and billed at our standard
billing rates.
LIMITATIONS OF THE AUDITING PROCESS
Our audit will include procedures designed to obtain reasonable assurance of detecting 6
misstatements due to errors or fraud that are material to the financial statements, Absoltate
assurance is not attainable because of the nature of audit evidence and the characteristics of fraud..
For example, audits pertormed in accordance with GAAS are based on the concept of selective
testing of the data being examined and are, therefore, subject to the limitation that material
misstatements due to errors or fraud, if they exist, may not be detected, Also, an audit is not
designed to detect matters that are immaterial to the financial statements. In addition, an audit
conducted in accordance with GAAS does not include procedures specifically designed to detect
illegal acts having an indirect effect (e.g., violations of fraud and abuse statutes that result in fines or
penalties being imposed on the County) on the financial statements.
As required by the Single Audit Act Amendments of 1996, OMB CircularA-133, and the State Single
Audit Implementation Act, our audit will include tests of transactions related to major federal and
State award programs for compliance with applicable laws and regulations and the provisions of
contracts and grant agreements, Because an audit is designed to provide reasonable, but not
absolute assurance and because we will not perform a detailed examination of all transactions,
there is a risk that material errors, fraud, other illegal acts, or noncompliance may exist and not be
detected by us. In addition, an audit is not designed to detect immaterial errors, fraud, or other illegal
acts or illegal acts that do not have a direct effect on the basic financial statements or to major
programs. It should be recognized that our audit generally provides no assurance that illegal acts will
be detected, and only reasonable assurance that illegal acts having a direct and material effect on
the determination of financial statement amounts will be detected, However, we will inform you with
respect to material errors and fraud, or illegal acts that come to our attention during the course of
our audit. We will include such matters in the reports as required for a Single Audit,
If, for any reason, we are unable to complete the audit, or are unable to form or have not formed an
opinion on the basic financial statements, we may decline to express an opinion or decline to issue a
report as a result of the engagement.. In this case, our firm will inform in writing the parties to the
contract..
RESPONSIBILITIES AS TO INTERNAL CONTROLS
As a part of our audit, we will considerthe County's internal control structure, as required by auditing
standards generally accepted in the United States of America and GovemmentAuditing Standards,
sufficient to plan the audit and to determine the nature, timing, and extent of auditing procedures
necessary for expressing our opinion concerning the basic financial statements, You recognize that
the basic financial statements and the establishment and maintenance of an effective intemal
control over financial reporting are the responsibility of management, You also recognize that
management is responsible for identifying and ensuring that the County complies with the laws and
regulations applicable to its activities. Appropriate supervisory review procedures are necessary to
provide reasonable assurance that adopted policies and prescribed procedures are adhered to and
to identify enors, fraud, or illegal acts. An audit is not designed to provide assurance on internal
control. As part of our consideration of the County's internal control structure, however, we will
inform you of reportable conditions and other matters that come to our attention that represent
significant deficiencies in the design or operation of the internal control structure, if any, as required
by OMB Circular A-133 and the State Single Audit Implementation Act.
As required by OMB Circular A-133 and the State Single Audit Implementation Act, we will perform
tests of controls to evaluate the effectiveness of the design and operation of controls that we
consider relevant to preventing or detecting material noncompliance with compliance requirements,
applicable to each major federal and State award program,.
However, our tests will be less in scope than would be necessary to render an opinion on those
controls and, accordingly, no opinion will be expressed in our report on internal control issued -~
pursuantto OMB Circular A-133 and the State Single Audit Implementation Act.
You are also responsible forthe design and implementation of programs and controls to prevent and
detect fraud, and for informing us about all known or suspected fraud affecting the County involving
(a) management, (b) employees who have significant roles in internal control, and (c) others where
the fraud could have a material effect on the financial statements. You are also responsible for
informing us of your knowledge of any allegations of fraud or suspected fraud affecting the County
received in communications from employees, former employees, regulators, or others,.
RESPONSIBILITIES AS TO COMPLIANCE
Our audit will be conducted in accordance with the standards referred to in the section Summary of
Services. As part of obtaining reasonable assurance about whether the basic financial statements
are free of material misstatement, we will perform tests of the County's compliance with applicable
laws and regulations and the provisions of contracts and agreements, including grant agreements.
1-lowever, the objective of those procedures will not be to provide an opinion on overall compliance
and we will not express such an opinion in our report on compliance issued pursuantto Government
Auditing Standards..
OMB Circular A-133 and the State Single Audit Implementation Act require that we also plan and
perform the audit to obtain reasonable assurance about whether the auditee has complied with
applicable laws and regulations and the provisions of contracts and grant agreements applicable to
major programs. Our procedures will consist of the applicable procedures described in the OMB
Circular A-133 Compliance Supplement and the Audit Manual for Governmental Auditors in North
Carolina for the types of compliance requirements that could have a direct and material effect of
each of the County's major programs.. The purpose of those procedures will be to express an
opinion on the County's compliance with requirements applicable to major programs in our report on
compliance issued pursuantto OMB Circular A-133 and the State Single Audit Implementation Act.
REPRESENTATION FROM MANAGEMENT
Management is responsible for the fair presentation of the basic financial statements inconformity
with accounting principles generally accepted in the United States of America, for making all
financial records and related information available to us, and for identifying and ensuring that the
County complies with the laws and regulations applicable to its activities. Management is also
responsible for adjusting the financial statements to correct material misstatements. Additionally, as
required by OM6 CircularA-133 and the State Single Audit Implementation Act, it is management's
responsibility to follow up and take corrective action on prior audit findings and to prepare a
summary schedule of prior audit findings and a corrective action plan. The summary schedule of
prior audit findings and the corrective action plan should be made available to us during the course
of our engagement. Management, at the conclusion of the engagement, will provide to us a
representation letter that, among other things, addresses these matters and confirms certain
representations made during the audit, including, to the best of their knowledge and belief, the
absence of fraud involving management or those employees who have significant roles in the
County's internal control, or others where it could have a material effect on the basic financial
statements,. The representation letter will also affirm to us that management believes that the effects
of any uncorrected misstatements aggregated pertaining to the current yearfinancial statements are
immaterial, both individually and in the aggregate, to the financial statements taken as a whole..
Cherry, Bekaert & Holland, L.L.P. will rely on the County's management providing these
representations to us, both in the planning and performance of the audit, and in considering the fees
that we will charge to perform the audit.
COMMUNICATIONS
At the conclusion of the engagement, we will provide management, in a mutually agreeable format, 8
our recommendations designed to help the County make improvements in its internal control
structure and operations, and other matters that may come to our attention (see "Responsibilities as
to Internal Controls" above).
As part of this engagement we will ensure that certain additional matters are communicated to the
appropriate members of management and the Board of County Commissioners. Such matters
include (1) our responsibility Lander auditing standards generally accepted in the United States of
America; (2) the initial selection of and changes in significant accounting policies and their
application; (3) our independence with respect to the County; (4) the process used by management
in formulating particularly sensitive accounting estimates and the basis for our conclusion regarding
the reasonableness of those estimates; (5) audit adjustments that could, in our judgment, either
individually or in the aggregate be significant to the financial statements or our report; (6) any
disagreements with management conceming a financial accounting, reporting or auditing matterthat
could be significant to the financial statements; (7) our views about matters that were the subject of
management's consultation with other accountants about auditing and accounting matters; (8) major
issues that were discussed with management in connection with the retention of our services,
including, among other matters, any discussions regarding the application of accounting principles
and auditing standards; and (9) serious difficulties that we encountered in dealing with management
related to the pertormance of the audit.
GovemmentAuditing Standards require that we provide you with a copy of our most recent quality
control review report. Our most recent peer review report accompanies this letter,
ACCESS TO WORKING PAPERS
The working papers for the engagement are the property of Cherry, Bekaert & Holland, L.L.P. and
constittate confidential information. Except as discussed below, any requests for access to our
working papers will be discussed with you prior to making them available to requesting parties.
The workpapers for this engagement will be retained for a minimum of three years afterthe date the
auditors' report is issued or for any additional period requested by the County. Ifwe are aware that a
federal or State awarding agency, pass-through entity, or auditee is contesting an audit finding, we
will contact the party(ies) contesting the audit finding for guidance prior to destroying the
workpapers.
Our Firm, as well as all other major accotnting firms, participates in a "peer review" program,
covering our audit and accounting practices, This program requires that once every three years we
subject our quality assurance practices to an examination by another accounting firm. As part of the
process, the other firm will review a sample of our work. It is possible that the work we pertorm for
you may be selected by the other firm for their review, If it is, they are bound by professional
standards to keep all information confidential. If you object to having the work we do for you
reviewed by our peer reviewer, please notify us in writing..
USE OF THIRD PARTY SERVICE PROVIDERS
The firm may from time to time, and depending on the circumstances, use third-party service
providers in serving your account. We may share confidential information about you with these
service providers, but remain committed to maintaining the confidentiality and security of our
information,.
Accordingly, we maintain internal policies, procedures and safeguards to protect the confidentiality
of your personal information. In addition, we will secure confidentiality agreements with all service q
providers to maintain the confidentiality of your information and we will take reasonable precautions
to determine that they have appropriate procedures in place to prevent the unauthorized release of
your confidential information to others. In the event that we are unable to secure an appropriate
confidentiality agreement, you will be asked to provide your consent prior to the sharing of your
confidential information with the third-party service provider, Furthermore, the firm will remain
responsible for the work provided by any such third-party service providers.
SUBPOENAS
In the event we are requested or authorized by you or required by government regulation, subpoena,
or other legal process to produce outworking papers or our personnel as witnesses with respect to
our engagement for you, you will, so long as we are not a party to the proceeding in which the
information is sought, reimburse us for our professional time and expense, as well as the fees and
expenses of our counsel, incurred in responding to such a request.
OTHER MATTERS
If any dispute, controversy or claim arises in connection with the performance or breach of this
agreement, either party may, on written notice to the other party, request that the matter be
mediated, Such mediation would be conducted by a mediator appointed by and pursuantto the Hales
of the American Arbitration Association (AAA) or such other neutral facilitator acceptable to both
parties. Both parties would exert their best efforts to discuss with each other in good faith their
respective positions in an attempt to finally resolve such dispute, controversy, or claim.
Client and accountant both agree that any dispute overfees charged by the accountant to the client
will be submitted for resolution by arbitration in accordance with the Rules for Professional
Accounting and Related Services Disputes of the AAA. Any award rendered by the Arbitrator
pursuant to this Agreement may be filed and entered and shall be enforceable in the Superior Court
of the County in which the arbitration proceeds, In agreeing to arbitration, we both acknowledge that,
in event of a dispute over fees charged by the accountant, each of us is giving up the right to have
the dispute decided in a court of law before a judge orjury and instead we are accepting the use of
arbitration for resolution.
The prevailing party shall be entitled to an award of reasonable attorneys' fees and costs incurred in
connection with the arbitration of the dispute in an amount to be determined by the arbitrator.
If the foregoing is in accordance with your understanding, please sign this letter in the space
provided and return it to us. If you have any questions, please feel free to give me a call at 919-782-
1040.
Very truly yours,
CHERRY, BEKAERT & HOLLAND, L.L.P.
Eddie T. Burk~~CPA
Partner
Enclosure
RESPONSE:
This letter correctly sets forth the understanding of the County.
By:_,,
teceas (nee,. vln_obs) CONTRACT TO AUDIT ACCOUNTS 1'
Fllctn Tdpilnle, nP Orenge County, North Carolina ff
Govcmmmul Unit
On this 3rd Joy of Aj)G) ?006 cherry, geWen & flviland, L1P.,
Audikr
2626 Glenwood Avenue, Salle 3G0, Raleigh, North Carolina 276D8
Moiling Address
6eminnner mtcrted to as
dm Audiirr, and the County Commissioners of Orange County , hcreinnfrermfcrted
Gvveming BovN Cmvcmmenki Vnil
to as the Govetnmentnl Dni4 agree ns fallmvr.
1, The Auditor shell nuJit vii stvtvmrn6end Jlsdasums«qui«dbySroemlly asepleJ nttounting principles end vddillonoi «quirtd
legal atatemenk end disdowms of all fords vnJlor divisiom of tlm Gvvemrt«mnl Unil for Um pWW beginninS
lul 1 , agg5 and ending 3m¢m ,zoos . 71s, monngemenl's discussimt and analysis,
non-major~ombining, and indiviJuol fund aklctneNS end sdu:dulcs sbvil 6t wbjeded Io the audidn6 pmccduns oPPIiW W the
nuJit afthe bask finandal sktemcnls ovd m opinion will be rendeml In mlvdon m (as vppliroble} the govemmenml activities, the
business-type aWVi6es, the nSgregme Jkcrcelly prcsenled evmponrnt units, evch moj¢r govemmevkl end enterprise fund, and the
aBgtcgole mrtmining fund infvrtnotion (nomm~jvr Savcmmmt and rnlerpdse funds, the Intcmnl service funJ type, onJ the fiJurinry
fund types).
3 At ¢ minimum, the Auditor vholl conduct hk audit end ttnder his « port in ¢aordance rvilb SmemilY uttepteJ vuditkS smnJnNs.
Tim Auditor shall preform the audit in nccaNanm will G v mment M 1'tina SlnndaNs i(rcqui«d by the Skte Single Audit
Impkmalmi¢n Act, as roditicd in GS. 159-3q.. If rcqu'uvU by GMe Cirrolar A-133 aW the Stole Single Audit Impicmemotian
Ad, the audllorsbvll perform o Single Audit
3 rocmSn oar rotW vecovrntin rrind i~ (GAAPj, aril a smlermrnts foil m include all disdasurvs mquixted by GAAPU k ntaM
g Y cP g P P
Jepmtu« fmm GAAP in the 6pvro belmr.
None
q., Tlds anmrver mnranplurer mr unquurUeJ optnion being rvnr/tred 7Lc audit shall indwie wch trsls oFlfie oaoundng «eomis and
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hove no scope limikilvns utepn NSA.
5. ff Wis vudil eomSemrnt is subject m We stvndarsls for vudil ns delinW In G ,,,mt rev I'i nn SmndanLS, issued by Um
Cvmpwlla Gmeml of the Unikd Smtes, Wro the Auditor wnrtonts by accepting Uris rngnSemrnt lhvl he/she has met We
mquirements for ¢ peer «view end cvndnumg Wumiion vs aperifiW in G t AuA"n ~ gkWnNs. The Audikr vSrea tv
pmvidc o ropy of Umir mori mint peer «vimv «pan to We Gavemmenkl Unit out the Seemtnry aC the Laml Govemmml
Commission IIdarLn Wv exeadan of We audit ronlmet. (Sa Ikm?gJ
6. It is oSrced that time Is of We rssenro in Wis mntmrt Ali vuJi6 mn k be perl'otmed and We repan ofvudit submihed by
Oelobtr 3l ?0g6
7. it is aSreed Umt Senemily vccepkd vuditing skndaNs include o «vinv otilm Gvvemmenml Unips system of inlemal ronuol and
accounting vs some mktes m vcmuntvbiliry of funds vm1 adhmence m hudgu and law ttqufirmmis vpplicabie Ummto; shot [fie
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foNt bis findings, tvSWrcr sviW his «evmmenda6vns for improvement Thnt written «port mml include vtl mutters defined ar
'tepanuble rnndidvrm" in AV 3S of the AICPA P f nl gleWnNC. Th A ih 1 ii fl v f th t rt 'il tb
S t ftl ip 1 Govemmenl Cammistinn.
B, All loeui Sovemmrnl rend public auWvdty conlmc6 for annual or spcool audits, 6ookkecpinS ¢r oUrv assizknro rem
pmpme din Unit's revotds for audit, nwndvl sktemeat p«pvmlivo, any fiwnce-«Iu1 W investigvdvns, or m,y other Audi
swdc in the Skk ¢f Noah Comlirm require the aPPmva( of the Seerckry of the Laml Govemmenl Cammissina. Inm
d d d d nn hit t 6 m'd b II G I U it tll tha Invoice bus been vnnmvc
5 m F U L I C I C n fmr I I d v a b Ihnes 1 Ail mv¢ims shouid be whi
tdplittle W the Seemtary of Um Loml Govrmment Commission The vngmnl and oae copy will be rctumW to We
Appmva) is real trquirW on conwds and invoices far system impmvemmis onJ similar services o(n non-vWitinS nvWte.
p.. In eonsiJwdon of the smisfntlary performance a(dm pmvaivm of Uris agmcmrn4 the Govemmenkl Dolt slmll pay to the
AWimr, upon aPPmv¢i by We Secrckry of the Inml Govtrnmenl Commission, the (ollmvine fee which includes any cost Ifie
Auditor may incur fmm work pvpm m par «vtews ar my vilmr gwlity nssumnro pmb'ram «quimJ by thiN pvniu (Feder¢i end
gkle gmntormd oversight agcnries orvlherarnnnimtioasJ as mquimd under the FWeml end Skle Single AWit Acts:
Yevr-end bookkeeping vss[slv¢ec-)Fur vudits svbJcct tv Govemmenl AuJiling StnnJards, Ibis is ilmitW t¢ bvnkkevp[ng
services permitted by mvlsW IndepeWence Slnndnrds) ---
Audit_ 563,500
Prepamflvv of Ibc amncfal natemcnts- 510,0~~
Avviatvnec with preparvtlvn of [he vcnedule of federal vntl State FLnendal vvviaxance Sy
le. After rompledng Ws vudi4 We Auditor shall whmit to the Gavemmg BvaN o svriuen mpon ofaudlC This rcpon sjmU include, of
least, ManoScment's Discussion and Armlysis, the 6mneial smmments oRhc gavemmenml unit end ell of its romponent oohs end
notes thereto prtpvred in vcxonlnnce with genanlly accepted occounilnS pdncipics, combining and supplemenmry infvrmudvn
mqurstW by the dirnt or rxquirW for full disdosum under the Imo, end the Auditor's opinion vn the material prrsmicd. Thc
Author shvii famish the rcquiml number vt copies of the «port of vudit to the Governing eaaN as soon as pmcntal otter the
[lase oftbe accounting Period
'lire Audimr s6ni1 file wish the Lami Government Commission two topics o! the mpon aC nudi; including one mpy of We
fedemi Dam CvlkNOn Farm, lies federal single audit is conducted. In addNlan, lithe Nonit Gmlim DIHce of the Sink Audimr
designates certain progams m he vudikd a mvjvrproSmms, v one page mmomund document nod o rtpmsmmUon leucr addressed
m the Smte Audisorahvll be mbmined Io Um Local Government Comm¢sion..
Two copies of We mpon of nadir should be eu6missed lithe nadir is performed only undcrihe pmvisiaa of the Sense Single Audit
[mplemmmrian A4 ar n frnmcini audit is mquirtd m 6e perfawcd in necardnnce with Gnvernmrnt Anditine Smndmds.
Otherwise, one copy shv116e m6mioed Copla of l6c mpon shall 6e fried rvith me Lace Govenment Commission wlkn [or pdor
so) suhmining Um invoice for the serviw tendered. All mpia o[ the mpon submined must fie bound Tim rtport ofnudis, ns Ned
with the Secmmry of she Loral Govwmens Cammissivn, buama o mono of puhlic record for irupa(ion and mvicw in Use
offices a! the SrarGnry by any Inkmskd parties. Any subsequent envisions to s6ac reports mat 6e sent to the Semcmry of the
Loal Government Commiuson These nudikd finwdvl sintemats nen used in the prepamdon of DHicial Skmmenu for debt
a(fedng; by munielpol band mdng services, and m fulfill secondary market disclasum mquienmenls of the Saudtia and
Exchange Cvmmiuivn
l2 Should cimunsWnaa dudoscd 6y Use audit mil fur o mom derailed invatiLmdan by We Audhor Umn naesmry undo ordinary
rirtamstanas, she Audimr s6ali infvnn she Governing Hoard in svddng of the need for such addidonnl invasigvUon and the
addhionvl compeavdan enquired thucfvm Upon appmval6y Uen Sattmry ofthe Lore) Government Commission, this ngenemen[
may be ended ar changed m Include the inmeaed Ume vndlm mmpcaosion a envy 6e agrad upon by the Governing HooN and
the Auditor.
13. If an appmved eanw4 nods m 6c varied ar changed for any reason, the dmngc man be redumd m tvdling, signed by both
pvNes, pttvudild if neersvry, and suhmitled to the 6euclary of the Lvmi Gavrnvnen! Commission tor;nppmwl. Nn chance
Id, Nhenever the Auditor uses m engagement Icner with Um elirn; Lkm IS may be completed 6y rcfercncing the engagement 14kr
vnd amchin6 o mpY of the engagement kva to Um cvnwG to incorpomie Um engagement 141LI into the mnlmrl In eae of
canllim hetwem die temrs v[ Urt engagement lever and the terms of Ods cvntme4 the Iemts of this evnlm4 will eonwi.
Engagement 141er terms arc decmrd m be void unless We eunlii4ing krms of Utis eonwd arc spaigmlly deleted in Item 21 of
Wu contend. EngUgement IGters evnlnining indemnifimtioo douses will not he appmved by the Lval Government Cammiuivn.
I6, Thcm oen no spedd pmvisiva aeepe
See attached engagement letter,
t6, A sepamm wntract c vu d n 6e mode for each divlsian tv be audited or mpon l0 6e submined. A separate mnuad mat 6e
ueeuWl for ach mmpvnent unit which is o lomi government and far which v sepnmk audit rcpad is load.
17. Thn evovnet should 6e executed vnd submilkd in tdolirnrc m Um Sememry of the Lomi Government Commission, 3S Nudh
Salisbury 6tttet, Rale{gh, NvrW Corolinv Z76g1-13g6.
10. Upon approval, the original mnWd will be rcrusned m We Gavemmenml Unit. v copy will be forwarded Iv she Audimq and a
mpy mmiaed by she Secenmry of We Lnml Govemmem Cammiuion The nud't should not he sinned hefvrc the commd j6
E41 m!' :~
19. 'them me oo aihu agecmenk between the parties h4eiv vnd nv otbu vgwnmts rcla6ve herein mat simli he en(ottahle unless
minted torn In vavNmsa wish Urc pmcedurc set out hernia and appmved by the Hraemry of the Loral Government Commission,
2g, lfdds audit engogementanalsubjeetm Gnvemment AUditine SmndnNS, Uun lkm5shn11 be l'vtedanddeled pmvislvn in Item
21. An explvnadun must be given furdeledng Wis provision
ZI. Ali vF the above pamLmtphs vin undcrssavd vnd shell apply so this ngtamen; uapt the tviivwing numbed pamgmplu shell 6e
ddemd: (sea Item 14,) N/A
ey
(Pleae type m pdnl mmc and '! e
Cherry, Seknert & Holland, I.L.P.
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CommUsion m pmvidcd in Aside 3, CWpia 154 of the
Gmeml gt4wa m Aside 3i. Pon 3, Clvpkr I ISC a! the
GmaalSmkks
For the Seeemry, Lvmi Gwcmmens Commiuion
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muted "N/h.')
Tds inswmmi lus ban prcvudikd in she manna mgvimd by The
Lvml Guvcrtrtncm audSes and FsrW Cunwl An yr by nc~ 6chovi
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October 21, 20D4
To the Partners of
Cherry Beltaert & Holland L,L,P.
and the Center for Public Company Audit Firms Peer Review Committee
We have reviewed the system of quality control for the accounting and auditing practice of
Cherry Bekaert & Holland L.L.P, (the firm) applicable to non-SEC issuers in effect for the yeaz
ended April 30, 2004. The firm's accounting and auditing practice applicable to SEC issuers
was not reviewed by us since the Public Company Accounting Oversight Board (PCAOB) is
responsible for inspecting that portion of fire firm's accounting and auditing practice in
accordance with PCAOB requirements. A system of quality control encompasses the firm's
organizational structure and the policies adopted and procedures established to provide it with
reasonable assurance of complying with professional standazds, The elements of quality control
aze described in the Statements on Quality Control Standards issued by the American Institute of
Certified Public Accountants (the AICPA). The design of the system, and compliance with it,
aze the responsibilities of the firm. Our responsibility is to express an opinion on the design of
the system, and the firm's compliance with fire system based on our review.
Our review was conducted in accordance with standards established by the Peer Review
Committee of the Center for Public Company Audit Firms and included procedures to plan and
perform tUe review that are summarized in the attached description of the peer review process.
Our' review would not necessarily disc]ose all weaknesses in the system of quality control or all
instances of lade of compliance with it since it was based on selective tests. Because there arse
inherent limitations in the effectiveness of any system of quality control, departures from the
system may occur and not be detected. Also, projection of any evaluation of a system of quality
control to future periods is subject to the risk that the system of quality control may become
inadequate because of changes in conditions, or that the degree of compliance with the policies
or procedures may deteriorate,
In our opinion, the system of quality control for the accounting and auditing practice applicable
to the non-SEC issuers of Cherry Bekaert & Holland L.L.P, in effect for the year ended Apri130,
2004, has been designed to meet the requirements of the quality control standards for an
accounting and auditing practice established by the AICPA, and was complied wit]t during the
year then ended to provide Use firm with reasonable assurance of complying with applicable
professional standards,
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Cldton
Gunderson >>1r
Ccrtl0ed CuLlie A<munlonle b Comullanb
14
As is customary in a peer review, we have issued a letter under this date that sets forth comments
relating to certain policies and procedures or compliance with them. The matters described in
the letter were not considered to be of sufficient significance to effect the opinion expressed in
this report.
15
Attachment to the Peer Review Report of Cherry Selcaert & Holland L.L.P.
Description of the Peer Review Process
Overview
Firms enrolled in the AICPA Center for Public Company Audit Firms (the Center) Peer Review
Program have their system of quality control periodically reviewed by independent peers. These
reviews are system and compliance oriented with the objectives of evaluation whether:
The reviewed fimr's system of quality control for its accounting and auditing practice
applicable to non-SEC issuers has been designed to meet the requirements of the Quality
Control Standards established by the AICPA.
The reviewed firm's quality control policies and procedures applicable to non-SEC
issuers were being complied with to provide the firm with reasonable assurance of
complying with professional standards.
A peer review is based on selective tests and directed at assessing whether the design of and
compliance with the firm's system of quality control for its accounting and auditing practice
applicable to non-SEC issuers provides the firm wilt reasonable, not absolute, assurance of
complying with professional standazds. Consequently a peer review on the firm's system of
quality control is noturtended to, and does not, provide assurance with respect to any individual
engagement conducted by the firm or that none of the financial statements audited by the fimt
should be restated.
The Center's Peer Review Committee (PRC) establishes and maintains peer review standards.
At regulaz meetings and through report evaluation task fo[nes, the PRC considers each peer
review, evaluates the reviewer's competence and performance, and examines every report, letter
of comments, and accompanying response from the reviewed firm that states its corrective action
plan before the peer review is finalized. The Center's staff' plays a Ivey role in overseeing the
performance of peer reviews working closely with the peer ['eview teams and the PRC.
Once the PRC accepts the Peer review reports, letters of comments, and reviewed firms'
responses, these documents are maintained in a file available to the public. In some situafions,
the public file also includes a signed undertaldng by the firm agreeing to specific follow-up
action requested by the PR.C,
Firms that perfomt audits or play a substantial role in the audit of one or' more SEC issuers, as
defined by the Public Company Accounting Oversight Boazd (PCAOB), are required to be
registered with and have their accounting and auditing practice applicable to SEC issues
inspected by the PCAOB. Therefore, we did not review the firm's accounting and auditing
practice applicable to SEC issuers.
I(v
Planning the Review for the Firm's Accounting and Auditing Practice Applicable to Non-
SECIssuers
To plan the review of Cherry Bekaert & Holland L.L,P., we obtained an understanding of (1) the
nature and extent of the firm's accounting and auditing practice, and (2) the design of the firm's
system of quality control sufficient to assess the inherent and control risks implicit in its practice.
Inherent risks were assessed by obtaining an understanding of the firm's practice, such as the
industries of its clients and other factors of complexity in serving those clients, and the
organization of the firm's personnel into practice units, Control risks were assessed by obtaining
an understanding of the design of the fine's system of quality control, including its audit
methodology, azid monitoring procedures. Assessing contro] risk is the process of evaluating the
effectiveness of the reviewed Firm's system of qua]ty control in preventing the performance of
engagements drat do not comply with professional standards.
Performing the Review for the Firm's accounting and Auditing Practice Applicable to Non-
SEC Issuers
Based on our assessment of the combined level of inherent and control risks, we identified
practice units and selected engagements within those units to test for compliance with the firm's
system of quality control. The engagements selected far review included engagements
performed under the Government Auditing Standards, multi-office audits, and audits of
Employee Benefit Plans. The engagements selected for review represented across-section of the
firm's accounting and auditing practce with emphasis on higher-risk engagements. The
engagement reviews included examining working paper files and reports and interviewing
engagement personnel,
The scope of the peer review also included examining selected administrative and personnel files
to determine compliance with the firm's policies and procedures for the elements of quality
control pertaining to independence, integrity, and objectivity; personnel management; and
acceptance and continuance of clients and engagements, Prior to concluding the review, we
reassessed the adequacy of scope and conducted a meeting with firm management to discuss our
findings and recommendations.
Clifton
® Gunderson zzp
CMIficJ Pu61ic ~omwtants b Consutlanb
October 21, 2004
To the Partners of
Cherry $elcaert & Holland L.L,P,
and the Center for Pubtic Company Audit Firms Peer Review Committee
We have reviewed the system of quality control for the accounting and auditing practice of
Cherry $ekaert & Holland L,L.P. (the firm) applicable to non-Sec issuers in effect for the year
ended April 30, 2004 and have issued our report thereon dated October 21, 2D04. "i`he matters
described below were not considered to be of sufficient significance to affect the opinion
expressed in that report, which should be read in conjunction with this letter,
Engagement Performance
Findhlg -Tire firm's quality control policies and procedures require the completion of a
financial statement disclosure checkist for its full disclosure engagements. However, on several
engagements reviewed we noted inappropriate answers on the checklists in the areas of
investments and debt disclosures. As a result, several financial statements did not disclose all the
disclosures required by generaIIy accepted accounting principles for these two items. None of
the missing disclosures were of such significance to cause the financial statements to be
nusleading.
Reconrmendatiwt -The firm should carefully review the proper use of its financial statement
disclosure checklist as part of the final financial statement review. In addition, a training session
should be held to review the questions on the checklist with regazd to investments and debt
disclosures and establish procedures for resolving issues when quesfions about such disclosures
arise,
Finding -The firm's audit programs outline steps for performing and documenting audit
procedures for deternlining fair vatue of investments, reliance on SAS 70 Type II letters,
determining reporting enfities and component units, and reviewing budgetary versus actual
information, However, our review disclosed several instances where the firm's wonting papers
did not include documentation for these areas, Tluough discussion with engagement personnel,
we were able to satisfy ourselves that the procedures were performed btrt not adequately
documented,
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Recommendation -The firm should renund all professionals of the matters to be considered
when documenting procedures performed in the above azeas. The firm should consider
conducting a training session to highlight the documentation matters noted during the review.
Finally the firm should monitor the adequacy of audit documentation through increased emphasis
by the reviewers of'audit engagements in the above areas.
Finding -The firm's quality control policies and procedures require that representation letters
refer to uncorrected adjustments and that a schedule of such adjustments be attached to the
representation letters. We found several instances in which the representation letter did not
address uncorrected adjustments or the schedule attached contained incorrect amounts. These
instances did noC result in arty financial statement misstatements.
Recommendation - We recommend that the firm re-emphasize its policies and procedures
concerning reference to uncorrected adjustments and hold a training session to review such
procedures. In addition, all reviewers should more closely monitor representation letters and the
schedules attached to such Ietters for uncorrected adjustments.
tq
November 5, 2004
Center for Public Company Audit Firms Peer Review Committee
American Institute of Certified Public Accountants
Practice Monitoring Department
Harborside Financial Center
201 Plaza Three
Jersey City, New Jersey
This letter represents our response to the letter of comments issued in
connection with our firm's peer review for the year ended April 30, 2004, and
should be read in conjunction with that letter.
The Firm will issue communications to all professionals to focus their attention on
the matters noted in the peer review, In addition, these matters will be the focus
of training sessions to be conducted in the nearfuture. The items noted during
the peer review will also be given emphasis in the design and delivery of future
professional development programs at appropriate levels.
The communications and training described above will emphasize (i) accurate
completion and review of our financial statement disclosure checklists,
particularly in the areas of investment and debt disclosure requirements, (ii)
documentation requirements related to procedures performed, results of such
procedures, and conclusions reached, particularly in the areas of determining fair
values of investments, reliance on SAS 70 Type II letters, determining reporting
entities and component units, and reviewing budgetary versus actual information,
and (iii) compliance with the requirements to obtain management's
representations regarding uncorrected financial statement adjustments.
Cherry, ~elkaea~ ~ ~oiland, R..~,.~ a0
The Firm of Choice. www,c5h.com
2850 Vllage Drive - Sulle 201
Fayetlevllle. North Carolina 28304
phone 910 463 7131
(ax 910 323 0672
April 3, 2006
Mr. Kenneth T, Chavious, Finance Director
Orange County SportsPlex
208 South Cameron Street
hiillsborough, North Carolina 27278
Dear Ken:
This letter of arrangement between the Orange County SportsPlex, an Enterprise Fund of Orange
County, North Carolina (the "entity")and Cherry, Bekaert & Holland, L.L.P. sets forth the nature and
scope of the services we will provide, the entity's required involvement and assistance in support of
our services, the related fee arrangements and other terms and conditions designed to assure that
our professional services are performed to achieve the mutually agreed upon objectives of the
entity,
SUMMARY OF SERVICES
We will audit the financial statements of the entity as of and forthe year ended .tune 30, 2006. Our
audit will be conducted in accordance with auditing standards generally accepted in the United
States of America; and Government Auditing Standards, issued by the Comptroller General of the
United States, and will include test of accounting records, and other procedures as deemed
necessaryto enable us to express such an opinion and to renderthe required reports. The objective
of an audit is the expression of our opinion concerning whether the financial statements are fairly
presented, in all material respects, in conformitywithaccounting principles generaltyaccepted in the
United States of America. If our opinion resulting from the procedures described above are other
than unqualified, we will fully discuss the reasons with you in advance.
As part of our engagement, we will prepare the financial statements and note disclosures from
individual fund trial balances that you will provide. However, management is responsible for the
financial statements and note disclosures. In your representation to us, you will be asked to
acknowledge our role in this regard, and your review, approval, and responsibility for the financial
statements and note disclosures.. Further, you are responsible for designating a qualified
management-level individual to be responsible and accountable for overseeing these services.
Any additional services that you may request, and that we agree to provide, will be the subject of
separate written arrangements. Should the entity wish to include or incorporate by reference these
financial statements and our report thereon into any official statement or any other document related
to the offering of debt securities at some future date, we would consider our consent to the inclusion
of our report into another such document at that time. However, we are required by auditing
standards generally accepted in the United States of America to perform certain procedures before
we can give our permission as to the inclusion of our report into another such document. You agree
that you will .not include or incorporate by reference these financial statements and our report
thereon into any other document without our prior written consent..
~6AKER TILLY
INTERNATIONAL
I will be responsible for assuring the overall quality, value, and timeliness of our services to you, and
will lead the engagement.
YOUR EXPECTATIONS
a'
As part of our planning process, we will discuss with you your expectations of Cherry, Bekaert &
Holland, L,L.P., changes that occurred during the year, your views on risks facing you, any
relationship issues with Cherry, Bekaert & Holland, L.L.P., and specific engagement arrangements
and timing. Our service plan, which includes our audit plan, is designed to provide a foundation for
an effective, efficient, and quality-focused approach to accomplish the engagement objectives and
to meet or exceed your expectations. Our service plan will be reviewed with you periodically and will
serve as a benchmark against which you will be able to measure our pertormance,
TERMS AND CONDITIONS SUPPORTING FEE
As a result of our planning process, the entity and Cheny, Bekaert & Holland, L.L.P. have agreed to
a fee, subject to the following conditions.
To facilitate meeting our mutual objectives, the entitywill provide in a timely manner audit schedules
and supporting information, including timely communication of all significant accounting and financial
reporting matters, as well as working space and clerical assistance as mutually agreed upon and as
is normal and reasonable in the circumstances, When and if for any reason the entity is unable to
provide such schedules, information and assistance, Cherry, Bekaert & Holland, L.L.P, and the
entity will mutually revise the fee to reflect additional services, if any, required of us to achieve these
objectives.
In providing our services, we will consult with the entity with respect to matters of accounting,
financial reporting, or other significant business issues. Accordingly, time necessary to effect a
reasonable amount of such consultation is reflected in our fee. However, should a matter require
research, consultation, or audit work beyond that amount, Cheny, Bekaert & Holland, L.LP. and the
entity will agree to an appropriate revision in services and fee.
Except for any changes in fees, which may result from the circumstances described above, ourfees
will be limited to those set forth below.
FEE
Financial Audit -Our fees for these services will be based upon our customary billing practices at
the time of the engagement.. Bills for services will be rendered as work progresses and are due
within 15 days from invoice date. A service charge will be added to past due accounts equal to 1'/%
per month (18% annual rate) on the previous month's balance less payments received during the
month, with a minimum charge of $2.00 per month. The fee for our audit as described in this letter
will not exceed $17,500. 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. Any modification to the fee shall be in writing and signed by both parties.
You agree to pay all costs of collection (including reasonable attorneys' fees) that we may incur in
connection with the collection of unpaid invoices.
The fees setforth are based on auditing standards effective as of the date of this engagement letter
and do not contemplate research and/or implementation of FIN46R, Consolidation of Variable
Interest Entities, if applicable.
If new auditing standards are issued and are effective for the period under audit or it is determined
the entity must implement the provisions of FIN46R, either of which may require additional audit ^
procedures that were not known at the date of this engagement letter, we will estimate the impact of afa
any new such standard on the nature, timing and extent of our planned audit procedures and will
communicate with you concerning the scope of the additional procedures and the estimated fees..
Any additional accounting matters which maybe necessary to complete the accounting for the year
ended June 30, 2006 will be performed in addition to the audit services and billed at our standard
billing rates.
LIMITATIONS OF THE AUDITING PROCESS
Our audit will include procedures designed to obtain reasonable assurance of detecting
misstatements due to errors or fraud that are material to the financial statements, Absolute
assurance is not attainable because of the nature of audit evidence and the characteristics offraud.
For example, audits performed in accordance with GAAS are based on the concept of selective
testing of the data being examined and are, therefore, subject to the limitation that material
misstatements due to errors or fraud, if they exist, may not be detected. Also, an audit is not
designed to detect matters that are immaterial to the financial statements. In addition, an audit
conducted in accordance with GARS does not include procedures specifically designed to detect
illegal acts having an indirect effect (e.g„ violations of fraud and abuse statutes that result in fines or
penalties being imposed on the entity) on the financial statements..
Because an audit is designed to provide reasonable, but not absolute assurance and because we
will not perform a detailed examination of all transactions, there is a risk that material errors, fraud,
other illegal acts, or noncompliance may exist and not be detected by us. In addition, an audit is not
designed to detect immaterial errors, fraud, or other illegal acts or illegal acts that do not have a
direct effect on the basic financial statements orto major programs. It should be recognized that our
audit generally provides no assurance that illegal acts will be detected, and only reasonable
assurance that illegal acts having a direct and material effect on the determination of financial
statement amounts will be detected, However, we will inform you with respect to material errors and
fraud, or illegal acts that come to our attention during the course of our audit,
If, for any reason, we are unable to complete the audit, or are unable to form or have not formed an
opinion on the financial statements, we may decline to express an opinion or decline to issue a
report as a result of the engagement. In this case, our firm will inform in writing the parties to the
contract.
RESPONSIBILITIES AS TO INTERNAL CONTROLS
As a part of our audit, we will consider the entity's internal control structure, as required by auditing
standards generally accepted in the United States of America and GovemmentAuditing Standards,
sufficient to plan the audit and to determine the nature, timing, and extent of auditing procedures
necessary for expressing our opinion concerning the basic financial statements. You recognize that
the financial statements and the establishment and maintenance of an effective internal control over
financial reporting are the responsibility of management. You also recognize that management is
responsible for identifying and ensuring that the entity complies with the Taws and regulations
applicable to its activities. Appropriate supervisory review procedures are necessary to provide
reasonable assurance that adopted policies and prescribed procedures are adhered to and to
identify errors, fraud, or illegal acts,. An audit is not designed to provide assurance on internal
control, As part of our consideration of the entity's internal control structure, however, we will inform
you of reportable conditions and other matters that come to our attention that represent significant
deficiencies in the design or operation of the internal control structure..
RESPONSIBILITIES AS TO COMPLIANCE
Our audit will be conducted in accordance with the standards referred to in the section Summary of
Services. As part of obtaining reasonable assurance aboutwhethertheflnancial statements are free as
of material misstatement, we will perform tests of the entity's compliance with applicable laws and
regulations and the provisions of contracts and agreements, including grant agreements, However,
the objective of those procedures will not be to provide an opinion on overall compliance and we will
not express such an opinion in our report on compliance issued pursuant to Government Auditing
Standards.
REPRESENTATION FROM MANAGEMENT
Management is responsible for the fair presentation of the financial statements in conformity with
accounting principles generally accepted in the United States of America, for making all financial
records and related information available to us, and for identifying and ensuring that the entity
complies with the laws and regulations applicable to its activities. Management is also responsible
for adjusting the financial statements to correct material misstatements. Management, at the
conclusion of the engagement, will provide to us a representation letter that, among other things,
addresses these matters and confirms certain representations made during the audit, including, to
the best of their knowledge and belief, the absence of fraud involving management or those
employees who have significant roles in the entity's internal control, or others where it could have a
material effect on the financial statements. The representation letter will also affirm to us that
management believes that the effects of any uncorrected misstatements aggregated pertaining to
the current year financial statements are immaterial, both individually and in the aggregate, to the
financial statements taken as a whole.
Cherry, Bekaert & Holland, L..L..P, will rely on the entity's management providing these
representations to us, both in the planning and performance of the audit, and in considering the fees
that we will charge to perform the audit.
COMMt1NICATIONS
At the conclusion otthe engagement, we will provide management, in a mutually agreeable format,
our recommendations designed to help the entity make improvements in its intemal control structure
and operations, and other matters that may come to our attention (see "Responsibilities as to
Internal Controls" above).
As part of this engagement we will ensure that certain additional matters are communicated to the
appropriate members of management and the Board of County Commissioners. Such matters
include (1) our responsibility under auditing standards generally accepted in the United States of
America; (2) the initial selection of and changes in significant accounting policies and their
application; (3) our independence with respect to the entity; (4) the process used by management in
formulating particularly sensitive accounting estimates and the basis for our conclusion regarding
the reasonableness of those estimates; (5) audit adjustments that could, in our judgment, either
individually or in the aggregate be significant to the financial statements or our report; (6) any
disagreements with management concerning a financial accounting, reporting or auditing matterthat
could be significant to the financial statements; (7) our views about matters that were the subject of
management's consultation with other accountants about auditing and accounting matters; (8) major
issues that were discussed with management in connection with the retention of our services,
including, among other matters, any discussions regarding the application of accounting principles
and auditing standards; and (g) serious difficulties that we encountered in dealing with management
related to the performance of the audit.
ACCESS TO WORKING PAPERS
The working papers for the engagement are the property of Cherry, Bekaert & Holland, L.L.P.. and
constitute confidential information. Except as discussed below, any requests far access to our a~'~'
working papers will be discussed with you prior to making them available to requesting parties,
The workpapers forthis engagement will be retained for a minimum of three years afterthe date the
auditors' report is issued or for any additional period requested by the entity, If we are aware that a
federal and State awarding agency, pass-through entity, or auditee is contesting an audit finding, we
will contact the party(ies) contesting the audit finding for guidance prior to destroying the
workpapers.
Our Firm, as well as all other major accounting firms, participates in a "peer review" program,
covering our audit and accounting practices. This program requires that once every three years we
subject our quality assurance practices to an examination by another accounting firm. As part of the
process, the other firm will review a sample of our work. It is possible that the work we perform for
you may be selected by the other firm for their review. If it is, they are bound by professional
standards to keep all information confidential. If you object fo having the work we do for you
reviewed by our peer reviewer, please notify us in writing.
USE OF THIRD PARTY SERVICE PROVIDERS
The firm may from time to time, and depending on the circumstances, use third-party service
providers in serving your account. We may share confidential information about you with these
service providers, but remain committed to maintaining the confidentiality and security of our
information. Accordingly, we maintain internal policies, procedures and safeguards to protect the
confidentiality of your personal information. In addition, we will secure confidentiality agreements
with all service providers to maintain the confidentiality of your information and we will take
reasonable precautions to determine that they have appropriate procedures in place to prevent the
unauthorized release of your confidential information to others. In the event that we are unable to
secure an appropriate confidentiality agreement, you will be asked to provide your consent prior to
the sharing of your confidential information with the third-party service provider. Furthermore, the
firm will remain responsible for the work provided by any such third-party service providers.
SUBPOENAS
In the event we are requested or authorized by you or required by government regulation, subpoena,
or other legal process to produce our working papers or our personnel as witnesses with respect to
our engagement for you, you will, so long as we are not a party to the proceeding in which the
information is sought, reimburse us for our professional time and expense, as well as the fees and
expenses of our counsel, incurred in responding to such a request.
OTHER MATTERS
If any dispute, controversy or claim arises in connection with the performance or breach of this
agreement, either party may, on written notice to the other party, request that the matter be
mediated. Such mediation would be conducted by a mediator appointed by and pursuant to the rules
of the American Arbitration Association (AAA) or such other neutral facilitator acceptable to both
parties. Both parties would exert their best efforts to discuss with each other in good faith their
respective positions in an attempt to finally resolve such dispute, controversy, or claim.
Client and accountant both agree that any dispute over fees charged by the accountant to the client
will be submitted for resolution by arbitration in accordance with the Rules for Professional
Accounting and Related Services Disputes of the AAA. Any award rendered by the Arbitrator aCJ
pursuant to this Agreement may be filed and entered and shall be enforceable in the Superior Court
of the County in which the arbitration proceeds, In agreeing to arbitration, we both acknowledge that,
in event of a dispute over fees charged by the accountant, each of us is giving up the right to have
the dispute decided in a court of law before a judge orjury and instead we are accepting the use of
arbitration for resolution.
The prevailing party shall be entitled to an award of reasonable attorneys' fees and costs incurred in
connection with the arbitration of the dispute in an amount to be determined by the arbitrator.
If the foregoing is in accordance with your understanding, please sign this letter in the space
provided and return it to us. If you have any questions, please feel free to give me a call at 919~~782-
1040..
Very truly yours,
CHERRY, BEKAERT & HOLLAND, L.L.P.
Eddie T. Burk ,.CPA
Partner
Enclosure
RESPONSE:
This lett/e/r correctly sets forth the understanding of the entity.
Rv / /
LGC-cos prrv. utn~on CONTRACT TO AUDIT ACCOUNTS
FHrinrdpnat` of Orange County Sportsplex
Govsmmmm7 Unil /~
On IkSs aid day of April 2006 Chvry, Helmrtt &UagunJ, L.LP., l~
2626 Glenwood Avenue, Susie 366, Raleigh, Nndh CHroI(na 27666 nudhar 6+~YYY"'
Mailing Addrus
hcminafier referred to os
the Audimr, and the County Commissimcrs of Dmngc County . hcminaficr mFencd
Gavcming Ham! GovemmeN¢I Unil
m as the Govemmenml Unit, ngmc us follows:
i. The AUJimrsholi audit Nl ssntemmts and disdosutes rtquimd by gemm~lly nmepledvccormling pdnciplo mdodditiomlrequlrcd
legal smmmmts and discimmes of nil funds mdfar divisions o! the Govemmmml Unit for the period begiming
oecembv 16 . 2HH$ and ending tuveso onus .The, mnnvgement's dimussion and noalysis,
nm•mnjor combining, and indiviJml fund smlemenm and schedules shell be subjected to the vudiUng pro«dures applied in the
audit oFlhc bosie financial riutmnmts end on opinion will be rendered in minion to (as nppiimbiej Um govcmmenlni nedvitles, the
business-type adiviUrs, the ogh'rcgnte dtscmNly prcsenled mmponml colts, nick motor gavemmrnml and micrprise fund, and Um
nggregvle mmoining Pond informnlion (nonmvJorgovernmcnt and enterprise Fundsn the imemol servim Fund type, and dm HUurinry
Nod types).
'? Ain minimum, the Audimrshvli conduct his audit and mndcrbis report inamordunn sviW genemHy nempled vuditing smndnrils.
Thc Audimr shell perform the audit in amartlanm wWs G r Auditin ~ Sm dords if rtquired by the Smte Single Audit
Impiemenmtion Act, ns eodi0ed in G5. 159.34,. if mquirtd by OMB Cimulm A-133 and the Smte Single Audit lmpicmmmlion
Ae4 Um nudimr shall perform n Single Audit
3.. 77ds mnrmN commnplntu an mrq+mllfird apbdvn bring rtmdemd. if finnnciel riatemenls ass not pmpnmd in omadance svidt
generally neceptml ncam0ng princ(plrs (GMPj, or the stotemmts full to lactate ell disdosurts mquird by GAAP, upinin Wut
depnnum fmm GAAP {n We space blow:
None
d. ThQ mnlmel mnfamplararan nnrryalified apbdon bntng rendemd The audit slmll include such tests oF1he neeovoting mmnls and
such othd auditing pmcedurt as am mmidertd 6y the Auditm to be neersmry bl the rimumsmnces. Any Hmimnnrss or
rrsrrtedonr Inseopc uddrh unnld Ind ro o gnvhfimrton shaold 8e )ally crplulrrrdln nrr armchmmr ao rh[r eonwar. Thc audit aviil
have m snipe I'unimtivas exmpL• NSA
S. If this oudit m}ygemmt a mbject to the slmU¢NS far nadir as defined in Gavemmmt Aud'lina Smndnnis, issued by the
Comptmiler Gmeml of the United Smles, thco the AvUilor Swrrmts by nmepdng Ihia rngagcment Umt he/she has and the
rtquiremmtz fm v prat mview nod mnlinuing dlumdvn ns spedfied in Govemmml Avdilinn Stmdenls. Thc Auditor ogees to
provide o copy of their mori anent pm mview mpon m the Gavemmenmf Unit nod tfie Semewy of the Laml Gvvcmment
Commission ndwto the eaecutim ofthc audit mnlmd (see item?HJ
6. It is ogneed Wm time is of the essmce in skis matron, NI audits ore m he pafarmed mJ the mpon ofnuditsuhmitlml 6y
Octaber3l 2606
7. It is ogcecd thvt genemliy vaapmd ouJidng smndorSs include n mview of the Govemmmmi Unit's system of imemni wntmi and
occouvdng ns same mintrs m acmunmbility of lords end ndlmrtnm to kuJgd and Inv requirtmmis applimbie Ihertm; ilsvr rite
Audimnvitl mule o vvrinen report, wOfds mvy ar may not be n pan oflhe vvrinen report ofnudi4 to the Gaveming Board selling
Pooh his findings, logetha wish b'ss recommmdndam For impmvemcnL 7bot svrinm mpon must imludc oil mnUcrs defined ns
"sepannbie conUlUvns" W AU 33 of the AICPA PmfesNnmi Strmdnrds.. Th A d1 shall fie n copy of that moon whh the
q Nry tike iami Gnvemment Cvmmissiaa
0. NI Ioml gavemmmt end public pufhodty mnimds far mnual or spraiol oudhs, bookkeeping or atha assismnce
pmpvm We Unif¢ meonk for audio fimneiol stnlement pmpomtian, any Cmvnm-mlvld invesligmtipm, or any odrrr
work in Um Smm of North Csralinn mquim Um oppmvol of rim Sevemry of Um Lnml Govemmenl Commission
tripiimte to the Secrdnry a(Um Lomi Govemmml Commission. Ttc original and one mpy svill be mlumed Io the AWhar.
AppmvN is not rtquimd on eontmds and invoices For rystem impmvemenu and similar services afonon-oudiilng nmum
9. in ennsldemdon of ilm svdsfudory performmm of Um provisions of this ngmemeN, Um Gavemmenmi Unit shall pay to ilm
Audim , upm appmvpl by the 5ecmmry of We Lornl Govrmmmt Commission, ti a follnwinn tee which includes my mri dm
Auditor may incur fmm work paper or peer mvimvs or any other quality osrvmnm pmgam mquimd by third panics (Fdlmnl nnU
Sm¢ grvmor and oversight ogmdes or aUmr vsganFmtivnsj m mquirtd undo the Federal and Smm Single Audit Aets:
Audit
vrdprcporatlen efdr Hmvwi nmcmmn • SUSga
!0, AFmreomplelinghisnudi4 the Auditor skull rvbmitmlhe Governing Bmsvln vvrittrn mpon afauJiL'This report skull indmle,N
Icvsl, Mmngemenl's Uumssion ant Analysis, the financivl smtemmts ofrhe govemmcnmi unit and all of its component colts nnJ
noses Ihertlo pmpnmd in vecodanm wish gmemliy viceepred accounting prindples, combining and supplementary inlommtion
mquesled by the dint or mquircd !or full disdosurc under the low, and the Auditor's opinion on Om mmeriul presented Tim
Auditor simli fumisk the rtquimd number of cvplrs of Um rgsvn of audit to the Gowning Bovrd os soon vs pmdimt nHm the
close of Um vmounting period.
Ii. 71m AWlmr shall ale wish the Loral 6vvemmem Commission two ropim of dle repvn of audl4 indvding one copy of the
federal Dnm Coliccdon Form, if v federal single audit is mnducmd In addition, if the Nonh Cnmlina 06ee of We $mte Auditor
desigvavs certain pmgmms to he ¢udiL•d m rwjur pmgmms, v one page tumamund document vnd ¢ represmmdon Irneroddmssed
m the $mte Attdlmrshvll be submited to the Loral Government Commission,
hvo eopim of the report of vudit shnuld he submined iCthe audit is performed only under the pmvisione of We $mm SinGle Avdit
Implemmmdan Am or v finmeiol audit is rcqulmd to be pertarmed in accordaaee with Government Auditine SmndaNs.
Otherwise, ooe copy shall be submitted, Copies ofthe mpon shall 6ciiled with dse L.ocol Gwemment Commission when (err prior
m) submitting she invoice for dre servicrs mndemd Ali coplm of the mpon suhmirmd must be bound. The mpon of oudir, as filed
wide the Sevet¢ry aC the Loral Government Commissinn, beeomm ^ motto of public reeoN tar Inapemion and mview in the
officm of the Secmmry by tiny iaterrsrad emirs Any subsequent revisions m these reports muss 6e sera m the Seaemry of the
Loral Govcmmcnt Commission, These nuJimd financivl smtemmts om used in We pmpamdm of Ofli~l Smscmrnts for debt
o(fedngs, by municipal bond mdng services, vnd to tu1GI1 seenndvry market disdasum mquisemmm of the Severities and
Ezclmnge Commission
12 Should eimumstnnees disclosed by the oudir mil for o mart derailed invmtigadan 6y she Auditor than necessary undo oNimry
dmusnsmvca, she Audior shall inform the Governing Booty in writing of We need for such oddidanol invv(igalion and dm
addilionvl mmpeMOtim mqulmd dmmtorc Upon vppmval by the 5eemrary of the Lomi Govemmmt Commission, Ihis agmemenl
mvy be varied or ehmged m include the inamsed lime and/or rompmmdan as may be ogmed upon 6y dm Govcmin6 -oaN and
the Audilae
17. if an oppmved contract needs to 6e varied err changed 6r any reason, the change must 6c induced ra writing, signed 6y 6orh
nanim, prmudited it ncrrssnry, md~submitled m the Secretary of the Lomi Govemmmt Commission for appmvai. No chvnec
I-0. Whenever the Auditor uses m engngcmm[ tdiCr wide dm dimL ticm IS may 6e completed 6y mfemncin6 the engagement Icaer
and nMCfiing a copy of she engagement icav so the mnuna to incogaomle the enpvgemmt letter inm the contract In case of
ronnirt belwem the fcrrru of We engagement Idly and the tams of this convect, the scans of Ibis convect will contras.
Engagemen[leuv tcrrrss vin deemed m be void unless dm emnlaing tams of dris eavwe[nm speri6mtly ddcted in hem 21 of
this eanlmcL Engvgaoml Icttva canmmin6 indemnihmtivn elausm will not be approved by dm Laml Govemmmt Commission.
I5. 7lrac vin no spmivi provisionsumpL
See attached engagement latter.
IG, A sepmale mnwct shnuld nvl 6e mode for inch division to be vudimd or sport to 6e submitted, A sepvmm mnwct must be
exmmed for mcfi eomponmt unit wbi:h a a ivml govemmentavd for whicb n cepnmfe vudit report is issued
17.. The etsnuam ahauld he exmuted anti evbmitled in Irinlimte so the Seaemry of Use Loeol Gavernmmt Commtssinn, 33 North
Sdisbury Street, -nleigh,NoNt Camlioo27693.13g5.
1 G. Upon nppmwl, the vrigiml mntma will be mtumed m ilm Govcrnmmrai Unit. a ropy veil) 6e forwaNa! to the Audisor, and v
ropy mm{n:al by Ifie Seeremry of ilm L.aml Government Gmmission. Th tit h Id t b• tinned hefnm the evnhncs is
esnmved
19. Than am no ail¢r ogmemmts between the parties hemm and no other agmemenu mladvc fimcm tlmt slmll he enfvmmbL• unlms
enlacd into in acmnlnn¢ with fbe pmmdumaet out fiemin and oppmved by We Scvemry otille Laml Government Cvrtvnission.
?a. fffhis nuditmgvgwent'unvl suhjedm CwcmmeM Audlinr, 5sendnrds, dseo 7msn5shvil be iistedmvddeled pmvisivn in tram
3i.. An estplanodan muri be glom fmddedn6 ills provision
? i. NI of dse above pamgrapbS vin underriwd and shall vppty to Ulis vgreement, mmpt the followin6 numbered paragraphs vhWi be
ddcted: (Sea Item id.) N/A
Chefry, Bekaert & Holland, L L P.
(I'Imse type arprint nvmej
(Signntum ofmWorimd audit firm mpmsenmdvej
Dole ~^ ~' J
Appmvcd 6y the Srnaary of the Inmi Dvvcmmml
Commissivv vs pmvidcd In Asdde 7. Cbapta 15- of the
Gmcml Smrmm err Anicte 11, Pm ], Cbaprm IISC a(rhe
nmaai Smwsn
Forthc Sevemry, Loral Gavemmenl Commission
($ignomm)
By
(Plmse type orprinlnvme vnd sine
(Sigmtum of vvnror CM'mersnn ofgovanin6 hoard)
Dote
ey
(Chairpesxon ofAUdil Cvmudum (I'Ime type vrpdnt name)
(Signarsrrc of Audit Comminec Chvirperson)
Dale
(Ifunis dots not bnvem audit commiuca tbu sadvn shmld be
mmkcd•N/A7
Thu imwmmt fins b:m prmudilvd in the manna rcquimd by Thc
Loral Govaurtrnr -udga and Fuml Gmml An or by dm School
gudda vnd Fsml Cnnvol Atv
Gvvcmmavmi Unil Finmm ORmr (Pirmc rye: orpdm nom:)
(Signnmre)
Dom
(prmudit Cerll-mtc mint be doted)
a1