May 10, 2023
Councilmember Elizabeth Pabon-Alvarado
1000 Gateway Avenue
San Pablo, CA 94806
Dear Councilmember,
We are engaged to audit of the City of San Pablo’s (C ity) financial statements for the year ended June 30, 2023. Professional standards require th at we provide you with the follo wing information related to our audit. Topics include audit sc ope, management representations, fraud risk considerations and audit timing. We have presented an overview of these topics below: We would also appreciate the opportunity to meet with you to discuss this information furt her since a two-way dialogue can provide valuable information for the audit process.
Our Responsibility under U.S. Generally Accep ted Auditing Standards and Government Auditing Standards
As stated in our engagement letter provided to the Finance Director on April 13, 2023 (copy enclosed), our responsibility, as described by professional standa rds, is to express opinions about whether the financial statements prepared by ma nagement with your oversight are fa irly presented, in all material respects, in conformity with U.S. generally accepte d accounting principles. Our audit of the financial statements does not relieve you or management of your responsibilities.
In planning and performing our audit, we will consider the City’s inte rnal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and not to provide assurance on the internal control over financial reporting. We will also consider internal control over compliance with require ments that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test report on inte rnal control over complia nce in accordance with the Uniform Guidance.
As part of obtaining reasonable assurance about whet her the City’s financial statements are free of material misstatement, we will perform tests of its compliance with certain provisions of laws, regulations, contracts and grants. However, providi ng an opinion on compliance with those provisions is not an objective of our audit. Also, in accordance wi th the Uniform Guidance, we will examine, on a test basis, evidence about the City’s co mpliance with the types of complian ce requirements described in the U.S. Office of Management and Budget (OMB) Complia nce Supplement applicable to each of its major federal programs for the purpose of expressing an opinion on the City’s compliance with those requirements. While our audit will provide a reasonabl e basis for our opinion, it will not provide a legal determination on the City’s compliance with those requirements.
Generally accepted accounting principles provide for certain required supplementary information (RSI) to supplement the basic financial statements. Our responsibility with respect to the Required Supplementary Information which supplements the basic financial st atements, is to apply cer tain limited procedures in accordance with generally accepted a uditing standards. However, the RSI will not be audited and, because of the limited procedures do not provide us w ith sufficient appropriate evidence to express an opinion or provide any assurance, we will not express an opinion or provide any assurance on the RSI.
We have not been engaged to re port on the Introductory and Statistical Section, which accompany the financial statements but are not RSI. Our responsib ility with respect to this other information in documents containing the audited financial statemen ts and auditor’s report does not extend beyond the financial information identified in the report. We have no responsibility for determining whether this other information is properly stated. This other in formation will not be audited and we will not express an opinion or provide any assurance on it.
Planned Scope and Other
The audit scope is included in the engagement lette r provided to the Finance Director on April 13, 2023 (copy enclosed). It defines what an audit of the City’s financial statements is and discusses internal control, fraud considerations and management responsibilities for data c ontained in financial statements.
It is the standard used when a financ ial statement audit is to be conducted. This letter is a clarification of the audit process contemplated in the contract we ha ve entered into with the City pursuant to the Council’s approval.
Management Representations
We will request representations from management th at data and assertions provided are complete and accurate. We rely primarily on our audit verifi cation tests and procedures, however, management assertions and judgments unavoidably affect financial data.
Fraud Risk Considerations
Audit standards require us to have discussions with our clients to discuss both the potential for and any occurrences of fraud and the impact on financial statemen ts. “Fraud” is defined as an intentional act that results in a material misstatement in financial statements that are subject to audit. In this case, fraud includes two concepts. The first is fraudulent financ ial reporting, including misapplication of accounting principles, the omission of data or disclosures, fictitious transactions or sham transactions and concealment of relevant data. Th e second concept is that of misappropriations of assets, including theft, its concealment and conversion to cash.
In accordance with audit standards, we met with management and asked:
a. Is management aware of known instances of fraud or allegations of suspected fraud?
b. Are there areas management believes are “Susceptible to Fraud”?
i. Areas presumed susceptible to fraud under audit standards:
i. Improper revenue recognition
ii. Management override of Internal Control
Audit Timing
We have met with City staff and agreed to the following schedule:
The interim phase of the audit (internal control re view and tests) was completed during the weeks of April 24 and May 1, 2023.
The final phase of the audit (substantive tests and financial report preparation) is scheduled for the weeks of October 2 and October 9, 2023.
Our plan is to finalize the reports by the end of November.
Communicating the Audit Process
We discussed the above topics with staff and wish to provide you with an opportunity to participate in the audit process prior to its completion. If you could pl ease respond to the following questions related to the City and its component units and if the answer to any question is “yes,” please provide an explanation:
a. Are you aware of any instances of fraud or allegations of suspected fraud?
b. Are there any areas you believe are “Susceptible to Fraud”?
c. Are you aware of any possible or actual noncom pliance or waste or abuse of programs and controls?
d. Are you aware of any related-party transaction s? (Transactions between the City or its component units and elected or appointed officials)
Sincerely,
Whitney Crockett
Audit Partner
Maze & Associates
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April 13, 2023
Norman Veloso, Finance Director
City of San Pablo
1000 Gateway Avenue
San Pablo, CA 94806
Dear Norm:
We are pleased to confirm our understanding of the services we are to provide for the City of San Pablo as of and for the year ended June 30, 2023.
Audit Scope and Objectives
The services we have been engaged to provide are ou tlined below, but we are also available to provide additional services at your request:
1. Audit of the basic financial st atements, preparation of memora ndum on internal controls and assistance with the preparation of the Annual Comprehensive Financial Report.
2. Audit of the Successor Agency to the Redevelopment Agency footnote disclosures included in the City’s basic financial statements.
3. Perform procedures and issue agreed upon proc edures report to comply with Proposition 111 appropriation limit increment requirements.
4. Test one program for compliance with the Single Audit Act and applicable laws and regulations and issuance of our report thereon, if required. (One program)
5. Tests of compliance for Metropolitan Transportation Commission/Transportation Development Act Programs and issuance of our report thereon, if required. (One project)
6. Preparation of Web-ready PDF of the Annual Comprehensive Financial Report for the City’s website.
7. Perform procedures and issue agreed upon proced ures report on the collection, management and expenditure of the Measure Q revenue (expires in 2023) and Measure S revenue (starts in 2023), based on the procedures on Attachment A.
8. Perform procedures and issue agreed upon proced ures report on the collection, management and expenditure of the Measure K revenue, based on the procedures on Attachment B.
9. Preparation of the City’s Annual Report of Financial Transactions (Controller’s Report) and issuance of a compilation report. (See Compilation Attachment for Our Responsibilities and Your Responsibilities related to the compilation report).
10. Preparation of the Financing Authority JPA Annual Report of Financial Transactions (Controller’s Report) and issuance of a compilation report. (See Compilation Attachment for Our Responsibilities and Your Responsibilities related to the compilation report).
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11. Preparation of the Annual Street Report for the City and issuance of a compilation report. (See Compilation Attachment for Our Responsibilities and Your Responsibilities related to the compilation report).
Accounting standards generally accepted in the Un ited States of America (GAAP) provide for certain required supplementary information (RSI), such as management’s discussion and analysis, to supplement the City’s basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial stat ements in an appropriate operational, economic, or historical context. As part of our engagement, we will apply certain limited procedures to the City’s RSI in accordance with auditing standards generally accepted in the United States of America (GAAS). These limited procedures will consist of inquiries of mana gement 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.
If the City’s financial statements are accompanied by supplementary information other than RSI, we will subject the supplementary information to the auditing procedures applied in our audit of the financial statements and certain additional procedures, in cluding comparing and reconciling such information directly to the underlying accounting and other records u sed to prepare the financial statements or to the financial statements themselves, and other additiona l procedures in accordance with auditing standards generally accepted in the United States of America, a nd we will provide an opinion on it in relation to the financial statements as a whole, in a report combined with our auditor’s report on the financial statements.
In connection with our audit of the basic financia l statements, we will read the other information accompanying the financial statements and consider wh ether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report.
The objectives of our audit are to obtain reasonable assurance as to whether the financial statements as a whole are free from material misstatement, whether due to fraud or error; issue an auditor’s report that includes our opinion about whether your financial statements are fairly presented, in all material respects, in conformity with GAAP; and report on the fairness of the accompanying supplementary information when considered in relation to the financial statements as a whole. Reasonable assurance is a high level of assurance, but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards will always detect a material misstatement when it exists. Misstatements, including omissions, can arise from fraud or error and are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment of a reasonable user made based on the financial statements. The objectives also include reporting on:
Internal control over financial reporting and compliance with the 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).
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Auditor’s Responsibilities for the Audit of the Financial Statements
We will conduct our audit in accordance with GAAS a nd 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 the accounting records, a determination of major program(s) in accordance with Uniform Guidance, and other procedures we consider necessary to enable us to express such opinions. As part of an audit in accordance with GAAS and Government Auditing Standards , we exercise professional judgment and maintain professional skepticism throughout the audit.
We will evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management. We will also evaluate the overall presentation of the financial statements, including the disclosures, and determine whether the financial statements represent the underlying transactions and events in a manner that ach ieves fair presentation. 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 City or to acts by management or employees acting on behalf of the City. Because th e determination of waste and abuse is subjective, Governmental Auditing Standards do not expect auditors to perform specific procedures to detect waste or abuse in financial audits nor do they expect auditors to provide reasonable assurance of detecting waste or 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, an unavoidable risk exists that some material misstatements or noncompl iance may exist and not be detected by us, even though the audit is properly planned and performed in accordance with GAAS 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 mana gement of any material errors, fr audulent financial reporting, or misappropriation of assets that comes 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. 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.
We will also conclude, based on the audit evidence obtained, whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the government’s ability to continue as a going concern for a reasonable period of time.
Our procedures will include tests of documentary ev idence supporting the transactions recorded in the accounts, and may include tests of physical existence of inventories, and direct confirmation of cash, investments and certain othe r assets and liabilities by corresponden ce with selected customers, funding sources, creditors and financial institutions. We will also request written representations from your attorneys as part of the engagement, and they may bill the City for responding to this inquiry.
We may from time to time, and depending on the circumstances, use third-party service providers in serving your account. We may share confiden tial information about you with th ese 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 ta ke 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 confid entiality agreement, you will be asked to provide your consent prior to the sharing of your confidential in formation with the third- party service provider.
Furthermore, we will remain responsible for the work provided by any such third-party service providers.
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Audit Procedures - Internal Control
We will obtain an understanding of the City and its environment, including internal control relevant to the audit, sufficient to identify and assess the risks of material misstatement of the financial statements, whether due to error or fraud, and to design and perform audit procedures responsive to those risks and obtain evidence that is sufficient and appropriate to provide a basis fo r our opinions. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. 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 othe r 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 majo r federal award program.
However, our tests will be less in scope than 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 intern al control or to identify significant deficiencies or material weaknesses. Accordingly, we will express no such opinion. However, during the audit, we will communicate to management and the Council internal control related matters that are required to be communicated under AICPA pr ofessional standards, Government Auditing Standards , and the Uniform Guidance.
Audit Procedures - Compliance
As part of obtaining reasonable assurance about whet her the financial statements are fre e of material misstatement, we will perform tests of the City’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 City has complied with federal statutes, regulations and the terms and conditions of federal awards applicable to major programs. Our procedures will c onsist 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 major program. For fede ral programs that are included in the Compliance Supplement, our compliance and internal control procedures will relate to the compliance requirements that the Compliance Supplement, identifies as being subj ect to audit. The purpose of these procedures will be to express an opinion on the City’s compliance with requirements applicable to each of its major programs in our report on compliance issued pursuant to the Uniform Guidance.
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Agreed-Upon Procedures
The City agrees to the procedures related to the Appropriations Limit Worksheet (Worksheet) for the year ended June 30, 2023, as suggested by the League of Ca lifornia Cities and presented in their Article XIIIB Appropriations Limitation Uniform Guidelines, and will acknowledge that the procedures to be performed are appropriate for the intended purpose of the en gagement, which is to assist you in meeting the requirements of Section 1.5 of Article XIIIB of th e California Constitution. Our engagement to apply agreed-upon procedures to the Worksheet will be c onducted in accordance with attestation standards established by the American Institute of Certified Pub lic Accountants. Those standards require that we obtain your written agreement to the procedures to be applied and your ac knowledgement that those procedures are appropriate for the intended pur pose of the engagement. The agreement and acknowledgement are contained within this letter. A refusal to provide such agreement and acknowledgement will result in our withdrawal from the engagement. We make no representation that the procedures we will perform are appropriate for the in tended purpose of the engage ment or for any other purpose.
Because the procedures requested do not constitute an examination or review, we will not express an opinion or conclusion on the Worksheet. In addition, we have no obligation to perform any procedures beyond those to which you agree.
We will issue a written report upon completion of our engagement that lists the procedures performed and our findings. Our report will be addressed to the C ity. If we encounter restrictions in performing our procedures, we will discuss the matter with you. If we determin e the restrictions are appropriate, we will disclose the restrictions in our report. Our report will contain a paragraph indicating that had we performed additional procedures, other matters might have come to our attention that would have been reported to you.
There may exist circumstances that, in our professiona l judgement, will require we withdraw from the engagement. Such circumstances include the following:
You refuse to provide written agreement to th e procedures and acknowledge that they are appropriate for the intended purpose of the engagement. You fail to provide requested written representations, or we conclude that there is sufficient doubt about the competence, integrity, ethical valu es or diligence of those providing the written representations, or we conclude that the written representations provided are otherwise not reliable. We determine that the description of the pro cedures performed or the corresponding findings are misleading in the circumstances of the engagement.
We determine that restrictions on the performance of procedures are not appropriate.
An agreed-upon procedures engagement is not designed to detect instances of fraud or noncompliance with laws or regulations; however, should any such matters come to our attention, we will communicate them in accordance with professional standards and applicable la w. In addition, if, in connection with this engagement, matters come to our attention that contradict that the Worksheet is in accordance with Article XIIIB of the California Constitution, we will communicate such matters to you.
You agree to the procedures to be performed and ac knowledge that they are appropriate for the intended purpose of the engagement.
You are responsible for the Worksheet and that it is in accordance with Article XIIIB of the California Constitution. In addition, you are responsible for prov iding us with (1) access to all information of which you are aware that is relevant to the performance of the agreed-upon procedures on the subject matter, (2) additional information that we may request for the purpose of performing the agreed-upon procedures, and (3) unrestricted access to persons within the entity from whom we determine it necessary to obtain evidence relating to performing those procedures.
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At the conclusion of our engagement, we will require certain written representations in the form of a representation letter from management that, among other things, will confirm management’s responsibility for the presentation of the Worksheet in accordance with Article XIIIB of the California Constitution.
Other Services
We will also assist in preparing the financial stat ements, schedule of expenditures of federal awards, and related notes in conformity with GAAP and the Uniform Guidance based on information provided by you.
These nonaudit services do not constitute an audit under Government Auditing Standards and such services will not be conducted in accordance with Government Auditing Standards. We will perform the services in accordance with applicable professional standards. The other services are limited to the financial statements, schedule of expenditures of federal awards, and the related notes services previously defined. 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’s responsibilities.
Responsibilities of Management for the Financial Statements
Our audit will be conducted on the basis that you acknowledge and understand your responsibility for (1) designing, implementing, establishing and maintaining effective internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, 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 progra ms are administered in co mpliance 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. Management is 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 GAAP; and for compliance with applicable laws and regulations (including federal statutes) and the provisions of contracts and grant agreements (including award agreements). Management’s 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 drafts of financial statements, schedule of expenditures of federal awards, all financial records and related information available to us and for the accuracy and completeness of that information (including information from outside of the general and subsidiary ledgers). Management is also responsible for providing us with (1) access to all information of which management is aware is relevant to the preparation and fair presentation of the financ ial statements, including identification of all related parties and all related-party relationships and transactions; (2) access to personnel, accounts, books, records, supporting documentation, and other information as needed to perform an audit under the 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.
We understand that the City will provide us with the Closing Checklist information required for our audit and that the City is responsible for the accuracy and completeness of that information. At the conclusion of our audit, we will require certain written representations from management about responsibilities for the financial statements; schedule of expenditure s of federal awards; federal awar d programs; compliance with laws, regulations, contracts, and grant agreements; and related matters.
Management’s 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 of each opinion unit as a whole.
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Management is 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 City involving (1) management, (2) employees who have significant ro les in internal control, and (3) ot hers where the fraud could have a material effect on the financial statements. Manage ment’s responsibilities include informing us of its knowledge of any allegations of fraud or suspected fraud affecting the City received in communications from employees, former employees, grantors, regulators, or others. In add ition, management is responsible for identifying and ensuring that it 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 that we report. Additionally, as required by the Uniform Guidance, it is management’s responsibi lity to evaluate and monitor noncompliance with federal statutes, regulations, and th e terms and conditions of federal awards; take prompt action when instances of noncompliance are identified including nonc ompliance 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 schedule of prior audit findings must be made available for our review.
With regard to including the auditor’s report in an exempt offering document, you agree that the aforementioned auditor’s report, or reference to Maze & Associates, will not be included in any such offering document without our prior permission or consent. Any agreement to perform work in connection with an exempt offering document, including an agreement to provide permission or consent will be a separate engagement. With regard to an exempt offering document with which Maze & Associates is not involved, you agree to clearly indicate in the exempt offering document that Maze & Associates is not involved with the contents of such offering document.
Management is also responsible for identifying all federal awards received and understanding and complying with the compliance requirements and for th e preparation of the schedule of expenditures of federal awards (including notes and noncash assistance received, and COVID-19-related concepts, such as lost revenues, if applicable) in conformity with the Uniform Guidance. Management agrees 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 fe deral awards. Management also agrees to include the audited financial statements w ith any presentation of the schedule of expenditures of federal awards that includes our report thereon. Management’s 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 Unif orm Guidance; (2) you believe the schedule of expenditures of federal awards, including its form and content, is stated fa irly in accordance with the Uniform Guidance; (3) the methods of measurement or presentation have not changed from those used in the prior period (or, if they have changed, the reasons for such changes); and (4) you have disclosed to us any significant assumptions or interpretations underlying the measurement or pr esentation of the schedule of expenditures of federal awards.
Management is also responsible for the preparation of the other supplementary information, which we have been engaged to report on, in conformity with U. S. generally accepted accounting principles (GAAP).
Management agrees to include our report on the supplementary information in any document that contains and indicates that we have reported on the supplementary information. Management also agrees to include the audited financial statements with any presentation of the supplement ary information that includes our report thereon. Management’s responsibilities include acknowledging to us in the representation letter that:
(1) management is responsible for presentation of the supplementary information in accordance with GAAP; (2) that management believes the supplementary information, including its form and content, is fairly presented in accordance with GAAP; (3) the methods of measurement or presentation have not changed from those used in the prior period (or, if th ey have changed, the reasons for such changes); and (4) management has disclosed to us any significan t assumptions or interpre tations underlying the measurement or presentation of the supplementary information.
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Management is responsible for esta blishing and maintaining of a proce ss for tracking the status of audit findings and recommendations. Management is also responsible for identifying and providing report copies of previous financial audi ts, attestation engagements, performance audits, or ot her studies related to the objectives discussed in the Audit Scope and Objective 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 other studies. Management is also responsible for providing management’s views on our current fi ndings, conclusions, and recommendations, as well as your planned corrective actions, for the report, and for the timing and format for providing that information.
With regard to the electronic diss emination of audited financial statements, including financial statements published electronically on your webs ite, you understand that electronic sites are a means to distribute information and, therefore, we are not required to read the information contained in these sites or to consider the consistency of other information in the electronic site with the original document.
Management agrees to assume all management responsibilities relating to the financial statements, schedule of expenditures of federal awards, related notes, and any other nonaudit services we provide. Management will be required to acknowledge in the management representation letter our assistance with the preparation of the financial statements, schedule of expenditures of federal awards, and re lated notes and any other nonaudit services we provide and that you have reviewed and approved the financial statements, schedule of expenditures of federal awards, and related notes and any other nonaudit services we provide prior to their issuance and have accepted responsibility for them. Further, ma nagement agrees to oversee the nonaudit 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.
In connection with this engagement, we may communicate with you or ot hers via email transmission. As emails can be intercepted and read, disclosed, or otherwise communicated by an unintended third party, or may not be delivered to each of the parties to whom they are directed and only to such parties, we cannot guarantee or warrant that emails from us will be properly delivered and read only by the addressee. Therefore, we specifically disclaim and waive any liability or responsibility whatsoever for interception or unintentional disclosure of emails transmitted by us in connection with the performance of this engagement. In that regard, you agree that we shall have no liability for any loss or damage to any person or entity resulting from the use of email transmissions, including any consequential, incidental, direct, indirect or special damages, such as loss of revenues or antici pated profits, or disclosu re or communication of c onfidential or proprietary information.
Engagement Administration, Fees, and Other
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, auditor’s 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 to 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 City; however, management is responsible for distribution of the reports and the financial statements. Unless restrict ed by law or regulation, or containing privileged and confidential information, copies of our reports are to be made available for public inspection.
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The audit documentation for this engagement is our property 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 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 re sponsibilities. We will notify you of any such request. If requested, access to such audit documentation will be provided under the supervision of Maze & Associates 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.
We will retain audit documentation for this engagement for seven years after the report release date pursuant to state regulations. 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.
We expect to begin our audit in April 2023 and to issue our reports no later than December 2023. Whitney Crockett is the engagement partner and is responsible for supervising the engagement and signing the reports or authorizing another individual to sign them.
To ensure that Maze & Associates’ inde pendence is not impaired under the AICPA Code of Professional Conduct, you agree to inform the engagement partner be fore entering into any substantive employment discussions with any of our personnel.
Our fees for these services are billed based on our cont ract with the City. Our standard hourly rates vary according to the degree of responsibility involved and the experience level of the personnel assigned to your audit. Our invoices for these fees will be rendered each month as work prog resses and are payable on presentation. In accordance with our firm policies, work may be suspended if the City’s account becomes thirty days or more overdue and may not be resumed until the City’s 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(s). You will be obligated to compensate us for all time expended and to reimburse us for all out-of-pocket costs through the date of termination.
These fees are based on anticipated cooperation from City personnel, the completion of schedules and data requested on our Checklists by City personnel, preparation of audit confirmations we request by City personnel, location of any documents selected by us fo r testing, and the assumption that there will be no unexpected increases in work scope, such as new Single Audit Act major programs, new debt issues, etc., or delays which are beyond our control, as discussed on the Fees Attachment to this letter. If significant additional time is necessary, we will discuss it with City management and arrive at a new fee before we incur any additional costs.
We understand you will provide us with basic workspace sufficient to accommodate the audit team assigned to your audit. We understand the ba sic workspace will be equipped w ith a telephone and direct Internet access, preferably a temporary network outside of your network, a public IP address and a wired connection.
We understand you will also provide us with access to a fax machine a nd read only access to your general ledger system.
You may request that we perform additional services not addressed in this engagement letter. If this occurs, we will communicate with you regarding the scope of the additional services and the estimated fees. We also may issue a separate engagement 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 letter.
Our most recent peer review report accompanies this letter.
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City of San Pablo Engagement Letter
Fees Attachment
June 30, 2023
Our fees for the work described in the attached engagement letter will be as follows, unless they are adjusted for one or more of the items below.
Ite
m 2023 Fees
1. Annual Comprehensive Financial Repor t
Including Management Lette r $68,448
2. Successor Agency Disclosures 6,448
3. Review of City’s Appropriation Limi
t 1,191
4. Single Audit, one tested progra m 5,678
5. MTC/TDA Programs Audit (1 project) 4,545
6. Web PDF file of Annual Comprehensive Financial Repor t Included
7. Measure Q (expires 2023) Agreed Upon Procedures and
Measure S (starts 2023) Agreed Upon Procedures
2,647
8. Measure K Agreed Upon Procedures 2,647
9. Annual Report of Financial Tr ansactions preparation for the City
3,328
10. Annual Report of Financial Tr ansactions preparation for the Financing Authority JPA
2,080
11. Annual Streets Report preparation for the City 2, 600
12. Scope increase due to GASB # 96 (A) TBD
Total $99,612
2023 Fees – Our fees are based on our extension letter dated January 30, 2023.
(A) Implementation of GASB Pronouncement 96, Subscription-Based Information Technology Arrangements – We will not know the extent of the potentia l increase in audit scope, if any, until we have additional conversations with City staff. Therefore, once that information is known for the fiscal year, we will provide a cost estimate and addendum to this engagement letter that will be based upon our standard hourly rates. Our initial estimate of the fee for the increase in aud it scope if the City has 5 or fewer subscriptions in place, regardless of wh ether they’ve been recorded as an asset or liability, is $3,000.
PDF Copies of Reports – print to PDF copies of the above reports are provided at no charge. These report copies are high quality, but do not in clude any bookmarks or hyperlinks and the file sizes may be large, depending on the length of the report. If you would like a higher quality PDF file with bookmarks and hyperlinks in the table of contents, we have liste d three options below. Please contact us for more information on the specifics of these options. Please contact us if you would like us to prepare one of the following three options for your Annual Comprehensive Financial Report, or if you’d like a quote for the preparation of a file for another type of report. In addition, should you decide on one of the following options, please let us know at least a week in advance.
1. WEB PDF Annual Comprehensive Financial Report - $810
2. CAMERA READY PDF Annual Comprehensive Financial Report - $1,125
3. INDIVIDUAL PDF Annual Comprehensive Financial Report PAGES - $215
Additional Services - The above fees are for audit and assuran ce services described in the accompanying engagement letter. They do not include fees for as sisting with closing the books nor providing other accounting services. Should the City require assi stance beyond audit services we will provide a cost estimate before proceeding.
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Report Finalization - Our fee is based on our understanding that all information and materials necessary to finalize all our reports will be provided to us before we complete our year-end fieldwork in your offices. In the case of Annual Comprehensive Financial Reports, this includes all the materials and information required to print the Annual Comprehensive Financial Report. As in the past, we will provide final drafts of all our reports before we leave your offices. We will schedule a Final Changes Meeting with you for a date no more than two weeks after we complete our fieldwork. At that meeting, we will finalize all reports for printing.
After that date, report changes you make and changes required because information was not received timely will be billed at our normal hourly rates.
Post-Closing Client Adjusting Entries - The first step in our year-end audit is the preparation of financial statement drafts from your final closing trial balance. That means any entries you make after handing us your closing trial balance must be handled as audit adjustments, or in extreme cases, by re-inputting the entire trial balance, even if the amounts are immaterial. If you make such entries and the amounts are in fact immaterial, we will bill you for the costs of the adjustments or re-input at our normal hourly rates.
Recurring Audit Adjustments - Each year we include the prior year’s adjusting entries as new steps in our Closing Checklist, so that you can incorporate these entries in your closing. If we are required to continue to make these same adjustments as part of this year’s aud it, we will bill for this service at our normal hourly rates.
Annual Comprehensive Financial Report Printing - As a convenience, we can send your Annual Comprehensive Financial Report to a printer we use locally. We do not charge for delivering camera-ready print masters to any printer of your choice and delivering the Annual Comprehensive Financial Reports or BFS to you. However, we will bill you for any additional time spent on the Annual Comprehensive Financial Report printing at our normal hourly rates. This includes changes after the report goes to the printer, obtaining, reviewing and / or delivering printer’s proofs, etc.
We can also help with Annual Comprehensive Financial Report design, including covers, tabs, dividers, color choices, bindings, organization charts, maps, etc. We will estimate these costs for you before proceeding.
Single Audit Act - Additional programs will each cost $5,000 in 2023, unless there are other factors which add to that program’s cost; in that case, we will provide a cost estimate before proceeding.
Grant Programs Requiring Separate Audit - Grant programs requiring se parate audits represent a significant increase in work scope, and fees for these audits vary based on the grant requirements. If you wish us to determine and identify which programs are subject to audit, we will bill you for that time at our normal hourly rates.
Changes in City Personnel - Our experience is that changes and /or reductions in Finance Department staff can have a pronounced impact on costs of performing the audit. If such changes occur, we will meet with you to assess their impact and arrive at a new fee before we begin the next phase of our work. However, we reserve the right to revisit this subject at the conclusion of the audit, based on your actual performance and our actual costs.
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City of San Pablo Engagement Letter
Compilation Attachment
June 30, 2023
The services we have been engaged to provide are outlined below.
Prepare and Electronically File the following Reports for the City:
o Annual Report of Financial Transactions for the City
o Annual Report of Financial Transactions for the Financing Authority JPA o Annual Street Report for the City
We will prepare and electronically file the Annual Financial Transactions Report(s) for the year ended June 30, 2023 in accordance with the requirements of Government Code Section 53891 and the California State Controller’s Office’s, Financial Transactions Report Instructions dated 10/2021 and perform a compilation engagement with respect to the Financial Transactions Report. City staff will provide us with a detailed trial balance and any supporting general ledger reports or schedules required to prepare the Report(s).
The supplementary information accompanying the Report( s), including the U.S. Bureau of the Census Survey and any others required by the California St ate Controller’s Office, will be presented for purposes of additional analysis. Such supplementary informa tion is the responsibility of management and will not be subject to our compilation engagement.
Our Responsibilities
The objective of our engagement is to -
1. prepare the Report(s) in accordance with the format prescribed by the California State Controller’s Office based on information provided by you and is not intended to be a presentation in accordance with accounting principles generally accepted in the United States of America, and
2. apply accounting and financial reporting expertise to assist you in the presentation of the Report(s) without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the Report(s) in order for them to be in accordance with the format prescribed by the California State Controller’s Office.
We will conduct our compilation engagement in accordance with Statements on Standards for Accounting and Review Services (SSARS) promulgated by the Accounting and Review Services Committee of the AICPA and comply with applicable professi onal standards, including the AICPA's Code of Professional Conduct, and its ethical principles of integrity, objectiv ity, professional competence, and due care, when performing the preparation and electronic filing of the Report(s), and performing the compilation engagement.
We are not required to, and will not, verify the accuracy or completeness of the information you will provide to us for the engagement or otherwise gather ev idence for the purpose of expressing an opinion or a conclusion. Accordingly, we will not express an opi nion, a conclusion, nor provide any assurance on the Report(s).
Our engagement cannot be relied upon to identify or disclose any Report misstatements, including those caused by fraud or error, or to identify or disclose any wrongdoing within the entity or noncompliance with laws and regulations.
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 since taking such action would impair our independence.
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Your Responsibilities
The engagement to be performed is conducted on the basis that you acknowledge and understand that our role is to prepare the Report(s) in accordance with the format prescribed by the California State Controller’s Office and assist you in the presentation of the Report( s) in accordance with the format prescribed by the California State Controller’s Office. You have the following overall responsibilities that are fundamental to our undertaking the engagement in accordance with SSARS:
1. The selection of the format prescribed by the Calif ornia State Controller’s Office as the financial reporting framework to be applied in the preparation of the Report(s).
2. The preparation and fair presentation of the Report(s) in accordance with the format prescribed by the California State Controller’s Office.
3. The design, implementation, and ma intenance of internal control relevant to the preparation and fair presentation of the Report(s) that are free from material misstatement, whether due to fraud or error.
4. The prevention and detection of fraud.
5. To ensure that the City complies with the laws and regulations applicable to its activities.
6. The accuracy and completeness of the records, doc uments, explanations, a nd other information, including significant judgments, you provide to us for the engagement.
7. To provide us with-
a. access to all information of which you are aware that is relevant to the fair presentation of the Report(s), such as records, documentation, and other matters.
b. additional information that we may request from you for the purpose of the compilation engagement.
c. unrestricted access to persons within the entity of whom we determine it necessary to make inquiries.
You are also responsible for all management decisions and responsibilities and for designating an individual with suitable skills, knowledge, and experience to ove rsee our preparation and electronic filing of your Report(s). You are responsible for evaluating the ad equacy and results of the services performed and accepting responsibility for such services.
Our Report
As part of our engagement, we will issue a report that will state that we did not audit or review the Report(s) and that, accordingly, we do not express an opinion, a conclusion, or provide a ny assurance on it(them).
There may be circumstances in which the Report(s) differ from the expected form and content. If, for any reason, we are unable to complete the compilation of your Report(s), we will not issue a report on such Report(s) as a result of this engagement.
Our report will disclose that the Report(s) are pres ented in a prescribed form in accordance with the requirements of the California State Controller’s O ffice and are not intended to be a presentation in accordance with accounting principles generally accepted in the United States of America.
You agree to include our accountant's compilation repor t in any document containing the Report(s) that indicates we have performed a compilation engagement on such Report(s) and, prior to inclusion of the report, to obtain our permission to do so.
Grace Zhang is the engagement partner and is respon sible for supervising the compilation portion of the engagement and signing the report or authorizing another individual to sign it.
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