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HomeMy WebLinkAbout87-97 RESOLUTION• This letter will confirm our understanding of the arrangements made covering the audit 1 you wish us to perform of the combined Balance Sheet of the City of Fayetteville as of b December 30.1998. and the related combined Statement of Revenues. Expenditures. and Changes in Fund Balances, the combined Statement of Revenues, Expenses and changes in Retained Earnings, and the combined Statement of Cash Flows - all Proprietary Fund Types and the Single Audit for the City of Fayetteville for the year ended December 30, 1998. •f ARTHUR ANDERSEN To the Honorable Mayor and City Council of the City of Fayetteville, Arkansas December 14,1998 Page 2 r complete the audit or are unable to form or have not formed an opinion, we may decline to express an opinion or decline to issue a report as a result of the engagement. While an audit includes obtaining an understanding of internal control sufficient to plan the audit and to determine the nature, timing and extent of audit procedures to be performed, it is not designed to provide assurance on internal control or to identify significant deficiencies in internal control. However, we are responsible for ensuring that management and the City Council are aware of any such deficiencies that come to our attention. Year 2000 responsibilities. An audit of financial statements is not designed to detect whether any systems are Year 2000 compliant. Further, we have no responsibility with regard to the City's efforts to make its systems, or any other systems (such as those of the City's vendors, service providers or any other third parties), Year 2000 compliant or provide assurance on whether the City has addressed or will be able to address all of the affected systems on a timely basis. This is the responsibility of management. However, we will make inquiries of management regarding the Year 2000 issue, consider management's assessment of the potential impact of the Year 2000 issue on the current U= year's financial statements and our audit, and discuss or otherwise be satisfied that management and the City Council are apprised of any observations we have relative to \'• its Year 2000 remediation plan. The working papers prepared in conjunction with our audit are the property of our /' firm, constitute confidential information and will be retained by us in accordance with our firm's policies and procedures. However, arrangements may be made to make the working papers available to representatives of federal and state agencies, if necessary. Management's Responsibilities and Representations The financial statements are the responsibility of the City's management. Management is also responsible for (1) maintaining effective internal control over financial reporting, (2) identifying and ensuring the City complies with the laws, regulations, contracts and grants applicable to its activities and (3) making available to us all financial records and related information and personnel with information of relevance to our audit. 'r- .. 9� 'r .-.,F° 1' _. ARTHUR Tf • T DCT To • the Honorable Mayor and City Council • of the City. of Fayetteville, Arkansas December 14,1998 Page 3 from certain members of management. The results of our audit tests, the responses to !.. our inquiries, and the written representations constitute the evidential matter we intend ` ` • t k to rely upon in forming an opinion on the financial statements and issuing our other. . FF�r reports in connection with the Single Audit. Because of the importance of management's representations to an effective audit, the City of Fayetteville agrees to release Arthur Andersen LLP and its personnel from an' 1iability,and costs relating to our services underthis letter attributable to any misrepresentations by management. o tl If you intend to publish or otherwise reproduce the financial statements together with our report (or otherwise make reference to our Firm) in a' document that contains other •a information, you agree to provide us with draft of the document to lead and comment F • printed on before it is and distributed. Furthermore, you agree that the terms of this by engagement do not encompass an undertaking by us (1) to consent, means of a r N•statements' 'separate letter or otherwise, to the inclusion of our auditors' report on the financial referred to above in a filing with a Federal or state regulatory agency or otherwise reissue our report for purposes of a securities offering or other financing S4 transaction; or (2) to acknowledge 'rehance' on our'report by others Other Services ARTHUR 2. ANVFPc�N L Ll ✓L To the Honorable Mayor and City Council of the City of Fayetteville, Arkansas - a December 14,1998 Page 4 , 4. Prepare and print the Comprehensive Annual Financial Report, including related footnotes and schedules, and provide support for all footnote disclosures and schedules. 5. Prepare the schedule of expenditures of federal and state awards, including related :• footnotes, and provide support for all footnote disclosures. �r 6. Analyze and explain variations in selected account balances between years and/or from budget, as identified by Arthur Andersen. 7. Prepare appropriate year-end accruals. 8. Provide copies of executed legal documents supporting significant current year transactions, i.e., bond sales, lawsuit settlements, etc. 9. Provide timely resolution of exceptions or questioned costs as identified during the .,. course of the audit. 10. Completion of GFOA checklist as appropriate, to ensure compliance with the GFOA Certificate Program. The above discussion of responsibilities has been included in an effort to provide maximum client service at minimum cost to the City. In the event the City is unable to • either complete the procedures outlined or to complete them on schedule, Arthur Andersen is authorized to request an adjustment in fees and/or completion dates. As part of our continuing commitment to the City, we extend an offer to the City to send up to three people per year to pertinent training courses. 44 In addition, we understand that the City may require us to perform certain procedures which are beyond the scope of our engagement. Although not a part of this specific arrangement, we are available to assist the City in such other audit -related areas. Such areas might include loan staff assistance in completing the City's responsibilities under' these arrangements, assistance in the preparation of Official Statements as contemplated by the "Disclosure Guidelines for State and Local Governments" issued by the Government Financial Officers Association, special reviews of selected areas, and/or- provide the City with grant accounting or other technical assistance in connection with the audit. Description of Independent Public Accountant's Responsibilities Under Generally Accepted Auditing Standards, Government Auditing Standards and the Single Audit Act INTERNAL CONTROL STRUCTURE Responsibility under Generally Accepted Auditing Standards (GAAS). We will obtain an understanding of the internal control structure. Based on this understanding we assess control risk - the risk that a material misstatement could occur in the financial statements that will not be prevented or detected on a timely basis by the City's internal control structure. Based on our understanding of the internal control structure and the assessed level of control risk, we will determine the nature, timing and extent of our audit procedures. The procedures we perform under GAAS do not provide sufficient evidence to enable us to express an opinion or any other assurance relative to the internal control structure's design or effectiveness. The - - purpose of our consideration of the internal control structure is to plan the audit and to determine the nature, timing and extent of the substantive tests necessary to enable us to form an opinion as to the fair - S presentation of the City's financial statements. 5 Responsibility under Government Auditing Standards Government Auditing Standards does not require us to perform any procedures with respect to the internal control structure beyond those required by GAAS. However, we are required to issue a written report (either as a part of our report on the financial statements or separately) on our consideration of the internal control structure. Our report must disclose reportable conditions and material weaknesses, if I any, we identify as a result of the procedures we performed. The report does not provide any assurance on the internal control structures design or effectiveness. Responsibility under the Single AuditAct and Circular A-133 In addition to the procedures performed to meet GAAS and Government Auditing Standards requirements, the Single Audit Act including the Single Audit Act Amendments of 1996, and Circular A-133 require that'} we specifically consider the internal control structure over federal and state award programs and perform tests of those controls. The test of controls must cover the controls used to administer at least 50% of the - S, expenditures under all federal and state award programs unless we determine the City to be a low risk t auditee, in which case we would use a 25% threshold. We are required to issue a report (in addition to • the report required by Government Auditing Standards) on our consideration of internal control over federal and state programs, including tests of those controls. Our report must disclose reportable s t ,any conditions and material weaknesses we identify as a result of the procedures weperformed. This report �!' i p i tkb crr- does not provide any assurance on the design or the effectiveness of the internal control structure used to administer federal and state award programs. , Additional services available � � � t .. :. ... • •' '. While the work described above is not intended to result in the expression. of assurance or an opinion on Sal sY CYh�} !A " the design and operating effectiveness of the internal control structure, you could engage us to perform agreed -upon procedures or examine and report on a written assertion from the City's management as to V the design and, if desired, the operating effectiveness of the internal control structure or a segment of that ; ; < Standards, Government Auditing Standards and the Single Audit Act COMPLIANCE WITH LAWS AND REGULATIONS a: as Responsibility under GAAS. We are required to design the audit to provide reasonable assurance of detecting errors and irregularities material to the financial statements, and illegal acts with a direct and material effect on financial { statement amounts. .3. i . W41, :sp I- to ;»eal acts that co,Wtd have a material fln�._irect effecton the financial s+t tements, if 4 { { information comes to our attention that provides evidence of the existence of possible indirect effect illegal acts, we must apply procedures directed to ascertaining whether an illegal act has occurred. The results of these procedures are considered by us in forming an opinion on the financial statements. Responsibility under Government Auditing Standards. •q In addition to the responsibilities under GAAS, we are required to design the audit to provide reasonable • assurance of detecting material misstatements resulting from noncompliance with provisions of contract or • grant agreements with a direct and material effect on the determination of financial statement amounts. Government Auditing Standards requires that if specific information comes to our attention providing • evidence of possible noncompliance that could have a material indirect effect on the financial statements, 0 • we must apply audit procedures directed to ascertaining whether that noncompliance has occurred. �' We are required to issue a written report, separately or as a part of the report on the financial statements, q P P Y P P on the results of the procedures performed with respect to compliance with applicable laws and regulations. K'S Responsibility under the Single Audit Act and Circular A-133. In addition to the requirements of GAAS and Government Auditing Standards, the Single Audit Act including the Single Audit Act Amendments of 1996 and Circular A-133 require auditors to perform •7 _ procedures to provide sufficient evidence to express an opinion as to whether the City has administered : its major federal and state award programs in compliance with applicable laws and regulations. After yearend, we will determine, with the City's assistance, the major programs, and we will perform procedures sufficient to express an opinion as to whether the programs have been administered m F ttcompliance with applicable laws and regulations. Additional services available We could also render the following additional services regarding compliance : • t Financial statements. • If the City asserts it complied, in all material respects, with specified laws and regulations; we could © perform agreed upon procedures or an examination engagement accordance with AICPA __.,.. _ ._.:.. P eq .. Y attestation standards aThe procedures we will perform .as r ured b _.. � � P GAAS and'Goveriinint