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HomeMy WebLinkAbout[04g] Audit Services CITY OF ST.JOSEPH Council Agenda Item [04g1 MEETING DATE: December 18,2017 AGENDA ITEM: Audit Services-Requested Action: Authorize execution of the Engagement Letter between the City of St.Joseph and KDV for the years 2017—2019. SUBMITTED BY: Administration/Finance BOARD/COMMISSION/COMMITTEE RECOMMENDATION: PREVIOUS COUNCIL ACTION: BACKGROUND INFORMATION: The City has received the annual engagement letter from KDV to prepare and complete the annual audit. All Cities over 2500 are required to hire an independent auditor annually. They have provided a quote for the next three years and they are as follows: December 2017 $27,750 December 2018 $28,075 December 2019 $28,450 BUDGET/FISCAL IMPACT: See table above ATTACHMENTS: Engagement Letter REQUESTED COUNCIL ACTION: Authorize the Administrator to execute the engagement letter between the City of St.Joseph and KDV for a three year term beginning in 2017 and ending in 2019. c: berganKov December 13,2017 BerganKDV,Ltd. Honorable Mayor and City Council C/0 Ms.Judy Weyrens,City Administrator C/0 Ms. Lori Bartlett, Finance Director Cedar Falls City of St.Joseph 602 Main Street PO Box 668 Suite l00 P.O.Box 489 St.Joseph, MN 56374 Cedar Falls,IA 50613-0026 F 319.268.1715 Dear Honorable Mayor, City Council and CityManagement: F 319.268.1720 This letter is to confirm and summarize our understanding of the terms and objectives of our engagement and Cedar Rapids 27201st Avenue NE the nature and limitations of the services we will provide. Suite 300 P.O.Box 10200 of Engagement Terms: Cedar Rapids,IA Summary52402-0200 T 319.294.8000 Level of Attest Service: Audit(Governmental)/Audit in accordance with Government Auditing Standards F 319.294.9003 (Governmental)and Federal Single Audit in Accordance with OMB Circular A-133, if applicable. Coralville 2530 Corridor Way Financial Statements: Governmental activities, each major fund,aggregate remaining fund information. suite 301 P.O.Box 5267 Coralville,IA Financial Reporting Framework: Accounting Principles Generally Accepted in the United States of 52241-0267 America. T 319.248.0367 F 319.248.0582 Period: As of and for the Year Ended December 31, 2017,2018,and 2019. Des Moines 9207 Northpark Drive Johnston,IA Required Supplementary Information(RSI): Management's Discussion and Analysis(MD&A),Schedule of 50131-2933 Funding Progress—Other Post Employment Benefits,Schedule of Employer Contributions—Other T 515.727.5700 F 515.727.5800 Post Employment Benefits,Schedules of Net Pension Liabilities and City Contributions. Minneapolis AmSupplementary Information: Opinion in relation to the financial statements as a whole, including the Suite 1000 3800 1000 n Blvd W schedule of expenditures of federal awards,if applicable. Bloomington,MN 55431-4420 Engagement Partner: Steven Wischmann CPA. T 952.563.6801 F 952.563.6801 Non-attest Services: Preparation of the financial statements/schedule of federal awards,if applicable. St.Cloud 220 Park Avenue S A.O.Box 1304 Fees: Our fees for these services will be as follows: December 31,2017-$27,750,2018-$28,075,and St.Cloud,MN 2019-$28,450.OMB Single audit program fees to be negotiated if required(annually). 56302-3713 T 320.251.7010 F 320.251.1784 We appreciate the opportunity to be of service to you and believe this letter and attached audit engagement Waterloo agreement accurately summarizes the significant terms of our engagement. If you have any questions, please 100 East Park Avenue let us know. If you agree with the terms of our engagement as described in this letter and as further detailed Suite 300 in the attached audit engagement agreement,please sign the enclosed copy of this summary of engagement P.O.Box 21A IA terms and return it to us. 50704-2100 T 319.234.6885 I have read and I agree to the summary of engagement terms listed above and the terms in the attached F 319.234.6287 audit engagement agreement. bergankdv.com Sincerely, Acknowledged by: BerganKDV, Ltd. SZ (;(/04i --- d0 Signature i C .�l Steven Wischmann,CPA Title Date BerganKDV, Ltd. ATTACHMENT—AUDIT ENGAGEMENT AGREEMENT (GOVERNMENTAL—FEDERAL SINGLE AUDIT) This agreement is to confirm our understanding of the terms and objectives of our engagement and the nature and limitations of the services we are to provide. We will audit the financial statements as identified in the summary of engagement terms,including the related notes to the financial statements,which collectively comprise the basic financial statements of the governmental entity.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 governmental entity'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 governmental entity'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 required RSI is identified in the summary of engagement terms and will be subjected to certain limited procedures, but will not be audited. We may also be engaged to report on supplementary information other than RSI,including the schedule of expenditures of federal awards,that accompanies the governmental entity's financial statements. If we opine on the supplementary information,accompanying the financial statements as identified in the summary of engagement terms,we will subject the 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 we will provide an opinion on it in relation to the financial statements as a whole. If we do not provide an opinion or any assurance on the supplementary information other than RSI as identified in the summary of engagement terms,the 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. Audit Objectives The objective of our audit is the expression of opinions as to whether your financial statements are fairly presented, in all material respects,in conformity with the financial reporting framework identified in the summary of engagement terms and to report on the fairness of the supplementary information for which we opine on as identified in the summary of engagement terms when considered in relation to the financial statements as a whole.The objective also includes reporting on— • Internal control over financial reporting and compliance with provisions of laws,regulations,contracts,and award agreements,noncompliance with which could have a material effect on the financial statements in accordance with Government Auditing Standards. • Internal control over compliance related to major programs and an opinion(or disclaimer of opinion)on compliance with federal statutes, regulations,and the terms and conditions of federal awards that could have a direct and material effect on each major program in accordance with the Single Audit Act Amendments of 1996 and Title 2 U.S.Code of Federal Regulations(CFR)Part 200, Uniform Administrative Requirements,Cost Principles, and Audit Requirements for Federal Awards(Uniform Guidance). The Government Auditing Standards report on internal control over financial reporting and on compliance and other matters will include a paragraph that states that(1)the purpose of the report is solely to describe the scope of testing of internal control and compliance and the results of that testing,and not to provide an opinion on the effectiveness of the entity's internal control or on compliance,and(2)the report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance.The Uniform Guidance report on internal control over compliance will include a paragraph that states that the purpose of the report on internal control over compliance is solely to describe the scope of testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance.Both reports will state that the report is not suitable for any other purpose. 1 BerganKDV, Ltd. ATTACHMENT—AUDIT ENGAGEMENT AGREEMENT (GOVERNMENTAL—FEDERAL SINGLE AUDIT) 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 the Uniform Guidance,and will include tests of accounting records,a determination of major program(s)in accordance with the Uniform Guidance,and other procedures we consider necessary to enable us to express such opinions.We will issue written reports upon completion of our single audit.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 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 issue reports,or we may withdraw from this engagement. 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 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 government or to acts by management or employees acting on behalf of the government. 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 properly planned and performed in accordance with auditing standards generally accepted in the United States of America 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 major programs. However,we will inform the appropriate level of management of any material errors,any fraudulent financial reporting,or misappropriation of assets that come to our attention.We will also inform the appropriate level of management of any violations of laws or governmental regulations that come to our attention,unless clearly inconsequential,and of any material abuse that comes to our attention.We will include such matters in the reports required for a single audit.Our responsibility as auditors is 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,creditors,and financial institutions.We may 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 your responsibilities for the financial statements;schedule of expenditures of federal awards;federal award programs; compliance with laws,regulations,contracts,and grant agreements;and other responsibilities required by generally accepted auditing standards. Audit Procedures—Internal Control Our audit will include obtaining an understanding of the government and its environment,including internal control, sufficient to assess the risks of material misstatement of the financial statements and to design the nature,timing,and extent of further audit procedures.Tests of controls may be performed to test the effectiveness of certain controls that we consider relevant to preventing and detecting errors and fraud that are material to the financial statements and to preventing and detecting misstatements resulting from illegal acts and other noncompliance matters that have a direct and material effect on the financial statements.Our tests,if performed,will be less in scope than would be necessary to render an opinion on internal control and,accordingly,no opinion will be expressed in our report on internal control issued pursuant to Government Auditing Standards. As required by the Uniform Guidance,we will perform tests of controls over compliance 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 award program. However,our tests will be less in scope than 2 BerganKDV, Ltd. ATTACHMENT—AUDIT ENGAGEMENT AGREEMENT (GOVERNMENTAL—FEDERAL SINGLE AUDIT) would be necessary to render an opinion on those controls and,accordingly,no opinion will be expressed in our report on internal control issued pursuant to the Uniform Guidance. An audit is not designed to provide assurance on internal control or to identify significant deficiencies or material weaknesses. However,during the audit,we will communicate to management and those charged with governance internal control related matters that are required to be communicated under AICPA professional standards,Government Auditing Standards,and the Uniform Guidance. Audit Procedures—Compliance As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement,we will perform tests of the governmental entity's compliance with provisions of applicable laws,regulations,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. The Uniform Guidance requires that we also plan and perform the audit to obtain reasonable assurance about whether the auditee has complied with federal statutes,regulations,and the terms and conditions of federal awards applicable to major programs.Our procedures will consist of tests of transactions and other applicable procedures described in the OMB Compliance Supplement for the types of compliance requirements that could have a direct and material effect on each of the governmental entity's major programs.The purpose of these procedures will be to express an opinion on the governmental entity's compliance with requirements applicable to each of its major programs in our report on compliance issued pursuant to the Uniform Guidance. Other Services We will also assist in preparing the financial statements,schedule of expenditures of federal awards,and related notes of the governmental entity in conformity with the financial reporting framework identified in the summary of engagement terms and the Uniform Guidance based on information provided by you.These non-attest services do not constitute an audit under Government Auditing Standards and such services will not be conducted in accordance with Government Auditing Standards. We may provide other non-attest services,as identified in the summary of engagement terms.These services may not be fully covered under this engagement agreement and may be billed separately under other agreements with you. We will perform the services in accordance with applicable professional standards.We,in our sole professional judgment, reserve the right to refuse to perform any procedure or take any action that could be construed as assuming management responsibilities. Management Responsibilities Management is responsible for(1)establishing and maintaining effective internal controls,including internal controls over federal awards,and for evaluating and monitoring ongoing activities,to help ensure that appropriate goals and objectives are met;(2)following laws and regulations;(3)ensuring that there is reasonable assurance that government programs are administered in compliance with compliance requirements;and(4)ensuring that management and financial information is reliable and properly reported. Management is also responsible for implementing systems designed to achieve compliance with applicable laws,regulations,contracts,and grant agreements.You are also responsible for the selection and application of accounting principles;for the preparation and fair presentation of the financial statements,schedule of expenditures of federal awards,and all accompanying information in conformity with the financial reporting framework identified in the summary of engagement terms and for compliance with applicable laws and regulations(including federal statutes)and the provisions of contracts and grant agreements(including award agreements).Your responsibilities also include identifying significant contractor relationships in which the contractor has responsibility for program compliance and for the accuracy and completeness of that information. Management is also responsible for making all financial records and related information available to us and for the accuracy and completeness of that information.You are also responsible for providing us with(1)access to all information of which you are aware that is relevant to the preparation and fair presentation of the financial statements,(2)access to personnel, accounts,books,records,supporting documentation,and other information as needed to perform an audit under the 3 BerganKDV, Ltd. ATTACHMENT—AUDIT ENGAGEMENT AGREEMENT (GOVERNMENTAL—FEDERAL SINGLE AUDIT) Uniform Guidance,(3)additional information that we may request for the purpose of the audit,and(4)unrestricted access to persons within the government from whom we determine it necessary to obtain audit evidence. Your responsibilities include adjusting the financial statements to correct material misstatements and confirming to us in the management representation letter that the effects of any uncorrected misstatements aggregated by us during the current engagement and pertaining to the latest period presented are immaterial,both individually and in the aggregate,to the financial statements as a whole. You are responsible for the design and implementation of programs and controls to prevent and detect fraud,and for informing us about all known or suspected fraud affecting the government involving(1)management,(2)employees who have significant roles in internal control,and(3)others where the fraud could have a material effect on the financial statements.Your responsibilities include informing us of your knowledge of any allegations of fraud or suspected fraud affecting the government received in communications from employees,former employees,grantors,regulators,or others. In addition,you are responsible for identifying and ensuring that the government complies with applicable laws, regulations,contracts,agreements,and grants.Management is also responsible for taking timely and appropriate steps to remedy fraud and noncompliance with provisions of laws,regulations,contracts,and grant agreements,or abuse that we report.Additionally,as required by the Uniform Guidance,it is management's responsibility to evaluate and monitor noncompliance with federal statutes,regulations,and the terms and conditions of federal awards,take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings, promptly follow up and take corrective action on reported audit findings and prepare a summary schedule of prior audit findings and a separate corrective action plan.The summary of prior audit findings should be available for our review during our field work. You are responsible for identifying all federal awards received and understanding and complying with the compliance requirements and for the preparation of the schedule of expenditures of federal awards(including notes and noncash assistance received)in conformity with the Uniform Guidance.You agree to include our report on the schedule of expenditures of federal awards in any document that contains and indicates that we have reported on the schedule of expenditures of federal awards.You also agree to include the audited financial statements with any presentation of the schedule of expenditures of federal awards that includes our report thereon or make the audited financial statements readily available to intended users of the schedule of expenditures of federal awards no later than the date the schedule of expenditures of federal awards is issued with our report thereon.Your responsibilities include acknowledging to us in the written representation letter that(1)you are responsible for presentation of the schedule of expenditures of federal awards in accordance with the Uniform Guidance;(2)you believe the schedule of expenditures of federal awards,including its form and content,is stated fairly in accordance with the Uniform Guidance;(3)the methods of measurement or presentation have not changed from those used in the prior period;and(4)you have disclosed to us any significant assumptions or interpretations underlying the measurement or presentation of the schedule of expenditures of federal awards. You are also responsible for the preparation of the other supplementary information,which we have been engaged to report on,in conformity with the financial reporting framework identified in the summary of engagement terms.You agree to include our report on the supplementary information in any document that contains and indicates that we have reported on the supplementary information.You also agree to include the audited financial statements with any presentation of the supplementary information that includes our report thereon or make the audited financial statements readily available to users of the supplementary information no later than the date the supplementary information is issued with our report thereon.Your responsibilities include acknowledging to us in the written representation letter that(1)you are responsible for presentation of the supplementary information in accordance with the financial reporting framework identified in the summary of engagement terms;(2)you believe the supplementary information,including its form and content,is stated fairly in accordance with the financial reporting framework identified in the summary of engagement terms;(3)the methods of measurement or presentation have not changed from those used in the prior period;and(4)you have disclosed to us any significant assumptions or interpretations underlying the measurement or presentation of the supplementary information. Management is responsible for establishing and maintaining a process for tracking the status of audit findings and recommendations.Management is also responsible for identifying and providing report copies of previous financial audits, attestation engagements,performance audits,or other studies related to the objectives discussed in the Audit Objectives section of this letter.This responsibility includes relaying to us corrective actions taken to address significant findings and recommendations resulting from those audits,attestation engagements,performance audits,or studies.You are also responsible for providing management's views on our current findings,conclusions,and recommendations,as well as your planned corrective actions,for the report,and for the timing and format for providing that information. 4 BerganKDV, Ltd. ATTACHMENT—AUDIT ENGAGEMENT AGREEMENT (GOVERNMENTAL—FEDERAL SINGLE AUDIT) You agree to assume all management responsibilities for the non-attest services identified in the summary of engagement terms and any other non-attest services we provide.You will be required to acknowledge in the management representation letter our assistance with preparation of the financial statements,schedule of expenditures of federal awards,and related notes and that you have reviewed and approved the financial statements,schedule of expenditures of federal awards,and related notes prior to their issuance and have accepted responsibility for them.Further,you agree to oversee the non-attest services by designating an individual,preferably from senior management,with suitable skill, knowledge,or experience;evaluate the adequacy and results of those services;and accept responsibility for them. Engagement Administration,Fees,and Other We 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 your 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,we will remain responsible for the work provided by any such third-party service providers. We understand that your employees will prepare all cash,accounts receivable or other confirmations we request and will locate any documents selected by us for testing. At the conclusion of the engagement,we will complete the appropriate sections of the Data Collection Form that summarizes our audit findings.It is management's responsibility to electronically submit the reporting package(including financial statements,schedule of expenditures of federal awards,summary schedule of prior audit findings,auditors' reports,and corrective action plan)along with the Data Collection Form to the federal audit clearinghouse.We will coordinate with you the electronic submission and certification. If applicable,we will provide copies of our report for you to include with the reporting package you will submit to pass-through entities.The Data Collection Form and the reporting package must be submitted within the earlier of 30 calendar days after receipt of the auditors'reports or nine months after the end of the audit period. We will provide copies of our reports to the governmental entity;however,management is responsible for distribution of the reports and the financial statements.Unless restricted by law or regulation,or containing privileged and confidential information,copies of our reports are to be made available for public inspection. The audit documentation for this engagement is the property of BerganKDV, Ltd.and constitutes confidential information. However,subject to applicable laws and regulations,audit documentation and appropriate individuals will be made available upon request and in a timely manner to oversight,regulatory,state agencies or their designees pursuant to authority given to them by law or regulation,a federal agency providing direct or indirect funding,or the U.S.Government Accountability Office for purposes of a quality review of the audit,to resolve audit findings,or to carry out oversight responsibilities.We will notify you of any such request. If requested,access to such audit documentation will be provided under the supervision of BerganKDV, Ltd.personnel. Furthermore,upon request,we may provide copies of selected audit documentation to the aforementioned parties.These parties may intend or decide to distribute the copies or information contained therein to others,including other governmental agencies. The audit documentation for this engagement will be retained for a minimum of five years after the report release date or for any additional period requested by the oversight,regulatory or state agencies.If we are aware that a federal 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 audit documentation. The engagement partner,as identified in the summary of engagement terms,is responsible for supervising the engagement and signing the reports or authorizing another individual to sign them. Our fees for these services are detailed in the summary of engagement terms.The fee estimate is based on anticipated cooperation from your personnel and the assumption that unexpected circumstances will not be encountered during the engagement.If significant additional time is necessary,we will keep you informed of any problems we encounter and our fees will be adjusted accordingly.Our invoices for these fees will be rendered each month as work progresses and are 5 • BerganKDV, Ltd. ATTACHMENT—AUDIT ENGAGEMENT AGREEMENT (GOVERNMENTAL—FEDERAL SINGLE AUDIT) payable on presentation.In accordance with our firm policies,work may be suspended if your account becomes 60 days or more overdue and will not be resumed until your account is paid in full.If we elect to terminate our services for nonpayment,our engagement will be deemed to have been completed upon written notification of termination,even if we have not completed our report.You will be obligated to compensate us for all time expended and to reimburse us for all out-of-pocket expenditures through the date of termination.A service charge of 1%per month,which is an annual rate of 12%,will be added to all accounts unpaid 30 days after billing date.If collection action is necessary,expenses and reasonable attorney's fees will be added to the amount due. You may request that we perform additional services not contemplated by this engagement agreement or summary letter. If this occurs,we will communicate with you regarding the scope of the additional services and the estimated fee.We also may issue a separate engagement agreement and summary letter covering the additional services. In the absence of any other written communication from us documenting such additional services,our services will continue to be governed by the terms of this engagement agreement and summary letter. During the course of our engagement,we may accumulate records containing data which should be reflected in your books and records.You will determine that all such data will be so reflected.Accordingly,you will not expect us to maintain copies of such records in our possession. This engagement agreement and summary letter includes your authorization for us to supply you with electronically formatted financial statements or drafts of financial statements,financially sensitive information,spreadsheets,trial balances or other financial data from our files,upon your request. If you intend to publish or otherwise reproduce the financial statements and make reference to our Firm name,you agree to provide us with printers'proofs or masters for our review and approval before printing.You also agree to provide us with a copy of the final reproduced material for our approval before it is distributed.Additionally,if you include our report or a reference to our Firm name in an electronic format,you agree to provide the complete electronic communication using or referring to our name to us for our review and approval prior to distribution. During the course of our engagement,we will request information and explanations from management regarding the entity's operations,internal controls,future plans,specific transactions,and accounting systems and procedures.At the conclusion of our engagement,we will require,as a precondition to the issuance of our report,that management provide certain representations in a written representation letter.The procedures we will perform in our engagement and the conclusions we reach as a basis for our report will be heavily influenced by the written and oral representations that we receive from management.Accordingly,false representations 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 entity's financial statements that we may fail to detect as a result of false or misleading representations that are made to us by management. Any disputes between us that arise under this agreement,or for a breach of this agreement,or that arise out of any other services performed by us for you,must be submitted to nonbinding mediation before either of us can start a lawsuit against the other.To conduct mediation,each of us shall designate a representative with authority to fully resolve any and all disputes,and those representatives shall meet and attempt to negotiate a resolution of the dispute.If that effort fails,then a competent and impartial third party acceptable to each side shall be appointed to hold and conduct a nonbinding mediation proceeding.You and we will equally share in the expenses of the mediator and each of us will pay for our own attorneys'fees,if any.No lawsuit or legal process shall be commenced until at least 60 days after the mediator's first meeting with the parties. The nature of our engagement makes it inherently difficult,with the passage of time,to present evidence in a lawsuit that fully and fairly establishes the facts underlying any dispute that may arise between us.We both agree that notwithstanding any statute of limitation that might otherwise apply to a claim or dispute,including one arising out of this agreement or the services performed under this agreement,or for breach of contract,fraud or misrepresentation,a lawsuit must be commenced within 24 months after the date of our report.This 24 month period applies and starts to run on the date of each report,even if we continue to perform services in later periods and even if you or we have not become aware of the existence of a claim or the basis for a possible claim.In the event that a claim or dispute is not asserted at least 60 days before the expiration of this 24 month period,then the period of limitation shall be extended by 60 days,to allow the parties of conduct nonbinding mediation. Our role is strictly limited to the engagement described in this letter,and we offer no assurance as to the results or ultimate outcomes of this engagement or of any decisions that you may make based upon our communications with,or our reports 6 BerganKDV, Ltd. ATTACHMENT—AUDIT ENGAGEMENT AGREEMENT (GOVERNMENTAL—FEDERAL SINGLE AUDIT) to you.Your entity will be solely responsible for making all decisions concerning the contents of our communications and reports,for the adoption of any plans and for implementing any plans you may develop,including any that we may discuss with you. You agree that it is appropriate to limit the liability of BerganKDV, Ltd.,its shareholders,directors,officers,employees and agents and that this limitation of remedies provision is governed by the laws of Minnesota,without giving effect to choice of law principles. You further agree that you will not hold us liable for any claim,cost or damage,whether based on warranty,tort,contract or other law,arising from or related to this agreement,the services provided under this agreement,the work product,or for any plans,actions or results of this engagement,except to the extent authorized by this agreement.In no event shall we be liable to you for any indirect,special,incidental,consequential,punitive or exemplary damages,or for loss of profits or loss of goodwill,costs or attorney's fees. The exclusive remedy available to you shall be the right to pursue claims for actual damages that are directly caused by acts or omissions that are breaches by us of our duties under this agreement. Government Auditing Standards require that we provide you with a copy of our most recent external peer review report and any letter of comment,and any subsequent peer review reports and letters of comment received during the period of contract.Our 2014 peer review report is attached as follows. 7 BergenKDV, Ltd. ATTACHMENT—AUDIT ENGAGEMENT AGREEMENT (GOVERNMENTAL—FEDERAL SINGLE AUDIT) Lewis, Kisch MN 5503 •''tsat}07-3356, k51)13?•3KOS Associates lease►�r,1 L7'i j.Siler,t?A 11i �s A.Madsen,EPA J iniwu, chuc$,CM CERTIVivi) 1L(C ACCOUN TANTS SYSTEM REVIEW REPORT Ju}r2+1,2014 To Rhe Shareholders Kern,DeWenter,Vre,Ltd. and the Peer Review Committee of the Minnesota Society of Certified Public Mcouritents We have reviewed the eysten or quality centre'for the*recounting end auditing prectioe of Kern,Dewenier,Mere, Ltd. (the firm)in effect for the year ended Mardi 31,2014. Our peer review was Conducted In accordance with the Standerne for Performing and Reporting on Peer Reviews astebllehed by the Peer Review Board of'he American Irate Certifiedaf` Pubic Accountants. As a part of our peer review,we ocinisidensd reviews by regulatory en tion,if applicable, in determining the nature and extent of ourproceeltrres, The firm is responsible for designing a system of quality control end complying with it to provide the firm meth reasonebte a LlretIta of performing and reporting in conformity with,applicetile professional standards in all material respects. Our responsibility is to express an opinion on the design of the system equality control and the firm's corripllance therewith based on our review. The rrtetu:p, objectives,scope, limitations of,and;he procedures performed in a System Review are described in tie standards at w+ww,a>cpa orrrrprsurr ary. As required by the star►dards.engagements eetecfed for review included engagements performed under Government Auditing Stem and audits of employee benefit plans. In cur opinion,the system of quality control for the accounting and audairig practice of Kern,DeVQenter,Viere, Ltd. in effect for the year ended March 31,2014,has been suitably designed and complied with to provide the fern will reasonable assurance of performing and.reporting ir1 periforrnity with applicable professional standards in all material respects. Firms can receive a rating of pass,pass ugh dtaficianc} r J,or fa Kern, DeWenter,Vivre,Ltd. has reeeived a peer review tilting of saws Respectfillfy eub'm ted, 9+ r.•, , utiebes r„ •• . {itIARs=SCCiElyOfC rafiitli Y'u1ii� :inrox:hnM tld�. store imr.Lt snt».varctYttiikei Puts, imx.n.nr:,Mx Nranntawa3.:cmeiuiana1rubiat + Rte wwvi .lcwirltiArka n 8