The URL can be used to link to this page

Home My WebLink AboutAudit Proposal Truckee- Donner Public Utility District October 11 , 2005 Tom Unke, CPA, Partner tunke@vlrchowkrause.com aoRc 4� 4 608.240.2394 w� e.M� r Thank you , it' s great to be here ! { q r � aWa. What I ' d Like to Cover Today • Who we are • Our public power background • How our firm can make a difference for you h • Our promises to you 4 w p x' Y • Any questions or concerns you have ,, . . y wre4 ti �+m+.mva-e varcvav;+ yynryRn `w r � Who is Virchow Krause ? y �f • Our company is 75 years old • We are the 15t" largest firm in the U . S . �� • We specialize in public utilities 4 — Audit/attest Consulting h Emphasis on job costing and plant accounting '' � ° We serve 272 utilities in 35 states n Our Collmitment to Public Power h We are theAPPA instructors on your issues We are experts with today's accepted job costing principles We are networked with national thought-leaders y 4 iS. i t i Kp,tip' ry .r We have firsthand knowledge of (national) best-practices . c:. _ _..: .. �. �.i .rf ^ +caw •;..„„ y.�..:. m.,...�..n v...x. 'r+ But Wisconsin ? ! yX`�xi•"�` �� rfytiH;,�"a • National client base • Demonstrated commitment to the West Coast • Midwestern work ethic • At tractwe fees Demonstrated commitment to Public Power is sec ond-to-none 4Y 4' 'y Yi Yeti { Why Virchow Krause ? • Unparalleled public utility expertise • Beyond-the-audit expertise — Telecommunications — Engineering , GIS w Our professionals have walked in your shoes • We are genuinely nice , hardworking people • An audit isn 't just an audit aV Uniqueness to the Industry . Y y WY 'vt 5 y, � x Sound Familiar? J • Plant accounting needs work • We need to get better job estimates to our developers • Where do we record telecommunications assets? w • Are we financially "OK?" x reports should we be looking Which re p g at to measure the District's r: performance? •S c yl) .z �n Your Team Thomas E. Unke, CPA Jodi L. Dobson, CPA Sarah S. Schleede, CPA Partner Manager Senior Accountant 608.240.2394 608.240.2469 608.240.2310 * gyp tunke@virchowkrause.com jdobson@virchowkrause.com sschleede@virchowkrause.com l ! .... Public utilities Are the Only Type of �l � 4•.' ('Y I4 4 Clients We Serve! r 5 v ry How Will Our Skills , Commitment to the Industry and Expertise Actually Help YOU ? • You will be an absolute priority a } • You will have complete contract L :w flexibility (enter and exit whenever A, K VP 5 you wish) r?v 9th"K Ry Y L Y ' ...... ,,......... .,,....w _...._.. ye ,..• o.- v +...'+h n - •,..r ..go-,. r+ewwv a.wrvv,v t u a How Will our Skills , . . Commitment to the Industry and Expertise Actually Help You ? • You will have access to all VK } public power resources • You will experience no staff turnover without your permission .•yyr KMn 5i r • Your staff will find this to be a low- stress transition x. w Our Promises to You • We will be honest in all that we do • We will go above and beyond what you 've come to expect from an accounting firm • We will always say YES when you ask for our help s • We will be a pleasure to work with What would you like to discuss ? Thank You Tom Unke, CPA, Partner tunke@virchowkrause.com v. 608.240.2394 i Proposal for Financial Auditing and Single Audit Professional Services Truckee Donner Public utility District "Truckee, CA For the Year Ending December 31 , 2005 and Option for Two Additional Years VirchowKrause company "Providing National Leadership for Public Power Entities" Ten Terrace Court P.O.Box 7398 Madison, WI 53707-7398 800.362.7301 virchowkrause.com Thomas E. Unke, CPA, Partner 608.240.2394 October 11, 2005 Virchow -ausarry e cor� LETTER OF TRANSMITTAL October 11, 2005 The Board of Directors Truckee Donner Public Utility District 1 1570 Donner Pass Road Truckee,CA 96161 Dear Board of Directors: We appreciate the opportunity to submit this proposal to the Truckee Donner Public Utility District(the"District"). Selecting an audit firm that provides quality service and understands the unique operating environment of the public power industry is important to the continued success of your organization. Our proposal is based on the Request for Proposal (RFP)and our substantial experience with other similar utilities throughout the United States. Understanding of the Work Our proposal includes audit services(financial and single audits)for the District for the year ending December 31, 2005, with the option of auditing the District's financial statements for each of the two subsequent fiscal years at the discretion of the District through December 31.2007, and to provide technical assistance to the District from December 31,2005 through December 31, 2007.The purpose of the audit will be to express an opinion on the fair presentation of the District's financial statements in conformity with accounting principles generally accepted in the United States of America and in conformity with the requirements of GASB and FASB Why Do We Believe that Virchow Krause is the Best Qualified National Recognition.Virchow Krause is nationally recognized in the public utility industry and provides services to utilities in 35 states.Our largest public power client has six billion dollars of assets and serves 1.1 million customers.We are also sought out by national organizations such as the American Public Power Association to speak, teach courses, and represent the industry. In addition, we provide expert testimony to FERC and state agencies. We have assisted with bond issuances for over two billion dollars in financing, including representation of utilities at S&P and Moodv's. Unsurpassed Industry Specialization, Virchow Krause has a substantial history of utility and joint action auditing and accounting. Our Public Sector Group includes over 100 full-time employees currently providing services to 260 public utilities. As the 13th largest CPA firm in the nation, we also have specialists in consulting, internal audit,technology, human resources,and other areas available to serve the District. Comfort with Rating Agencies.We provide significant credibility with rating agencies when placing audit opinions on financial statements. Recently,we were approved to conduct an audit of another utility, primarily based on being recognized as having "national recognition in the joint action community" by the public finance community. Team Capability and Chemistry.Our employees are genuinely nice people. Virchow Krause's key strategies include employing technical experts that people like to work with. We know you have a choice to select multiple vendors. Wouldn't you like to work with nice people?Our chemistry fits public power entities nicely. Ten Terrace Court•PO Box 7398•Madison,W 153707-7398•Tel 608,249,6622•Fax 608.249.8532•www v rchowk au e coia Virchow, Krause & Company, LLP Certified Public Accountants&Consultants•An Independent Member of Baker Tilly International ---------- The Board of Directors Truckee Donner Public Utility District October 11, 2005 Page 2 Experience.We understand the needs and pressures facing public power. Our continuing relationship with hundreds of utilities and other public sector entities provides a strong foundation to meet the District's needs. We have presented seminars on a variety of public utility financial and management issues at both the national and regional levels.Our staff comes ready with the experience and creativity to find practical solutions and provide the District with value for the services we will provide to you. Depth of Resources.The members of the project team have extensive prior utility experience. Your staff will not need to spend time explaining the intricacies of the industry. As a team, we are committed to low engagement turnover. If turnover does occur, we have the Learn depth to utilize personnel that are equally experienced in the industry to serve you. The average experience level of the District's engagement team approaches 15 years.With this level of experience, you can be assured of prompt and knowledgeable experience. Relationships. Virchow Krause's philosophy and desire is to build long-term relationships with our clients.We will take the time to learn and understand your organization and needs. Our goal is to provide valuable service and contribute to your success by serving as your most valued advisor. We hope that our client service philosophy, expertise,and reputation for quality will be major factors you consider when evaluating our firm. In subsequent sections of our proposal we present additional information regarding the audit objectives and approach, our qualifications and experience,the project team, references regarding similar engagements and other significant information consistent with your technical requirements. We appreciate the opportunity to submit this proposal and look forward to hopefully working with the District's staff and your Board of Directors on this engagement. Sincerely, VIRCHOrW.KKRAUSE &COMPANY, LLP Thomas E. Unke, CPA, Partner TEU/dss Enclosures IMINNOMMENOMMMM= We have addressed the requirements in your request for proposal as follows: Proposal Re uirement Scope of Services Pa e# One General Requirements I Two Firm Qualifications and Experience 2 Three Partner, Supervisory and Staff Qualifications and Experience 8 Four Similar Engagements—Electric Utilities and A133 Audits 17 Five Specific Audit Approach 19 Six Other Ke Information 26 Seven Forensic Accounting Expertise 28 Virchow�rause &company ABOUT Vmciiow KRAUSE Virchow Krause is one of the largest and oldest certified public accounting firms in the United States,originating in 1931. Our staff today includes 144 partners and approximately 1,000 total staff located throughout 14 offices. The 2004 Public Accounting Report ranked us as the 13th largest certified public accounting firm in the United States. In 2004. they also rated us as one of the fastest growing accounting firm in the United States. We have established ourselves as a comprehensive service provider by not only being proficient in our core competencies of accounting, auditing and tax, but also with our affiliate and extended services. Our mission is to serve as our clients' Most Valued Advisor.We strive to achieve this by providing value-added advice and guidance throughout many aspects of your organization. Our goal is to establish an enduring relationship with you that you will count on for years to come. As a full service accounting and consulting firm,we have a long history of commitment to our clients and strive to ensure your complete satisfaction.Our staff responds to your needs by carefully listening and evaluating your particular situation.We go beyond the services of a traditional CPA firm to find innovative solutions and offer useful suggestions to strengthen your organization. `OUTY STAFF EXPERTISE AND RESOURCE COPAPUTPAENT Virchow Krause has taken a unique approach to serving public utilities and joint action agencies. Our firm believes in and is organized around industry specialization. Virchow Krause has an Energy and Utilities Group,consisting of over 40 professionals,dedicated entirely to serving utilities. Because of this specialized focus,our staff understands the issues you face and have the experience to find effective solutions. All staff assigned to the District's audit are full-time Virchow Krause staff who are experienced in utility accounting and auditing. The staffing for this engagement will be done out of our Madison, Wisconsin and Minneapolis, Minnesota locations. Our delivery plan will assign four(4)full-time professionals to the engagement for audit fieldwork. Our firm doesn't believe in part-time employment to serve our customers. The District will not have any part-time employees assigned to this engagement. Virchogrause & ompany 2 AUDIT QUALITY CONTROL We are members of the Securities and Exchange Commission Practice Section (SECPS)and Private Companies Practice Section (PCPS)of the American Institute of Certified Public Accountants. As members of the SECPS and PCPS, we have agreed to subject our auditing policies and procedures to an independent outside review.The peer review is required every three years, and was successfully completed from 1982 through 2003. Many of the engagements selected by the peer review team are governmental audits. A copy of the most recent opinion is reproduced on the next page. As in the past, we have received a 'clean`opinion, the highest level of assurance we can obtain regarding our audit practice. We did not receive a letter of comments. We also underwent a peer review in 2003, and the final opinion is pending,although, preliminarily, it is again a"clean'opinion and does not contain any letters of comment- In addition to the external peer review, Virchow Krause performs internal office inspections annually, which ensures that we are maintaining our audit quality at the highest possible standards.Mr. Kim L.Tredinnick,audit quality control partner,also performs external peer reviews for numerous CPA firms throughout the United States. Utility audit inspections have taken place in every peer review conducted by Virchow Krause. Since Virchow Krause performs over 200 utility audits annually, it is an area that is always reviewed during peer reviews. Virchow Krause's auditing procedures and workpapers are in full compliance with the applicable federal and state guidelines as indicated elsewhere in this proposal. Because of the large volume of public sector work we do, and the numerous single audits we do every year,our workpapers and procedures often undergo review by regulatory agencies. We retain all workpapers for a specified period and the District can have access to those workpapers at its discretion. o DISCIPLINARY ACTION We are pleased to report that we have never had a finding of substandard work or any disciplinary action against us by the State Board, AICPA or any other federal or state agency. The following pages are copies of our most recent peer reviews. Virchogrause & ompany 3 NOMEMEMEMM MIX0 PEER REVIEW LETT ER (2003) ACCOUNTANTS CONSULTANTS To the Partners of Virchow, Krause&Company, LLP And the SEC Practice Section Peer Review Committee We have reviewed the system of quality control for the accounting and auditing practice of Virchow, Krause & Company, LLP (the firm) in effect for the year ended June 30. 2003. A system of quality control encompasses the firm's organizational structure and the policies adopted and procedures established to provide it with reasonable assurance of conforming with professional standards. The elements of quality control are described in the Statements on Quality Control Standards issued by the American Institute of Certified Public Accountants (the AICPA). The design of the system and compliance with it are the responsibilities of the firm. In addition, the firm has agreed to comply with the membership requirements of the SEC Practice Section of the AICPA Division for CPA Firms (the Section). Our responsibility is to express an opinion on the design of the system, and the tirm's compliance with that system and the Section's membership requirements based on our review. Our review was conducted in accordance with standards established by the Peer Review Committee of the Section and included procedures to plan and perform the review that are summarized in the attached description of the peer review process. Our review would not necessarily disclose all weaknesses in the system of quality control or all instances of Lack of compliance with it or with the membership requirements of the Section since it was based on selective tests. Because there are inherent limitations in the effectiveness of any system of quality control, departures from the system may occur and not be detected. Also, projection of any evaluation of a system of quality control to future periods is subject to the risk that the system of quality control may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, the system of quality control for the accounting and auditing practice of Virchow, Krause & Company. LLP in effect for the year ended June 30 2003, has been designed to meet the requirements of the quality control standards for an accounting and auditing practice established by the AICPA and was complied with during the year then ended to provide the firm with reasonable assurance of conforming with professional standards. Also, in our opinion, the firm complied during that year with the membership requirements of the Section in all material respects. Richmond, Virginia (VJ December 3, 2003 is VirchowKrause &(Mpany a .............. .. Attachment to the Peer Review Report of Virchow, Krause & Company I LP Description of the Peer Review Process Overview Member firms of the AICPA SEC Practice Section (the Section) must have their system of quality control periodically reviewed by independent peers. These reviews are system and compliance oriented with the objective of evaluating whether: The reviewed firm's system of quality control for its accounting and auditing practice has been designed to meet the requirements of the Quality Control Standards established by the AICPA. The reviewed firm's quality control policies and procedures were being complied with to provide the firm with reasonable assurance of complying with professional standards. The reviewed firm was complying with the membership requirements of the SECPS in all material respects. The Section's Peer Review Committee (PRC) establishes and maintains review standards. At regular meetings and through report evacuation task forces, the PRC considers each peer review, evaluates the reviewer's competence and performance, and examines every report, letter of comments, and accompanying response from the reviewed firm that states its corrective action plan before the peer review is finalized. The Transition Oversight Staff(formerly the staff of the Public Oversight Board, an independent oversight body) plays a key role in overseeing the performance of peer reviews working closely with the peer review teams and the PRC. Once the PRC accepts the peer review reports, letters of comments, and reviewed firms' responses, they are maintained in a file available to the public. In some situations, the public file also includes a signed undertaking by the firm agreeing to specific follow-up action requested by the PRC. That file also includes the firm's annual report which contains information regarding the number of firm offices, firm professionals, and SEC clients for which the firm is principal auditor-of-record. F1 Virchogrause & ompany 5 MOMMMUZZ Planning the Review To plan the review of Virchow, Krause & Company, LLP, we obtained an understanding of (1) the nature and extent of the firm's accounting and auditing practice and (2) the design of the firm's system of quality control sufficient to assess the inherent and control risks implicit in its practice. Inherent risks were assessed by obtaining an understanding of the firm's practice, such as the industries of its clients and other factors of complexity in serving those clients, and the organization of the firm's personnel into practice units. Control risks were assessed by obtaining an understanding of the design of the firm's system of quality control, including its audit methodology, and monitoring procedures. Assessing control risk is the process of evaluating the effectiveness of the reviewed firm's quality control system in preventing the performance of engagements that do not comply with professional standards. Performing the Review Based on our assessment of the combined level of inherent and control risks, we identified practice units and selected engagements within those units to test for compliance with the firm's quality control system. The engagements selected for review included audits of clients that are SEC registrants, audits performed under the Government Auditing Standards, audits performed under EDICIA, and audits of Employee Benefit Plans. The engagements selected for review represented a cross-section of the firm's accounting and auditing practice with emphasis on higher-risk engagements. The engagement reviews included examining working paper files and reports and interviewing engagement personnel. The scope of the peer review also included examining selected administrative and personnel files to determine compliance with the firm's policies and procedures for the elements of quality control pertaining to independence, integrity, and objectivity; personnel management; and acceptance and continuance of clients and engagements. In addition, we tested compliance with the membership requirements of the Section, including those pertaining to independence quality controls and concurring partner review. Prior to concluding the review, we reassessed the adequacy of scope and conducted an exit conference with firm management to discuss our findings and recommendations. VirchowKrause Wo';i my 6 MMffMMMMEM=M3= PEER REVIEW LETTER (2000) ` To the Partners Virchow, Krause&Company,LLP We have reviewed the system of quality control for the accounting and auditing practice of Virchow,Krause&Company,LLP(the firm)in effect for the year ended June 30, 2000, A system of quality control encompasses the firm's organizational structure and the policies adopted and procedures established to provide it with reasonable assurance of complying with professional standards. The elements of quality control are described in the Statements on Quality Control Standards issued by the American Institute of Certified Public Accountants(the"AICPA"), The design of the system,and compliance with it, are the responsibilities of the firm. In addition,the firm has agreed to comply with the membership requirements of the SEC Practice Section of the AICPA Division for CPA Firms(the Section). Our responsibility is to express an opinion on the design of the system,and the firm's compliance with that system and the Section's membership requirements based on our review. Our review was conducted in accordance with standards established by the Peer Review Committee of the Section. In performing our review,we obtained an understanding of the system of quality control for the firm's accounting and auditing practice. In addition, we tested compliance with the firm's quality control policies and procedures and with the membership requirements of the Section to the extent we considered appropriate. These tests covered the application of the firm's policies and procedures on selected engagements. Because our review was based on selective tests,it would not necessarily disclose all weaknesses in the system of quality control or all instances of lack of compliance with it or with the membership requirements of the Section. Because there are inherent limitations in the effectiveness of any system of quality control,departures from the system may occur and not be detected. Also,projection of any evaluation of a system of quality control to future periods is subject to the risk that the system of quality control may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion,the system of quality control for the accounting and auditing practice of Virchow,Krause&Company,LLP in effect for the year ended June 30,2000,has been designed to meet the requirements of the quality control standards for an accounting and auditing practice established by the AICPA,and was complied with during the year then ended to provide the firm with reasonable assurance of complying with professional standards. Also.in our opinion,the firm has complied with the membership requirements of the Section in all material respects. Lo Richmond,Virginia November 10,2t100 Virchogrause & ompany 7 SUPERVISORY PERSONNEL In developing our project team to serve the District we have matched the capabilities of our personnel with your requirements. The following page lists the key professionals that will serve on your audit.The roles of each of the individuals are described on the organization chart and their resumes are included in this proposal. We will not replace any key person without prior approval by the District. We believe that project team continuity is a must in order to produce an efficient and effective audit. The people we have chosen to serve you are experienced personnel who routinely deal with complex client situations in the utility environment. All key audit personnel on the District's audit team have extensive experience in serving public power utilities.They have the knowledge to perform in a responsive and constructive manner,and brine to the engagement the necessary balance of technical discipline,creativity and common sense. As a team, they will conduct a highly coordinated,efficient and cost-effective audit of the District. A significant reason why many of our clients stay with us for many years comes down to our people. We care about our clients'business,and it shows in our people. The culture of our firm offers flexibility to our employees thus creating positive work environment allowing its to retain our staff.We will keep the same people on the job for as Tong as possible. This allows us to be as efficient as possible and minimize your staff's time. Mr. Unke,partner-in-charge, has been with Virchow Krause over 15 years and the average experience of the District's team approaches 10 years of utility experience. It is this kind of continuity that gives a firm our size the technical edge over other firms whose audit staff that is constantly changing and may not become as specialized. ASSURANCE OF STAFF, CONTINUITY AND QUALITY We understand how painful it is for utilities when you feel like a training ground for new auditors. Our commitment is not to rotate staff without prior written consent. Virchow�rause &company s AUDIT SERVICEs TEAS': Project Board of Directors Trucker Donner Public Utility District Kim Tredinnick,CPA. Partner,Quality Control Director Tom Unke,CPA, Russ Hissom,CPA Partner in-Charge Concurring Partner Jodi Dobson. CPA Audit Manager Sarah Schleede. Audit Senior Jason Delum Staff Virchogrause & ompany 9 ENGAGEMENT PARTNER-Tfff3MAS E, UNKE Tom Unke, Partner in the Energy and Utilities Group,has been with Virchow, Krause&Company, LLP since 1991. He specializes in serving the financial and operational needs of the utility industry. Specific focus areas include auditing power negotiations, cost of service studies,unbundling and pricing of electric services, and strategic plan consulting including financial modeling and facilitating focus group discussions, shared municipal service negotiations,cash flow studies,property records, accounting system design, and feasibility studies. :•; : PEclplc xlERIENCE • Involved with emerging market issues relative to contract or �,: w litigation support. 4 • Involved with the electric energy markets including MISQ NYISQ and others. • Develops cost sharing methodologies for cities, townships,and villages in order to price joint services including wastewater treatment and water distribution services. TI'ornas E- Unke, CPA • Develops cost-of-service models and rate design concepts used to Partner attract and retain large industrial customers and send proper price signals necessary to enhance the customer's effectiveness and 608.240-23'-)4 efficiency. tenke@ virchotskrao se,com • Prepares econometric forecasts of sates,revenues,expenses, and other operational components necessary to predict the timing of rate adjustments, project financing,and cash flow. • Provides expert testimony before state regulatory agencies on electric. My promise to the water, and wastewater utility revenue requirements;cost of service; and District. rate design issues. INDUSTRY INVOLVEMENT "I promise to serve AICPA- American Institute of Certified Public Accountants the District with the WICPA-Wisconsin Institute of Certified Public Accountants highest level of APPA- American Public Power Association • Various state utility organizations. service and integrity. • Frequent speaker both regionally q p g y and nationally on pricing of utility l have 3 passion for services, financial planning for utilities,creative and innovative financial reporting tools, rate unbundling, budgeting, and various the energy industryaccounting topics. and feel that It would Authors various articles on topics related to the utility industry. be an honor to work for the District.99 DUCAT ION University of Wisconsin -Eau Claire Bachelor of Business Administration in Accounting and Business Finance Virun owKrause &company ENEENNEEMEEMMENEEMEM 10 • ✓9 NZEEMM ENGAGEMENT MANAGER-JODI L. DOBSON Jodi Dobson, Manager in the Energy and Utilities Group, has been with Virchow, Krause&Company, LLP since 1998. She specializes in serving municipal utilities,joint action agencies,and not-for-profit organizations. Her experience includes performing financial audits, agreed-upon procedure reviews,and fraud investigations as well as preparing rate studies,cost of service studies, rate designs, and financial forecasts. SPECIFIC EXPERIENCE • Manages audits for municipal utilities,joint action agencies,and not- for-profit organizations. • Performs agreed-upon procedure reviews of jointly owned facilities contractual billings for joint action agencies. • Prepares utility rate studies including cost of service studies and rate design options. • Conducts electric unbundling studies for public utilities and utility districts. • Helps governmental units interpret and implement Governmental Accounting Standards including GASB No.34. Jolt L, Dobson, CPA • Performs agreed-upon procedure reviews of cable franchise fee Manager agreements and remittances. • Analyzes the financial impact of construction projects on utility Sf;B'24.246�r customer rates, borrowing needs, and operational results. vflli5€1n�VIZGiR44:1EC�ubJ5&.Ct}n1 • Prepares annual operating budgets and long-range financial forecasts for electric, water,and wastewater utilities. My pf�i1`�1 � � � • Provides support to municipal utilities contesting wholesale rats increases from power providers. Distract; • Leads special projects including chart of account separations,specific rate designs,departmental cost analysis,development of connection fees and impact fees, operational benchmarking,and basis of "My entire career has accounting conversions. been devoted to • Compiles municipal utility financial statements and annual reports to Utilities. i commit to regulatory agencies. • Performs compliance audits of state funded programs. use my experiences • Conducts fraud investigations for municipalities and counties. to help add value to • Provides various types of accounting assistance. the Districts This would be a great INDUSTRY INVOLVENIEN€ • AICPA-American Institute of Certified Public Accountants opportunity for me to • WICPA-Wisconsin Institute of Certified Public Accountants be part of this audit • Speaks on internal controls, fraud prevention, budgeting, and other team,ss industry topics at management conferences. • Authors articles on utility regulation and accounting issues published nationwide. • Contributing author in the APPA Advanced Accounting Manual. EDUCATION Carthage College Bachelor of Business Administration in Accounting and International Business Virchow�-ause &company 11 NIMMM ARAH & SCHLEEDE Sarah Schleede, Senior Accountant with the Public Sector Practice Group, has been with Virchow, Krause&Company,LLP since 2004. She specializes in providing financial auditing, accounting, and consulting services to municipal electric,water, and sewer utilities. Sarah also has experience, in utility rate consulting developing revenue requirements,cost of service allocations, rate designs, and connection fee calculations s f SPEcinc EXPERIENCE • Leads financial audits of electric,water,and sewer utilities. • Develops electric, water, and sewer revenue requirements;cost of service allocations;and rate design for utilities. • Prepares financial forecasts,long-range plans, and cash flow projections for municipal utilities. • Provides consulting services for public utilties including agreed-upon procedures and contract settlements. • Audit, review,and compliance service experience. Sarah S. Schleede, CPA • Performs federally funded state programs compliance audits. Senior Accountant • Assists in on-the-job audit stafftraining. 508 248 23rG • Reviews contract compliance for utilities, universities,and transportation. • ssch edev howk�euse cap. Industry experience includes utilities,transportation, higher education, commercial banking,construction,and information technology. NDUSTR d INVOLVEMENT My promise to the • AICPA-American Institute of Certified Public Accountants District: • WICPA-Wisconsin Institute of Certified Public Accountants • TSCPA-Texas Society of Certified Public Accountants "I promise to uphold my responsibilities as EDuwATION Texas State University-San Marcos the District's auditor Bachelor of Business Administration in Finance to ensure the highest quality of service." RELEVANT CONTINUING EDUCATION • Virchow Krause Utility University • Single Audit Training Sessions • GASB No.34 Training Sessions • Utility and Transit Annual Conferences is Virchogrause company 12 ENGAGEMENT STAFF-JASON & DALUM Jason Datum, Accountant in the Public Sector Practice Group,has been with Virehow. Krause&Company LLP since 2004. He specializes in providing accounting.auditing, and tax services to colleges and universities and not-for- profit organizations. His experience also includes performing single audits of federal and state awards. } A' SPECIFIC EXPERIFNCE • Assists with financial audits of utilities,churches, school districts,and colleges and universities. • Performs single audits of not-for-profit organizations. • Performs single audit in accordance with A-133 and State Audit Guidelines. • Provides tax services for not-for-profit organizations and colleges and universities. • Assists with financial statement preparation. Jaf'= S, !''a6urss Accountant DUCATION 352'351'4654 Bethel University r�H$Urt1 CL':rtPr154 tJRY3€�S@A9it2 Bachelor of Science in Accounting and Finance y promise to the District: l promise to work hard and respect all District employees area try my hardest to promote a relatively painless audit. 11 VWOOWK-ause &(Mpany 13 9CMEMM CPE POLICY In order to keep current with industry regulations, our firm requires all professional staff to obtain a minimum of 120 continuing professional education credits(CPE)every three years with no Tess than 20 credits in any given year. All public sector audit staff attend courses in the accounting and auditing areas dealing with public sector topics.Some of the recent courses attended include: • Issues under formation of Regional Transmission Organizations • RctaiMhotesale Electric Cost of Service and Rate Design • Sarbanes-Oxley Compliance Testing • Utility Board Governance • Advanced Utility Accounting • Financial Statement Analysis • Utility Benchmarking • Accounting for Governmental Units Under GASB 34 • Obtaining Value from Your Audit(Virchow Krause as instructors for the American Public Power Association) • Current Issues for Water Utilities • Determining the Feasibility of Offering Broadband Communications Services in Your Community(Virchow Krause instructors for American Public Power Association) • Virchow Krause staff are instructors for American Public Power Association Utility Education Courses Some of our clients use Virchow Krause to provide training to their staff.We have been very active in the utility training area and annually present topics of interest to our clients. In addition, our company has hosted seminars on utility topics for over 20 years and currently serves as instructors for American Public Power Association courses on: • Utility Governance • Advanced Utility Accounting • Obtaining Valuefrorn'yourAudit • Performing Electric Cost of Service Studies and Designing Electric Rates • The Role of the Board and Management in Utility Operations and Financial Reporting • Developing an Internal Audit Function VirchowKrause &company 14 EMME=MMMzMCZM= QUALIFICATIONS, CAPABILITIES AND EXPERIENCE Our Public Sector Practice Group has a Tong-standing national tradition of providing quality auditing, accounting and consulting services to public utilities. We currently provide audit and consulting services to municipal utilities and joint action electric agencies nationwide.We give presentations at national American Public Power Association seminars and many state utility associations regarding industry issues. Some of our most recent seminars include: • "Job Costing and Plant Accounting", September, 2005 APPA. • "Governance and Internal Control Models", September, 2004 APPA B &F Workshop. • "Obtaining Value from Your Audit", September,2003 APPA. • "Implemented Activity-Based Management for Your Utility", March 2002 at APPA's Winter Institute. • "GASB No.34 for Utilities",October 2002,at APPA's Fall Institute. • "Advanced Public Utility Accounting", October 2002,at APPA's Fall Institute. • "Current Issues in Offering Telecommunications Services", October 2002, full-day seminar at APPA's Community Broadband Conference. • "Strategic Issues Facing Public Power Systems Under Restructuring",June 2000, a half day workshop at the Minnesota Municipal Utilities Association Annual Conference. Our experience includes: • Virchow Krause is the author of the 2003 Edition of the American Public Power Association's Advanced Utility Accounting Guidebook and also presents an ongoing class for APPA's Utility Education Courses series on advanced utility accounting. • Virchow Krause is the author of the 2003 Edition of the American Public Power Association's Telecommunications Guidebook used by public power systems nationwide in developing financial and technical feasibility studies and business plans to provide broadband communication services. • Regularly giving presentations on the national, regional and state industry level at a variety of financial and management issues affecting utilities. Virchogrause & ompany 15 "AUDIT TEAM QUALIFICATIONS AND EXPERIENCE In developing our audit team, we have carefully matched the capabilities of our personnel to provide the maximum value to the District for this audit. The individuals comprising our team routinely deal with complex client situations. They have the knowledge,and professionalism to develop solid recommendations by bringing to the District the necessary balance of technical discipline,creativity and common sense.As a team, they will provide you with highly coordinated and responsive services. Of particular importance is the specialized knowledge and experience of our firm and individuals on our project learn in a number of areas including_ • Experience in industry topics, including regulatory asset treatment under FAS 71,pricing of financial instruments under FAS 133, 138, and 139, recording of future plant removal costs under FAS 143, preparation of financial statements under GASB 34 and 38 and others. • Working knowledge of all aspects of utility operations, including organizational, operational and work order system issues. • Experience conducting organizational and operational analyses designed to improve financial system effectiveness and efficiency. • Experience conducting complex integrated financial system analysis and implementation reviews. • Experience conducting financial and compliance audits of electric utilities and joint action electric agencies. • Experience developing performance measures and benchmarking. Virchogrause & ompany 16 01mawasim SIMILAR NGAGEMENTS WITH PUBLIC POWER ORGANIZATIONS Below are current references where Virchow Krause has performed similar engagements. We urge you to contact any of these clients to get their feedback and impressions regarding our services to them. That these clients return to us again and again for service attests to their satisfaction. We urge you to look deeply into client references. Virchow Krause serves many more clients than the five listed below. Client: Lincoln Electric System Year, Since 2005 Partner: Tom Unke/Russell Hissom Hours: 500 Project Description: Financial Audit Contact: Keith Brown,CFO 1040 O Street Lincoln.NE 69508 402.475.4211 Client: Long Island Power Authority Year: Since 2002 Partner: Russell Hissom Hours: 10,000 Project Description: Agreed-upon Procedures—Examination of Contract Compliance in Connection with Joint Ownership Generation,Transmission and Distribution Contracts Contact: Mr.Steven Clark,Finance 333 Earle Orington Boulevard,Suite 403 Uniondale, NY 11553 516.719.8637 Client: Michigan Public Power Agency Year: Since 1998 Partner: Russell Hissom/Tom Unke Hours: 900 Project Description: Financial Audit,Contract Compliance Operational Review in Connection with Jointly-Owned Generation Facilities Contact: Mr. Gary Zimmerman,General Manager Mr. Duane Naberhuis,Finance Director 809 Centennial Way Lansing,MI 48917 517,323.8919 VirchowKrause &company 17 MENSORWO Client: Missouri Basin Power Project Year: 2004—Present Partner: Russell Hissom Hours: 380 Project Description: Financial Audit Contact Ms. Pat Sebastian 1717 Fast Interstate Avenue Bismarck, ND 58503 701.355.5436 Client: Missouri River Energy Services/Western Minnesota Municipal Power Agency/Missouri Basin Electric Cooperative Association Year: 2004—Present Partner: Tom Unke Hours: 350 Project Description: Financial Audit Contact Mr. Merlin Sawyer P.O. Box 88920 Sioux Falls,SD 57109-8920 605.338.4042 Client: Indiana Municipal Power Agency Year: Since 1993 Partner. Tom Unke Hours: 150 Project Description: Contract Compliance Operational Review in Connection with Jointly-Owncd Generation Facilities Contact: Mr. Rai Rao Mr.Chris Rettig, VP-Finance 11610 N. College Avenue Carmel, IN 46032 317.573.9955 A133 €DDITS Client: Multiple Year.- Ongoing Partner: Multiple Project Description: Virchow Krause performs hundreds of A133 audits annually and currently conducts an estimated 15 single audits in the State of California. VirchowKrause &company 18 MMMMMMMMMEM=MM=M The primary purpose of the audit, unless it is otherwise intended, is to express an opinion on the financial statements of the entities subject to audit. Such an audit is subject to the inherent risk that errors or irregularities may not be detected.If conditions are discovered that lead to the belief that material errors, defalcations or other irregularities may exist, or if any other circumstances are encountered that require extended services, Virchow Krause will promptly advise the District's management. As independent auditors of the District,our principal objective will be to express an opinion on the fairness of your financial statements. Our audit will be made in accordance with Generally Accepted Auditing Standards(GAAS)as promulgated by the American Institute of Certified Public Accountants(AICPA), the AICPA audit guide,Audits of State and Local Governmental Units,Government Auditing Standards issued by the U.S. General Accounting Office and the Single Audit Act of 1984 and OMB Circular A-1.33. The following reports will be prepared and presented at the completion of the audit: • A report on the fair presentation of the combined statements of net assets,combined statements of revenues,expenses and changes in net assets and cash Flows, in conformity with accounting principles generally accepted in the United States of America. • A report on the internal controls based on the auditor's understanding of the internal control structure and assessment of control risk. • A report to management containing suggestions for improvement of accounting procedures and internal control. In the reports on internal controls, we will communicate any reportable conditions found during the audit.A reportable condition shall be defined as a significant deficiency in the design or operation of the internal control structure 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.Reportable conditions that are also material weaknesses will be identified as such in the report.Nonreportable conditions discovered will be reported in a separate letter to management, which shall be referred to in the reports on internal controls. The reports on compliance shall include all instances of non-compliance, Reports will be completed consistent with the time commitments in the RFP. Irregularities and Illegal Acts-We will make an immediate, written report of all irregularities and illegal acts or indications of illegal acts of which we become aware of to the Board of Directors. Virchogrause ompany 19 Reporting to the Board-We will assure ourselves that the board is informed of each of the following: • The auditor's responsibility under generally accepted auditing standards • Significant accounting policies • Management judgments and accounting estimate • Audit adjustments • Disagreements with management in conducting the audit • Difficulties encountered in performing the audit SEGMENTATION OF THE ENGAGEMENT We have identified nine general work segments of the audit.Those segments, along with the anticipated audit procedures for each segment, are discussed below: I.Engagement Planning and Administration • Prepare client information forms, obtain signed engagement letters, complete company independence procedures. • Review of previous audit reports and reports on internal control. • Prepare memorandum regarding overall operations for permanent file records. • Complete staffing and scheduling summary. • Hold planning conference among engagement partner and in-charge auditors. • Hold entrance and progress conferences with client. • Obtain all documents and information required for permanent file- • Read minutes of board meetings. • Review and evaluate internal controls(includes completion of internal control questionnaires, flowcharts and other documentation and statistical testing of revenue,expenditure and payroll systems,as necessary). • Interview selected District staff and oversight board members in accordance with the requirements of SAS 99. • Develop and approve audit programs(modification of existing standard programs). • Accumulate all points to be included in management letter,draft letter and discuss with management. • Review regulatory reporting requirements and evaluate compliance with regulatory reporting and Standards. • Review internal contract compliance reports to determine any impact on audit procedures and District financial reporting. • Review workpapers for completeness- Undergo partner level workpaper reviews and independent reviews. • Hold exit conference with key District personnel. • Make presentation to the Board of Directors. II. Cash Segment • Review ledger account entries, compare cash account balances. • Confirm year-end account balances with depositories and Vi!p Cho W Krause reconciliations to amounts on the financial records. &CUITipany • Obtain bank reconciliations and substantiate reconciling items. 20 INEMMENNOMMEMM� • Substantiate cash cutoffs in all departments, interbank transfers and petty cash balances. II1.Investment Segment • Test investment transactions,test interest earned and trace to receipts and ledger accounts.Confirm investment balances. • Test recording of derivative instruments in compliance with current procurements. • Test proper recording of other instruments that are marked to market. • Test account transactions recording unrealized gains and losses. • Test compliance with funding requirements of bond resolutions. • Test compliance in use of accounts in repayment of outstanding debt • Test recording of derivative instruments and related note disclosures. IV.Revenue Segment • Compare revenues to prior year actual and current budget. • Perform validation procedures. • Confirm all member accounts receivable and power sales. • Reconcile other revenues to claims and invoices filed. V.Expense Segment • Compare expenses to prior years and budgeted amounts. • Account analysis of significant variations. • Review vouchers payable listings as of year-end,determine proper cutoffs and review for unrecorded liabilities. • Verify vested vacation and sick pay liabilities. • Verify other employee retirement obligations • Determine appropriateness of other liability accounts including accrued payrolls and related withholdings. • Test proper recording of billings for operating expenses from 3rd party joint generation facilities. • Confirm billings from 3rd party joint generation facility operators. Determine all costs are properly recorded in general ledger. • Perform test of transaction sample and walkthrough of selected transactions to determine effectiveness of controls. • Select sample of employee reimbursements for testing of controls and appropriateness of reimbursement to test controls in this area. VI. Deferred Costs • Obtain details of the various components of deferred assets. • Test account transactions. • Test recording of regulatory assets in compliance with FAS 71. VII. Property Segment • Obtain capitalization policy for capital assets and infrastructure. • Obtain summary schedules of capital assets including additions, retirements and accumulated depreciation, • Test the District's capital asset additions and retirements by project. Virc ow • Determine proper recording of capital asset additions and retirements Kra, billed by 3rd party facility operators. &(Mpany 21 • Perform test counts or obtain 3rd party confirmation of existence of inventory balances. • Test capital asset depreciation calculations. • Test pricing and quantity of inventories. • Test recording of nuclear fuel. • Verify FAS 143 asset retirement obligations. • Test and verify nuclear decommissioning liability. VIII.Financing Segment • Verify bond and note balances owed, information on new issues, if any, trace transactions to general ledger recompute interest paid. • Determine nature and appropriateness of other equity balances. • Test compliance with bond ordinances regarding earnings coverage. • Determine existence of any off-balance sheet liabilities and record or disclose if appropriate. XI.Financial Reporting Segment • Ascertain that all items of audit significance contained in the minutes have been considered and cross referenced to the working papers. • Post any adjusting entries and obtain adjusted trial balance. • Review client prepared financial statements. • Review management discussion and analysis(MD&A). • Perform subsequent events review to date of completion of fieldwork. • Obtain management and attorney representation letters. • Draft all required reports. • Review any past adjustments with financial management. • Verify commitments and contingencies. AUDIT SCHEDULE We plan on following the following audit schedule to meet the report delivery deadline of each year as follows: Detailed Audit Plan 12/1 Entrance Conference 4/1 Audit Fieldwork 4/1 —4/8 Progress Conference Ongoing Exit Conference 4/8 Draft Reports 4/22 Final Reports 4/29 Presentation to Oversight Board When requested This timing can be modified to a more mutually agreeable time, if desired. Virchogrause & ompany 22 ffi � & ffi ° ffi ffi ffi m We estimate the time allotments for the audit by segment are as follows: Total Hours Include: Supervisory Partner Manager Staff Staff Other Total Planning and Interim Work 24 24 6 54 Cash 4 16 12 32 6 70 Revenues 2 24 16 10 6 58 Expenditures 2 16 24 24 6 72 Property 4 24 32 40 6 106 Financing 4 4 12 8 2 30 Financial Reporting 16 16 22 14 8 76 Total 12A M 1�2 40 SAMPUNG APPROACH 1 IN T ERNML CONTROLS We plan to use audit sampling throughout many phases of our audit since we believe it allows us to perform an audit that is more cost beneficial to our clients. We have identified the following audit sampling tests that will be used on the District's audit. They include: • Substantive tests of details of balance sheet accounts. • Tests of controls. After we have documented the District's internal control structure, we will make decisions on the internal control procedures we intend to test. We will set parameters regarding the expected error rate, audit risk and tolerablee error rate in order to determine the sample size we will generate. We expect to perform these procedures in the following areas: • Cash disbursements/expenditures • Payroll • Employee reimbursements We also plan to use audit sampling to perform substantive tests of certain balance sheet accounts, including the inventory testing and recorded vouchers payable. Our firm plans to use the population proportionate to size (PPS) approach which encompasses the concept of individually significant amounts_ Since we have not yet gained an understanding of the District's internal control structure and we have not determined the control procedures we will test,we are not able to provide the exact sample sizes we will draw. However,similar first year engagement sample sizes range from 50— 115 disbursements tested by use of sampling techniques and a similar amount of payroll transactions. VirchowKrause &company 23 MMMMMMMMM33MMM� APERLEss AUDIT SOFTWARE Our audit tool is a web-based comprehensive software product that combines all financial audit tasks into an electronic paperless format, including work programs, trial balances,spreadsheets, workpapers.and the financial statements. This"paperless" technique results in savings of both time and resources. Because we are able to obtain the majority of our information electronically,the District's staff will spend less time copying and printing information for the audit. R oC T ION AND TECHNOLOGY IN PERFORMING AuMTS Auditing is evolving into one of true industry specialization. Our paperless audit software product is web-based,which eliminates locational issues in performing audit engagements and makes having an office local to your facility not as critical as it might have been in the past.using such toots and technologies leads to greater hour efficiencies in auditing, freeing time to ensure that our teams of auditors has the latest knowledge to help you implement ever-increasing audit transactional and disclosure standards. Requiring our audit staff to specialize in your industry allows us to be on the cutting edge of industry issues and how they impact the District. ANALYTICAL PROCEDURES Our analytical procedures are done in two parts—preliminary and final. Preliminary procedures are performed using the District's trial balance and budget reporting. In-charge auditors review the current year information and compare it to the current year's budget and the prior year's actual amounts. This is done at various levels of control over revenues and expenditures,and for all balance sheet accounts.The audit manager and staff are looking for variances between the fieures that exceed a predetermined threshold level, both from a percentage and a dollar amount perspective. Those accounts that exceed the variance threshold are highlighted for further investigation. This investigation includes reviewing detail transactions, vouching a sample of transactions,discussions with management and validation techniques. Final analytical review takes place after all audit entries are posted.The in- charge auditor and partner review the final financial statements,looking for variances to prior year actual and current year budget. Explanations of those variances are documented in our tile, with the results used to determine the extent of any additional audit testing or financial statement disclosures. Our procedures are in full compliance with SAS No. 56. VirchowKrause &company MMEMMMOMEMMMMMEMMEMN 24 MEMOMMENNIBEEMMEMM IMPACT ON ,t"#uDIT PROCEDURES FOR ARBANES-OX EY COMPLIANCE We have seen an increasing mind-set and movement on the part of Public Power Utilities to adopt a Sarbanes-Oxley approach to their governance models and control structure,even though the standard may not apply to these organizations for some time. We welcome this mindset as a necessary best practice in conducting business. As defined by the Institute of Internal Auditors(The IIA), internal auditing"is an independent, objective assurance and consulting activity designed to add value and improve an organizmion's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes". As auditors of the District under the Sarbanes-Oxley rules, Virchow Krause could not test or opine on any control structure or procedure that it might recommend that the District adopt.That being said, Virchow Krause has helped many organizations develop an internal audit function and recommend procedures to strengthen internal controls. Our approach to review of risk and internal audit services is rooted in obtaining a deep understanding of our clients' objectives and strategic plan. Virchow, Krause&Company, LLP has performed many Sarbox 404 projects for SEC clients.The staff assigned to those projects included audit staff from all of our business units so that audit staff and managers can use that knowledge in serving clients in many industries, including joint action agencies and utilities. The foundation for our approach to internal audit and controls is the three categories defined by COSO: operations,financial reporting*and compliance/regulatory. Our view is that internal audit responsibility extends to 100%of an entity's activities.We express our approach in terms of four areas: We train our people in this approach and feel having this knowledge makes for better auditors.The impact on our audit procedures is to place a greater emphasis on process mapping key financial procedures in the organization and evaluating the processes to determine if there are weaknesses in controls and the potential impact those weaknesses may have on the organization Doing so also gives us the insight and opportunity to make recommendations to management VirchowKrause on areas where controls should be strengthened. $company 25 NOMMENNEMOMEM22= DCu INIS`RATWE ITEMS We request office space capable of accommodating four(4)auditors on-site at your facifity with internet access. If additional administrative needs or requirements become apparent during the audit, we will discuss such requirements with you.It is our intent to require minimal disruption of your staff or physical facilities. ASSPS7'ANCE FROM THE DISTRICT Based on the REP,we understand that the District staff will provide sufficient hours to assist in preparation for the annual audit. Our audit plan will not require any additional increasing in-house audit preparation time. Requested assistance by the District personnel will include: • Preparation of detailed schedules. • Electronic delivery of prepared schedules prior to the start of interim and final fieldwork. • Pulling and filing of documents. • Preparation of confirmations and representation letters. • Assistance with interviews to discuss and document system process flows- Preparation of financial statements. Virchow Krause employs a paperless audit approach.We feel that this approach will help to minimize the time and effort of your staff in attending to the audit process.It is our intent to minimize any disruptions to your staff and normal day-to-day business practices. ELATIONSPIP WITH BOND AGENCIES Virchow Krause regularly works with bond rating agencies. We field questions from Moodys and Standard&Pours regarding financial statements. Our reputation with those firms is excellent. We have also worked with major underwriting firms, such as Morgan Stanley and Bear,Stearns&Co. in providing comfort letters and stub financial statements for bond issues. Our track record in providing these services on a timely basis for other clients has been outstanding. We have assisted public utilities with bond financings of over $I billion. VirchowKrause &company 26 NNEENNENERMCM= MANAGEMENT LETTER We want you to succeed. Throughout the course of our auditing work, we will emphasize the identification of opportunities(not necessarily limited to accounting considerations)for improving controls, improving operations, or reducing costs which can be brought to your attention on a timely basis for possible implementation. Although auditing standards do not require such consideration of administrative controls and business problems, we consider these matters of major importance to effective client service. One of the ways in which we bring such suggestions to the attention of the District is through our management letter. Recommendations for improvements or general observations will be discussed informally or included in a management letter to be presented to the Board of Directors for consideration. Prior to issuing a management letter, our suggestions are discussed with the operating personnel directly involved with or responsible for the subject area. Subsequently, higher levels of management are informed about our recommendations before they are included in the letter. Comments resulting from our normal review and evaluation of internal controls will be communicated to you in various formats,including, in certain situations, a separate letter report summarizing our overall findings and conclusions. The content of each of our management letters is determined,of course, by the nature of the particular engagement. but some of the areas typically covered are as follows: • New accounting issues • Financial status • Internal control improvements TECHNICAL RESOURCE Virchow Krause is committed to providing assistance and answers to its clients throughout the year_We encourage our clients to contact us as issues arise. Your audit team will work with our wide variety of specialty groups to provide a quick response. As a full service accounting and consulting firm we have experts in governmental and commercial accounting,taxation.IT services, benefit and insurance consulting and other areas.If your audit team does not have the expertise required to answer your question, we will contact the proper person and ensure your needs are stet. In addition, we provide newsletters and other timely mailings to our clients regarding industry developments. Virchow Krause speaks at various industry conferences and hosts seminars related to governmental and utility accounting issues. VirchowKrause &(MpanY 27 Forensic accounting is the fastest growing area of accounting today. Unfortunately, this area of accounting focuses on aspects of the industry aimed at supporting legal matters such as "Litigation Support.'. Forensic accounting represents the factual presentation of accounting issues used in pending litigation. Virchow Krause has an established forensic accounting team dedicated to providing litigation support and other forensic accounting services that usually revolve around legal actions. The District usually would use these services in connection with activities surrounding inappropriate business behaviors such as fraud and collusion which are typically the most extensively used services for forensic accountants. It is our understanding that there is no pending litigation or inappropriate business behaviors occurring at the District and as such these services are not required. However,in the event that these services will ever be required, Virchow Krause has the skill sets,experience and capabilities to serve you. Our firm has a fully dedicated and specialized litigation support business unit, which includes multiple Certified Fraud Examiners(CFE) with experience in both the public utility and governmental industries. Virchow�ause &company NOMMENWMEMMEMIMMEMMEM 28 LETTER OF TRANSMITTAL I. GENERAS. REQUIREMENTS_........._... ...... 2, FIRM QUALIFICATIONS AND EXPERIEI+ICE........,,,<............. 2 About Virehow Krause............................ . ... . 2 Utility S aff Expertise and Resource Commitment...................... ............. ...2 Audit Quality Control................................................... No ......................3 No Disciplinary Action.......... ...........3 ............................I............. Peer Review Letter(2003)..._ _.... ... ..... ..... .. ..................... ....._........._.....4 . . . . . . 3. PARTNER, SUPERVISORY a STAFF QUALIFICATIONS & EXPERIENCE_-... SupervisoryPersonnel...................................................................................8 Assurance of Staff,Continuity and Quality......................................._.........8 AuditServices Team....................._._..............._......._....._...........__............9 CPE Policy......................... 14 ......................................................................... Qualifications,Capabilities and Experience.................. ............................ 15 Audit Team Qualifications and Experience................................................16 4. SIMILAR ENGAGEMENTS- ELEC T RIC UTILITIES AND A133 AUDITS.... ...........<<..........,.........___ 5. SPECIFIC AUDIT APPROACH _......... ............ .. 19 Segmentation of the Engagement............................ __.._ ............. 20 AuditSchedule...........................................................................I................22 Sampling Approach l Internal Controls......................._................ ............23 Paperless Audit Software..........__........................ ......24 ................................ Location and Technology in Performing Audits Audits....................... Analytical Procedures.........................................................__...__...............24 Impact on Audit Procedures for Sarbanes-Oxley Compliance.._................25 6. OTHER KEY INF€)RMAT*N................................................... ........26 Administrative Items............................. .........16 ............................................. Assistance From the District.._...................................................................16 Relationship with Bond Agencies.............. ............ ..... .. ........ .................26 ManagementLetter.............................................................................._.....17 TechnicalResource...................................................... ..............................27 7, FORENSIC ACCOUNTING EXPERT€ E-,......... VirchowKrause &company f Y }