HomeMy WebLinkAboutContracts & Agreements_215-2013_CCv0001.pdf AGREEMENT TO FURNISH PROFESSIONAL AUDITING SERVICES
This agreement for professional auditing services ("Agreement") is made and entered
into this 15'h day of October, 2013 ("Effective Date") by and between the City of Redlands, a
municipal corporation and the Successor Agency to the former Redevelopment Agency of the
City of Redlands (together, "City"), and Lance, Soll & Lungard, LLP ("Consultant"). City and
Consultant are sometimes individually referred to herein as a "Party" and, together, as the
"Parties."
In consideration of the mutual promises contained herein, City and Consultant agree as
follows:
ARTICLE I - ENGAGEMENT OF CONSULTANT
1.1 City hereby engages Consultant to provide professional auditing services for the City's
fiscal years of 2012-2013, 2013-2014 and 2014-2015, which services are more
particularly described in Exhibit "A" attached hereto and incorporated herein by this
reference(the "Services").
1.2 The Services shall be performed by Consultant in a professional manner, and Consultant
represents that it has the skill and the professional expertise necessary to provide the
Services to City at a level of competency presently maintained by other practicing
professional consultants in the industry providing similar types of services.
1.3 Consultant's obligation to provide the auditing Services to City is personal in nature, and
shall not be delegated or assigned without City's prior written consent.
1.4 Consultant shall comply with all applicable Federal, State and local laws and regulations
in the performance of this Agreement including, but not limited to, the Americans with
Disabilities Act and the Fair Employment and Housing Act.
ARTICLE 2 - RESPONSIBILITIES OF CITY
2.1 City shall make available to Consultant information in City's possession that is relevant to
the performance of Consultant's Services.
2.2 City designates Tina T. Kundig and Tom Steele to act as its representatives with respect
to the Services to be performed under this Agreement.
ARTICLE 3 - PERIOD OF SERVICE
3.1 Consultant shall perform the Services in a prompt and diligent manner. The term of this
Agreement shall commence on the Effective Date and shall end upon completion of the
Services for the audit of the fiscal year ending June 30, 2015.
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ARTICLE 4 - PAYMENTS TO CONSULTANT
4.1 The total compensation for Consultant's performance of the Services for fiscal year
2012-13 shall be Forty Seven Thousand Six Hundred Seventy Dollars ($47,670), and for
fiscal years 2013-14 and 2014-15 Services, in the amount of Forty Nine Thousand One
Hundred Dollars ($49,100), in accordance with the schedule set forth in Exhibit "B,"
which is attached hereto and incorporated herein by reference.
4.2 Within ten days following the end of each month, Consultant shall submit an invoice to
City indicating the portion of the Services performed, who performed the Services,
indirect costs, and the detailed cost of all Services including backup documentation.
Payments by City to Consultant shall be made within thirty (30) days after receipt and
approval of Consultant's invoice,by warrant payable to Consultant.
4.3 All notices shall be made in writing and may be given by personal delivery or by mail.
Notices sent by mail shall be addressed as follows:
City Consultant
Tina T. Kundig/Tom Steele Richard K. Kikuchi, CPA,Partner
City of Redlands Lance, Soll & Lungard, LLP
Finance Department Certified Public Accountants
P.O. Box 3005 203 N. Brea Blvd., Suite 203
Redlands, CA 92373 Brea, CA 92821
When so addressed, such notices shall be deemed given upon deposit in the United States
mail. Changes may be made in the names and addresses of the person to whom notices
and payments are to be given by giving notice pursuant to this section.
ARTICLE 5 - INSURANCE AND INDEMNIFICATION
5.1 All insurance required by this Agreement shall be maintained by Consultant for the
duration of its performance of the Services. Consultant shall not perform any Services
pursuant to this Agreement unless and until all required insurance listed below is
obtained by Consultant. Consultant shall provide City with certificates of insurance and
endorsements evidencing such insurance prior to commencement of the Services. All
insurance policies shall include a provision prohibiting cancellation or modification of
the policy except upon thirty(30) days prior written notice to City.
5.2 Consultant shall secure Workers' Compensation and Employer's Liability insurance
throughout the duration of its performance of the Services in an amount which meets the
statutory requirement with an insurance carrier acceptable to City.
5.3 Comprehensive General Liability Insurance. Consultant shall secure comprehensive
general liability insurance with carriers acceptable to City. Minimum coverage of One
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Million Dollars ($1,000,000) per occurrence and Two Million Dollars ($2,000,000)
aggregate for public liability, property damage and personal injury is required. City shall
be named as an additional insured, and such insurance shall be primary and non-
contributing to any insurance or self-insurance maintained by City.
5.4 Professional Liability Insurance. Consultant shall secure professional liability insurance
in the amount of One Million Dollars ($1,000,000)per claim made.
5.5 Business Auto Liability Insurance. Consultant shall secure business auto liability
coverage, with minimum limits of One Million Dollars ($1,000,000) per occurrence,
combined single limit for bodily injury liability and property damage liability. This
coverage shall include all Consultant owned vehicles used in connection with the
services,hired and non-owned vehicles, and employee non-ownership vehicles. City shall
be named as an additional insured and such insurance shall be primary and non-
contributing to any insurance or self insurance maintained by City.
5.6 Hold Harmless and Indemnification. Consultant shall indemnify, hold harmless and
defend City and its elected officials, employees and agents from and against any and all
claims, losses or liability, including attorneys' fees, arising from injury or death to
persons or damage to property occasioned by any act, omission or failure to act by
Consultant,its officers, employees and agents in performing the Services.
ARTICLE 6 - CONFLICTS OF INTEREST
6.1 Consultant covenants and represents that it does not have any investment or interest in
real property and shall not acquire any interest, direct or indirect, in the geographical area
covered by this Agreement or any other source of income, interest in real property or
investment which would be affected in any manner or degree by the performance of
Consultant's Services. Consultant further covenants and represents that in the
performance of its duties hereunder, no person having any such interest shall perform any
Services under this Agreement.
6.2 Consultant agrees it is not a designated employee within the meaning of the Political
Reform Act because Consultant:
A. Does not make or participate in:
(i) the making or any City governmental decisions regarding approval of a
rate, rule or regulation, or the adoption or enforcement of laws;
(ii) the issuance, denial, suspension or revocation of City permits, licenses,
applications, certifications, approvals, orders or similar authorizations or
entitlements;
(iii) authorizing City to enter into, modify or renew a contract;
(iv) granting City approval to a contract that requires City approval and to
which City is a party, or to the specifications for such a contract;
(v) granting City approval to a plan, design, report, study or similar item;
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(vi) adopting or granting City approval of, policies, standards or guidelines for
City or for any subdivision thereof.
B. Does not serve in a staff capacity with City and in that capacity participate in
making a governmental decision or otherwise perform the same or substantially all the
same duties for City that would otherwise be performed by an individual holding a
position specified in City's Conflict of Interest Code under Government Code section
87302.
6.3 In the event City officially determines that Consultant must disclose its financial interests
by completing and filing a Fair Political Practices Commission Form 700, Statement of
Economic Interests. Consultant shall file the subject Form 700 with the City Clerk's
office pursuant to the written instructions provided by the City Clerk.
ARTICLE 7 - GENERAL CONSIDERATIONS
7.1 In the event any action is commenced to enforce or interpret any of the terms or
conditions of this Agreement the prevailing Party shall, in addition to any costs and other
relief, be entitled to the recovery of its reasonable attorneys' fees, including fees for use
of in-house counsel by a Party.
7.2 Consultant shall not assign any of the Services to be performed under this Agreement,
except with the prior written approval of City and in strict compliance with the terms,
provisions and conditions of this Agreement.
7.3 Consultant's key contact person to perform the Services is Richard K. Kikuchi, CPA,
Partner. Consultant agrees that this key person shall be made available and assigned to
perform the Services and that he shall not be replaced without concurrence from City.
7.4 All documents,records, drawings, designs, cost estimates, electronic data files,databases,
and other documents developed by Consultant pursuant to this Agreement, and any
copyright interest in such documents, shall become the property of City and shall be
delivered to City upon completion of the Services, or upon the request of City. Any reuse
of such documents and any use of incomplete documents will be at City's sole risk.
7.5 Consultant is for all purposes an independent contractor. Consultant shall supply all tools
and instrumentalities required to perform the Services. All personnel employed by
Consultant are for its account only, and in no event shall Consultant or any personnel
retained by it be deemed to have been employed by City or engaged by City for the
account of,or on behalf of City.
7.6 Unless earlier terminated, as provided for below, this Agreement shall terminate upon
completion and acceptance of the Services by City.
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7.7 This Agreement may be terminated by City, in its sole discretion and without cause, by
providing five (5) business days prior written notice to Consultant (delivered by certified
mail,return receipt requested) of intent to terminate.
7.8 If this Agreement is terminated by City, an adjustment to Consultant's compensation shall
be made, but (1) no amount shall be allowed for anticipated profit or unperformed
services, and (2) any payment due Consultant at the time of termination may be adjusted
to the extent of any additional costs to City occasioned by any default by Consultant.
7.9 Upon receipt of a termination notice, Consultant shall immediately discontinue all
services affected, and within five (5) days of the date of the termination notice, deliver or
otherwise make available to City, copies (in both hard copy and electronic form, where
applicable) of any data, design calculations, drawings, specifications, reports, estimates,
summaries and such other information and materials as may have been accumulated by
Consultant in performing the Services required by this Agreement. Consultant shall be
compensated on a pro-rata basis for work completed up until notice of termination.
7.10 Consultant shall maintain books and accounts of all payroll costs and expenses related to
the Services. Such books shall be available at all reasonable times for examination by
City at the office of Consultant.
7.11 This Agreement, including the Exhibits incorporated herein by reference, represents the
entire agreement and understanding between the Parties as to the matters contained
herein, and any prior negotiations, written proposals or verbal agreements relating to such
matters are superseded by this Agreement. Any amendment to this Agreement shall be in
writing, approved by City and signed by City and Consultant.
7.12 This Agreement shall be governed by and construed in accordance with the laws of the
State of California.
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IN WrrNESS WHEREOF, duty authorizedss t t s of the Cir and Consultant
have signed in colo otos Agreement.
CrTY OF REDLANDS LANCE, SOLS,& LLNIGHARD,LLP
By- - k
Pete , Richard K. Kikuchi,CPA,Partner
Ad=:
S �p`.
SUCCESSOR AGENCY TO HE FORMER
REDEVELOPMENT AGENCY OF THE
cnyOFREDLANDS
gg
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Pete A ,Chairperson
Attest:
Sam Irwin,4Ay-Sewmdlary
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EXHIBIT -
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*Brandon W OWTOWL CM
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14 pret"V49vapat"o
-Donald G,Stalet.CM
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-Bryan S GrtkffCPA
Match 18.2011
Tina T.Kundig.Finance Director/City Treasurer
City of Redlands
P.O.Box 3005
35 Cajon Street.Ste.30
Redlands.CA 92373
Lance, Soil&Lunghard, LLP(LSL)Is pleased to respond to your Request for Proposal for Professional
Auditing Services. As a leader in the field of governmental accounting and auditing,we appreclato this
opportunitygivert us to present cur professionat qualifications.Because of our extensive municipal experience,
dedication to excellence and determination to retain the brightest and most talented professionals,we are
certain that Lance,Soil&Lunghard,LLP Is the most qualified accounting firm to provide professional auditing
services to the City of Redlands.
The annual services that would be provided for the City of Redlands,for the fiscal year ending June 30,2011
through June 30.2013,with the option for each of the two subsequent fiscal years,would be as follows:
1. Perform a financial audit of the Basic Financial Statements of the City of Redlands.We understand
that LSL will be preparing this report. These financial statements will be Included within a
Comprehensive Annual Financial Report(CAFR)which may be submitted under the National awards
program.Out audit would express an opinion as to whether the financial statements and associated
notes conform to accounting principles generally accepted In the United States of America.
2. Perform a financial audit of the Component Unit Financial Statements of the Redlands
Redevellopment Agency. We understand LSL will prepare these financial statements and our opinion
would indicate adherence to generally accepted accounting principles. A separate compliance audit
would be performed and an opinion issued as requlied by Section 33080.1 of the Health and Safety
Code. This audit would be done in accordance with Guidelines for Compliance Audits of Caffibmis
Redevelopment Agencies of the State Controller's Office.
3, Perform a Single Audit of all federal grants received by the City of Redlands utilizing auditing
standards generally accepted in the United States of America. This audit would be performed
according to the requirements of OMS Circular A-133,Government Auditing Standards!meld by
the GAO and the AICPA Industry Audit Guide.
4. Perform procedures and prepare a report based on the review of the procedures applad to the Cityof
Redlands Appropriations Limit worksheets and calculation.
The sections that follow describe the benefits your organization would receive from Lance.Soil&Lunghard,
3 LLP.We are committed to provide the services discussed above In accordance with this tleriellable
specified in yow request for proposal. This proposal Is a firm and irrevocable offer for the fiscal year
ending June 30,2011 through June 30.2013.with the option for each of the two subsequent fiscal years.for
90 days.For purposes of this proposat.Richard K.Kikud*Partner is authorized to make represents for
3 our firm.I can be reached at the address above or by phone at(714)672-0022.
Very truly yours.
3 Richard K, Kikuchi,Partner
LANCE,SOLL&LUNGHAPD,LLP
Lance,Soft&Laashilrd,UP 203Ncr!hBrea 8()L1ejaid Sti;1e203 Bret,'CA92821 T-L 714612U22 hx 7!4612031 **W.1JJc0aS-c0M
41155 Golden Gale Citcle Suile103 M,.,iriei;i,CA 92562 Ti',951.3041728 F3x 951.304 3940
SIMILAR ENGAGEMENT WITH QjHER_GOVERNMENT ENTITIES
Similar engagements performed would be as follows:
City of Colton-Audit and preparation of a Comprehensive Annual Financial Report(CAFR),
which receives the National GFOA award. Last audit performed was for June 30,2010.Total
hours were 627. Engagement partner is Mr. Richard K. Kikuchi. Contact
_2@rq2n,
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..........iiiiii !I!!!.......... I IM6117 I or bioh P.I
_WA9M=_rAW9_W . ton.ca.us,
City of Palm Springs-Audit and preparation of a Comprehinsive,Annual Financial Report
(CAFR).Which receives the National GFOA award.Last audit performed was forJune 30,2010.
Services include performing the Single Audit and TOT audits on various vacation rentals.Total
hours were 612. Engagement partner Is Mr. Richard K. Kikuchi. Contact person:
Mr.Geoffrey Ki h Finan ire l:ora 32 §229 or Geoffrey. S
t 0
City of Cathedral City-Audit and preparation of a Comprehensive Annual Financial Report
(CAII which receives the National GFOA award.Last audit performed was forJune 30,2010.
Services include performance of the Single Audit. Total hours were 575. Engagement partner
is Mr.Richard K.Kikuchi.Contact Person:Mr.Keiijr 3 ig! j; i 1:111 Fiscal Officer at f 7 60
orkbie=!;h :I::ithedraIc6L9V- 11770-0378
Vty of Coronado - Audit and preparation of a Comprehensive Annual Financial Report
(CAF% Last audit performed was for June 30,2010. Services include performance of the
Single Audit and annual TOT audits. Total hours were 521. Engagement partner Is Mr.Richard
I i I , , .
K.Kikuchi.Contac :!1I :!icjI:111
r.Adrn I ri ii ti il I III Ili! 5!�!Ili
7309 or isuelter0coronado,ca.usIIE , MdOL2111=_01(6 19)522-
City of Big Bear Lake-Audit and preparation of a Comprehensive Annual Financial Report
(CAI Last audit performed was for June 30,2010.Services include performing the Single
Audit and TOT audits on various vacation rentals.Total hours were 472. Engagement partner
is Mr.Richard K. Kikuchi. Contact DAMon: Ms Kelly Ent Administrative Services Director
li (90-9219—&-5831 x119 or ken#ta7crtvbfiahaarlake COM.
Again, we welcome you contacting any or all of these to get their opinion on the services we
provide.
SPECIFIC AUQUAPPROACH
PROPOSED SEGMENTATION OF EN 3AGEMENJ
We utilize a standardized governmental audit program which we will tailor to the City of Redlands's
operations. The tailoring Is necessary to accomniodate specific client circumstances and to
recognize differences In local statutes, ordinances,and similar unique characteristics. Our audit
programs are organized using the financial statement(balance sheet)category approach. This
approach takes III advantage of our accumulated experience,The primary benefit is that the risk of
Omitting important procedures is substantially reduced.We believe that this approach tends to be
the most effective and efficient for an entity such as the City of Redlands. In a standardized
program,the audit procedures are listed in the Most logical sequence,and that improves efficiency.
The savings in effort and time gained by using a standardized audit program can free an auditor's
attention for unusual at difficult situations that may arise. The audit programs are designed to
increase audit efficiency by linking financial statement assertions,audit objectives,and procedures
that are basic to most governmental audit engagements.All working papers and reports will be
retained(at our expense)for a minimum of seven(7)years,unless we are notified by the City
of Redlands of the need to extend that retention period.
0
spECIFIC AUDIT APEROACNjCon#lnuedl
LEVEL OF STAFFA69SIGNED
The levet of personnel assigned to the engagements and number of hours estimated to be spent
on each proposed segment Is as follOws:
ent partner Mangger Senior Staff Total
City of Redlands 24.0 32.0 99.0 255.0 409.0
Redevelopment Agency, 5.0 5.01 12.0 3.0 31.0
Si Aud9.� 2.0' 2.0 10.0 32.0.._. 46.0
GANN Lim.It 1,0 1 1.0 1.0 4.0
Tom, 32.0` 40.0 121.0 297.0 490.0
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SAMPLE SIZE ANO EXTENT OF STATISTICAL.SAMPLING.
Our approach Is to utilize statistical sampling in the areas of receipts,disbursements and payroll.
Here we develop a statistical conclusion based upon an initial computer selected random
sample of 20 transactions.If errors are noted In the sample,the sample size will be expanded.
We believe that a random selection can be the most efficient,while providing each item in the
population an equal chance of being selected.Additionally,for receipts and disbursements.we
select a stratified sample of all transactions over a specified dollar limit for review.This allows us
to cover all high dollar value transactions not otherwise selected In the random sample.Our
samples are selected randomly utilizing random number generating software we developed in-
house.
EXTENT OF EDP SOFTWARE
We understand the City of Redlands utilizes Bi-Tech software.LSL has extensive experience
with this software by auditing cities such as the City of Azusa. LSL performs paperless audits
utilizing Caseware Auditing Software and IDEA Software(for Data Extraction).We extensively
use notebook computers In the field, with spreadsheet software, for financial statement
preparation and analytical procedures.
Our traditional approach is to"audit around"the computer,which means that we verifyoutput by
agreeing it,through our audit tests,with corresponding source input transactions.We do not use
audit software that runs through the City's computer system.titre other aspects of the internal
control structure, computer controls and processes are documented in our memoranda and
questlonnaires.We will consider whether specialized skills are needed to consider the effect of
computer processing on the audit, to understand the internal control structure policies and
procedures or to design and perform audit procedures.We will consider the complexity of the
computer system and assess whether we can identify the types of misstatements that might
occur. Mr. Bryan S. Gruner is the Firm's IT specialist and will be dedicated to the City of
Redland's audit. He will be reviewing the IT controls of the City of Redlands and will provide
feedback to the management of the City.
SPECIFIC AU IT APPROACH LCMtlnued)
ANALYTICAL PROCEDURES
We use analytical Procedures throughout our audit testing- Analytical procedures, such as
current year to prior year and budget to actual,allow us to easily identify any unusual gems or
inconsistencies in your financial reporting. Analytical procedures are also used as an overall
review of the financial information in the preliminary and final stages of the audit. These
procedures are designed to assist us in planning our audit and in assessing the Proprietyof the
conclusions reached and In the evaluation of the overall financial statement presentation.The
procedures to be utilized consist of determining percentage increases and decreases between
significant revenue,expenditure and balance sheet accounts,reading the financial statements
and related notes,and we focus on overall relationships within the financial statements.Once
determined,these are reviewed to determine if the changes appear reasonable or require further
analysis. For all significant differences, explanations are obtained as to why the situation
occurred and additional substantive procedures may be applied and related evidence gathered
to resolve concerns and questions.
APPROACH TO DETERMINING LAWS AN!'')
uWAMM.21,1!ii JECT TO AUDIT
The Laws and Regulations that will be subject to audit test work are deterrrdned from the
municipal code of the City (we would ask for access to a volume of the Code during our
fleldwork), applicable sections of Governmental Code for the State of California and our
extensive experience with governmental entities,
APPROACH 70 UNDERSfiANDINII"INTERNALST13UCTURE
To gain an understanding of the City of Redlands's internal control structure,we will perform
procedures as required by the new Auditing Standards,primarily SAS 104-111. This wig Include
completing forms taken from the Local Government Publication of Practitioners Publishing
Company.These forms meet the technical standards of the AICPA and allow us to document
the major transaction classes,purpose of funds,and the structure of the City of Redlands and to
quantify materiality.We will review and make recommendations on the internal control structure,
which consists of Control Environment Accounting System and Control Procedures.We will
review internal controls in the area of cash; investments; revenues and receivables,
expenditures and accounts payable;payroll;inventories;property and equipment debt and debt
service; insurance and claims. In addition, during the performance of the Single Audit, if
applicable, we will review areas of internal controls over federal grants, including general
requirements; specific requirements, Claims for advances and reimbursements and amounts
claimed or used for matching.Based on the result of our review,we will Issue a formal Internal
control report (SAS 115 Letter) that will identify any significant deficiencies and or material
weaknesses.This report is required by the Government Auditing Standards issued by the
Comptroller General of the United States, as well as the Single Audit Act, In addition,we will
also issue a separate communication letter directly to the governing board. This letter would
communicate any significant deficiencies or material weaknesses in the internal control system
and other matters that we feet should be communicated to the governing board. All internal
control issues will initially be discussed with management of the City of Redlands,
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EXHIBIT
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Scope of the Work to be Performed CONTINUED
The City of Redlands desires the independent auditor to provide the City, its constituents and the
public with a comprehensive annual financial report that gives complete, accurate and
understandable information about the City's financial condition in conformity with Generally
Accepted Accounting Principles (GAAP) and the other provisions contained in this request for
proposal, The selected independent auditor will be required to perform the following tasks:
I. Audit the General Purpose Financial Statements of the City in conformity with generally
accepted accounting principles and issue an opinion thereon; the auditor is not required to
audit the combining and individual fund and account group financial statements and
supporting schedules. However,the auditor is to provide an"in-relation-to"report on the
combining and individual fund financial statements and supporting schedules based on the
auditing procedures applied during the audit of the general purpose financial statements. The
auditor is not required to audit the statistical section of the report.
The auditor shall also be responsible for performing certain limited procedures involving
Management's Discussion and Analysis(MD&A)and Required Supplementary Information
{RSI)required by the Governmental Accounting Standards Board as mandated by generally
accepted auditing standards. The auditor will prepare and publish the City's Comprehensive
Annual Financial report.
2. The City has a Redevelopment Agency which requires a financial audit. The auditor will
perform tests of compliance in accordance with Guidelines for Compliance Audits of
California Redevelopment Agencies and prepare and publish an audit report.
3. Test compliance with the Single Audit Act of 1984,as amended in 19%,and applicable laws
and regulations;Auditor will prepare and publish an audit report.
4. Prepare report or memorandum on Internal Control and Management Letter;
5. Test compliance with Proposition 111,Article X11LB—Review of Appropriation Limit
Calculations;
6. Special Requirements
A. Cash and Securities: The auditor shall count all vault cash-on-hand and petty cash in the
Finance Department and verify the existence of all investment securities owned by the
City and held in safekeeping by the City's various banks and financial institutions;
ffirthermore auditor shall count all petty cash held at off--site locations.
B. Contracts and Payroll of Highly Compensated Employees or Elected Officials: The
auditor will 'examine the records of the City Clerk, Human Resources,and Finance
Payroll for proper approval,documentation, and implementation of compensation for
elected or appointed officials, the City Manager and City Attorney, Department Directors
I
Lance Sall&Lungm-d LLP-20t I Audit Scope
and all Redlands Association of Management Employees{RAMS), in addition to
standard payroll testing performed during the audit.
C. Overtime of Public Safety: The auditor shall perform a review of overtime for the Police
and Fire departments for proper authorization and compliance with the policies of the
departments and the City.
D. Contracts for Service: The auditor shall increase the sample size used to examine the
propriety of contracts for service in accordance with the City's Purchasing Ordinance.
E. Loans: The Auditor shall review all external or internal loans made by the City for proper
authorization,terms,recording in the General Ledger,and any potential conflicts of
interest associated with the loan.
2
Lame Soil&Lungattl LLP.20i I Audit&0pe
LSE--- •
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CERTIFIED PUBLIC ACCOUNTANTS
David I-He*,CPA,CM
•Donald G.Sla*CPA
Richard IL Maichl,CPA
•Sum F.Mat24 CPA
•Shelly KJ ,CPA
Bw S.Gruber,CPA
Deborah X Harlw,CPA
&Wdon W&am",CPA A~
September 3,2093
Tina Kundig
Finance Director
City of Redlands
35 Cajon Street,Street 200
Redlands,CA 92373
We are pleased to confirm our understanding of the services we are to provide the City of Redlands (the
City) for the year ended June 30, 2013. We will audit the financial statements of the governmental
activities, the business type activities, the aggregate discretely presented component units, each major
fund, and the aggregate remaining fund information, including the related notes to the financial
statements, which collectively comprise the basic financial statements, of the City as of and for the year
ended June 30,2013.Accounting standards generally accepted in the United States of America provide
for certain required supplementary information (RSI), such as management's discussion and analysis
(MD&A),to supplement the City's basic financial statements. Such information,although not a part of the
basic financial statements, is required by the Governmental Accounting Standards Board who considers it
to be an essential part of financial reporting for placing the basic financial statements in an appropriate
operational, economic, or historical context. As part of our engagement, we will apply certain limited
procedures to the City's RSI in accordance with auditing standards generally accepted in the United
States of America. These limited procedures will consist of inquiries of management regarding the
methods of preparing the information and comparing the information for consistency with management's
responses to our inquiries, the basic financial statements, and other knowledge we obtained during our
audit of the basic financial statements. We will not express an opinion or provide any assurance on the
information because the limited procedures do not provide us with sufficient evidence to express an
opinion or provide any assurance. The following RSI is required by generally accepted accounting
principles and will be subjected to certain limited procedures, but will not be audited:
1) Management's Discussion and Analysis,
2) Budgetary comparison schedules,
3) GASB—required supplementary pension
4) CIPEB
5) Infrastructure information under modified reporting
We have also been engaged to report on supplementary information other than RSI that accompanies the
City's financial statements. We will subject the following supplementary information to the auditing
procedures applied in our audit of the financial statements and certain additional procedures, including
comparing and reconciling such information directly to the underlying accounting and other records used
to prepare the financial statements or to the financial statements themselves, and other additional
procedures in accordance with auditing standards generally accepted in the United States of America and
will provide an opinion on it in relation to the financial statements as a whole:
1) Schedule of expenditures of federal awards.
2) Combirting statements.
3) Individual fund statements.
Lance,Soil&Lurighafill,LLP 203 North Brea Boulevard- Suits 203- Brea,CA 92821 - TEL 714.672.0022 Fax 714.672.0331 www.lslcpas.com
Orange County Temecula Valley Silicon Valley
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COMMEW FURM-KC-CMURTS
City of Redlands
Page 2
The following other information accompanying the financial statements will not be subjected to the
auditing procedures applied in our audit of the financial statements, and our auditor's report will not
provide an opinion or any assurance on that other information.
1) Supporting schedules.
2) Statistical schedules.
3) Introductory section.
Audit Objectives
The objective of our audit is the expression of opinions as to whether your basic financial statements are
fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles
and to report on the fairness of the supplementary information referred to in the second paragraph when
considered in relation to the financial statements as a whole.The objective also includes reporting on---
• Internal control related to the financial statements and compliance with the provisions of laws,
regulations, contracts, and grant agreements, noncompliance with which could have a material
effect on the financial statements in accordance with Government Auditing Standards.
• Internal control related to major programs and an opinion(or disclaimer of opinion)on compliance
with laws, regulations, and the provisions of contracts or grant agreements that could have a
direct and material effect on each major program in accordance with the Single Audit Act
Amendments of 1996 and OMB Circular A-133, Audits of States, Local Goveminents, and Non-
Profit Organizations.
The reports on internal control and compliance will each include a paragraph that states that the purpose
of the report is solely to describe (1) the scope of testing of internal control over financial reporting and
compliance and the result of that testing and not to provide an opinion on the effectiveness of internal
control over financial reporting or on compliance, (2)the scope of testing internal control over compliance
for major programs and major program compliance and the result of that testing and to provide an opinion
on compliance but not to provide an opinion on the effectiveness of internal control over compliance, and
(3) that the report is an integral part of an audit performed in accordance with Government Auditing
Standards in considering internal control over financial reporting and compliance and OMB Circular A-
133 in considering internal control over compliance and major program compliance. The paragraph will
also state that the report is not suitable for any other purpose,
Our audit will be conducted in accordance with auditing standards generally accepted in the United States
of America; the standards for financial audits contained in Government Auditing Standards, issued by
the Comptroller General of the United States; the Single Audit Act Amendments of 1996; and the
provisions of OMB Circular A-133, and will include tests of accounting records, a determination of major
program(s) in accordance with OMB Circular A-133, and other procedures we consider necessary to
enable us to express such opinions and to render the required reports.We cannot provide assurance that
unmodified opinions will be expressed. Circumstances may arise in which it is necessary for us to modify
our opinions or add emphasis-of-matter or other-matter paragraphs. If our opinions on the financial
statements or the Single Audit compliance opinions are other than unmodified, we will discuss the
reasons with you in advance. If,for any reason,we are unable to complete the audit or are unable to form
or have not formed opinions, we may decline to express opinions or to issue a report as a result of this
engagement
If circumstances occur related to the condition of your records, the availability of sufficient, appropriate
audit evidence, or the existence of a significant risk of material misstatement of the financial statements
caused by error, fraudulent financial reporting, or misappropriation of assets, which in our professional
judgment prevent us from completing the audit orforming an opinion on the financial statements, we
retain the right to take any course of action permitted by professional standards, including declining to
express an opinion or issue a report,or withdrawing from the engagement
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WITIFIED PUBLICO ACCOUNTANTS
City of Redlands
Page 6
report will be heavily influenced by the written and oral representations that we receive from
management
Accordingly,false representation could cause us to expend unnecessary efforts or could cause a material
error or a fraud to go undetected by our procedures. In view of the foregoing,you agree that we shall not
be responsible for any misstatements in the City's financial statements that we may fail to detect as a
result of knowing misrepresentations that are made to us by management.
In addition,the City further agrees to indemnify and hold us harmless for any liability and all reasonable
costs, including legal fees,that we may incur as a result of the services performed under this engagement
in the event there are knowing misrepresentations made to us by any member of the City's management.
Because there are inherent difficulties in recalling or preserving information as the period after an
engagement increases,you agree that, notwithstanding the statute of limitations of the State of Califomia,
any claim based on this engagement must be commenced within 12 months after performance of our
service, unless you have previously provided us with a written notice of a specific defect in our services
that forms the basis of the claim.
You acknowledge that as a condition of our agreement to perform an audit, you agree to the beat of your
knowledge and belief to be truthful, accurate, and complete in the representations you make to us during
the course of the audit and in the written representations provided to us at the completion of the audit.
Audit Procedures—General
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements; therefore, our audit will involve judgment about the number of transactions to be
examined and the areas to be tested.An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of significant accounting estimates made by management, as well
as evaluating the overall presentation of the financial statements. We will plan and perform the audit to
obtain reasonable rather than absolute assurance about whether the financial statements are free of
material misstatement, whether from (1) errors, (2)fraudulent financial reporting, (3) misappropriation of
assets, or(4)violations of laws or governmental regulations that are attributable to the entity or to acts by
management or employees acting on behalf of the entity. Because the determination of abuse is
subjective, Government Auditing Standards do not expect auditors to provide reasonable assurance of
detecting abuse.
Because of the inherent limitations of an audit, combined with the inherent limitations of internal control,
and because we will not perform a detailed examination of all transactions, there is a risk that material
misstatements or noncompliance may exist and not be detected by us, even though the audit is property
planned and performed in accordance with U.S. generally accepted auditing standards and Government
Auditing Standards. In addition, an audit is not designed to detect immaterial misstatements or
Violations of laws or governmental regulations that do not have a direct and material effect on the financial
statements or m programs.We will include such matters in the reports required for a Single Audit. Our
responsibility as auditors are limited to the period covered by our audit and does not extend to any later
periods for which we are not engaged as auditors.
Our procedures will include tests of documentary evidence supporting the transactions recorded in the
accounts, and may include tests of the physical existence of inventories, and direct confirmation of
receivables and certain other assets and liabilities by correspondence with selected individuals, funding
sources, creditom, and financial institutions. We will request written representations from your attorneys
as part of the engagement, and they may bill you for responding to this inquiry. At the conclusion of our
audit, we will require certain written representations from you about the financial statements and related
matters.
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CIATIFIED PUKIC"CMTAffg
City of Redlands
Page 8
out-of-pocket costs through the date of termination. The above 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.
Govemmnt Auditing Standards require audit organizations to provide a copy of their most recent
external peer review report and any subsequent review reports during the period of the contract. Our
2010 peer review accompanies this letter.
Our audit engagement ends on delivery of our audit report. Any follow-up services that might be required
will be a separate,new engagement. The terms and conditions of that new engagement will be governed
by a new,specific engagement letter for that service.
We appreciate the opportunity to be of service to the City and believe this letter accurately summarizes
the significant terms of our engagement. If you have any questions, please let us know. If you agree with
the terms of our engagement as described in this letter,please sign the enclosed copy and return it to us.
Very truly yours,
EXHIBIT
413'
ILSL
ciRriflftl PURIC ACCOUNiAlf1i
AUDIT WORK COST PROPOSAL FORM
Name Of FUM
Address: 203 N.Brea atvd. Suite 203
Brea l CA 92821
Contact Name:
Contact phone#- (7141672-0022 Fax#: (7141872 0
Contact Ema* r1chardJeAuchiasicpascorn
--Service 2010111 2011112 2017113 *2013/114
CilvAudit 40370 540 370 40370
age—yeboment Audit 480 2 2460 12,534 ,gel
§k!g!2 Audit Report $3 $3060 $3080 2&34
$3152 152
k;MM LOW R 5530 $530 530 $546
Cash and S 3i 250 $1,250
1 250 3f 288 f 288
Total for Fiscal Year not. eacceed 547 870 $47 670 347 870 49 i 00 49!00
'%increase of 3%from base year 2010.11
-This Spacial Requirement exceeds the normal scope of Our audit work. All other Spacial Requirements are included.
For the Purpose Of this Proposal,Richard K.Kikuchi,Partner is authorized to make representations for our firm,
empowered to submit the bid,and authorized to sign a contract with the city of Redlands.
W.—h--d_K_Mu.K�Pavw,
LANCF_SOLI.&LUNGHARO.LLP