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HomeMy WebLinkAbout8 KPMG Audit _ _ __ _. ___ _ _ _.. lox TRUCKEE DONNER Public Utility District I Memorandum To: Board of Directors From: Mary Chapman,Administrative Services Manager Date: October 30, 2003 SUBJECT: Proposal from KPMG to perform the District's 2003 audit and provide other related services 1. WHY THIS ITEM IS BEFORE THE BOARD Each year the Board of Directors approves hiring an auditing firm to perform the District's annual audit. It's that time of year again. 2. HISTORY Last year the District hired KPMG to perform the 2002 audit with a proposal to perform the 2003 and 2004 audits. Their original proposal was $45,000 for 2002, $47,250 for 2003 and $49,500 for 2004. The proposal included an estimated $4,000 in out-of-pocket expenses for each year. 3. NEW INFORMATION Attached is a letter of engagement from KPMG to perform the 2003 audit in the amount of $47,250 plus $4,000 in estimated out-of-pocket expenses. Should the Board authorize KPMG to perform the 2003 audit, this letter of engagement would be executed by an authorized person. Peter Holzmeister has executed these letters of engagement in the past. In addition to the normal audit fees, KPMG has provided us with an estimated cost to assist the District's staff with the implementation of new GASB 34 requirements. These requirements affect the District beginning in 2003. 1 am told that the requirements mostly affect how we gather information and report it in the audit report. I believe that their estimate of$10,240 is conservative. However, at this time I do not know what the details of the requirements are. I suspect that our staff will be doing the majority of the required work. RECOMMENDATION: A) Authorize Peter Holzmeister to execute the engagement letter from KPMG hiring them to perform the 2003 annual audit. B) To authorize KPMG to assist the District's staff to meet the new GASB 34 accounting and reporting requirements in an amount not to exceed $10,240. __ _ __ Suite 2000 Telephone 503 221 6500 1211 South West Fifth Avenue Fax 503 796 7650 Portland, OR 97204 Ms. Mary Chapman Truckee Donner Public Utility District 11570 Donner Pass Road Truckee, California 96161 October 6, 2003 Attention: Ms. Mary Chapman, Administrative Services Manager This letter will confirm our understanding of our engagement to report upon our audit of the balance sheet of Truckee Donner Public Utility District(the District) as of December 31,2002 and 2001,and the related statements of operations and cash flows for the years then ended. Should the District wish to include these financial statements and our report thereon in a registration statement proposed to be filed under the Securities Act of 1933 at some future date, we would consider our consent to the inclusion of our report in such registration statement at that time. We will conduct the audit in accordance with auditing standards generally accepted in the United States of America with the objective of expressing an opinion as to whether the presentation of the financial statements, taken as a whole, conforms with accounting principles generally accepted in the United States of America. In conducting the audit, we will perform tests of the accounting records and such other procedures, as we consider necessary in the circumstances to provide a reasonable basis for our opinion on the financial statements. We also will assess the accounting principles used and significant estimates made by management, and evaluate the overall financial statement presentation. Our report will be addressed to the board of directors of the District. We cannot provide assurance that an unqualified opinion will be rendered. Circumstances may arise in which it is necessary for us to modify our report or withdraw from the engagement. In such circumstances, our findings or reasons for withdrawal will be communicated to the board of directors. The District agrees that all records, documentation, and information we request in connection with our audit will be made available to us, that all material information will be disclosed to us, and that we will have the full cooperation of the District's personnel. As required by auditing standards generally accepted in the United States of America, we will make specific inquiries of management about the representations embodied in the financial statements and the effectiveness of internal control, and obtain a representation letter from management about these matters. The responses to our inquiries, the written representations, and the results of audit tests, among other things, comprise the evidential matter we will rely upon in forming an opinion on the financial statements. Moll Y MG LLP Kf v16 S linl 41 01 0 eJshiP.is smOsi o'K NC O^EI, __ _ .. ... .. ... ..... _ . _.__ _ . _ _ __ _ _ Ms. Mary Chapman October 6, 2003 Page 2 The management of the District has responsibility for the financial statements and all representations contained therein. Management also is responsible for identifying and ensuring that the District complies with laws and regulations applicable to its activities, for preventing and detecting fraud, for adopting sound accounting policies, and for establishing and maintaining effective internal control over financial reporting to maintain the reliability of the financial statements and to provide reasonable assurance against the possibility of misstatements that are material to the financial statements. Our audit is planned and performed to obtain reasonable, but not absolute assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud. Absolute assurance is not attainable because of the nature of audit evidence and the characteristics of fraud. Therefore, there is a risk that material errors, fraud (including fraud that may be an illegal act), and other illegal acts may exist and not be detected by an audit performed in accordance with auditing standards generally accepted in the United States of America. Also, an audit is not designed to detect matters that are immaterial to the financial statements. To the extent that they come to our attention, we will inform management about any material errors and any instances of fraud or illegal acts. Further, to the extent that they come to our attention,we will inform the board of directors about fraud and illegal acts that involve senior management, fraud that in our judgment causes a material misstatement of the financial statements of the District, and illegal acts, unless clearly inconsequential,that have not otherwise been communicated to the board of directors. Management is responsible for adjusting the financial statements to correct material misstatements and for affirming to the auditor in the representation letter that the effects of any uncorrected misstatements aggregated by the auditor during the current engagement and pertaining to the latest period presented are immaterial, both individually and in the aggregate, to the financial statements being reported upon taken as a whole. Because of the importance of management's representations to the effective performance of our services, the District will release KPMG LLP and its personnel from any claims, liabilities, costs and expenses relating to our services under this letter attributable to any misrepresentations in the representation letter referred to above. In planning and performing our audit, we will consider the District's internal control in order to determine the nature, timing and extent of our audit procedures for the purpose of expressing an opinion on the financial statements and not to provide assurance on internal control. While we are not being engaged to report on the District's internal control and are not obligated to search for reportable conditions, we will communicate reportable conditions to you to the extent they come to our attention. Reportable conditions are significant deficiencies in the design or operation of internal control, which could adversely affect the organization's ability to record, process, summarize and report financial data consistent with the assertions of management in the financial statements. The definition of "reportable conditions" does not include potential future internal control problems, i.e., control problems coming to our attention that do not affect the preparation of financial statements for the period under audit. 11 A Ms.Mary Chapman October 6, 2003 Page 3 The work papers for this engagement are the property of KPMG LLP (KPMG). However, we may be requested to make certain work papers available to the state auditors of the State of California pursuant to authority given to it by law or regulation. If requested, access to such work papers will be provided under the supervision of KPMG personnel. Furthermore,upon request,we may provide photocopies of selected work papers to the state auditors of the State of California. The State of California may intend, or decide, to distribute the photocopies or information contained therein to others, including other government agencies. In the event KPMG is requested pursuant to subpoena or other legal process to produce its documents relating to this engagement for the District in judicial or administrative proceedings to which KPMG is not a party, the District shall reimburse KPMG at standard billing rates for its professional time and expenses, including reasonable attorney's fees, incurred in responding to such requests. While the audit report may be sent to the District electronically by the KPMG engagement partner for the District's convenience, only the signed(electronically or manually)report constitutes the District's record COPY. Based upon our discussions with and representations of management,we estimate that our fees for these services will be $47,250. This estimate is based on the level of experience of the individuals who will perform the services. In addition,expenses are billed for reimbursement as incurred. Expenses for items such as travel, telephone,postage,and typing,printing, and reproduction of financial statements are estimated at$4,000. Circumstances encountered during the performance of these services that warrant additional time or expense could cause us to be unable to complete the services within the above estimates. We will endeavor to notify you of any such circumstances as they are assessed. The fees will be billed according to the following schedule: December 31, 2003 $ 5,000 March 15,2004 $37,250 April 15, 2004 5,000 Total $47,250 Additional Services Additional services related to the implementation of GASB 34 will be billed on an hourly basis at a blended rate of$185 an hour. We currently estimate our fees for this service will be $10,240, however this estimation will vary significantly depending on the level of preparedness by the District. MI ,. Ms. Mary Chapman October 6, 2003 Page 4 The engagement outlined in this letter is contingent upon satisfactory completion of our normal client evaluation and acceptance procedures. We shall be pleased to discuss this letter with you at any time. For your convenience in confirming these arrangements,we enclose a copy of this letter. Please sign and return it to us. Very truly yours, KPMG LLP Timothy E. McCann Partner Dsaml kreM=aPublicUtilityDi et-E pgc�try I0-6-03-HG.doo Enclosures ACCEPTED: Truckee Donner Public Utility District Authorized Signature Title Date