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HomeMy WebLinkAbout13103RESOLUTION NO. 13103 A RESOLUTION APPROVING AN ENGAGEMENT LETTER BETWEEN THE CITY OF PUEBLO, A MUNICIPAL CORPORATION, AND MCPHERSON, BREYFOGLE, DAVELINE & GOODRICH, PC, CERTIFIED PUBLIC ACCOUNTANTS, RELATING TO PROFESSIONAL AUDITING SERVICES AND AUTHORIZING THE PRESIDENT OF THE CITY COUNCIL TO EXECUTE SAME BE IT RESOLVED BY THE CITY COUNCIL OF PUEBLO, that: SECTION 1. The Engagement Letter between the City of Pueblo, a Municipal Corporation, and McPherson, Breyfogle, Daveline & Goodrich, PC, Certified Public Accountants, for the rendering of professional services to the City of Pueblo dated November 23, 2014, a copy of which is attached hereto, having been approved as to form by the City Attorney, is hereby approved. SECTION 2. The President of the City Council is hereby authorized to execute the Engagement Letter on behalf of Pueblo, a Municipal Corporation, and the City Clerk shall affix the seal of the City thereto and attest the same. SECTION 3. The officers and staff of the City are directed and authorized to perform any and all acts consistent with the intent of this Resolution and the contract to effectuate the transactions described therein. SECTION 4. This Resolution shall become effective immediately upon passage and approval. INTRODUCED: November 24, 2014 BY: Eva Montoya City Clerk’s Office Item # M-2 Background Paper for Proposed Resolution COUNCIL MEETING DATE: November 24, 2014 TO: President Stephen G. Nawrocki and Members of City Council CC: Sam Azad, City Manager VIA: Gina Dutcher, City Clerk FROM: Daniel C. Kogovsek, City Attorney, Law Department SUBJECT: A RESOLUTION APPROVING AN ENGAGEMENT LETTER BETWEEN THE CITY OF PUEBLO, A MUNICIPAL CORPORATION, AND MCPHERSON, BREYFOGLE, DAVELINE & GOODRICH, PC, CERTIFIED PUBLIC ACCOUNTANTS, RELATING TO PROFESSIONAL AUDITING SERVICES AND AUTHORIZING THE PRESIDENT OF THE CITY COUNCIL TO EXECUTE SAME SUMMARY: Attached is a proposed Resolution that would authorize the City to execute an Engagement Letter with McPherson, Breyfogle, Daveline & Goodrich, PC, Certified Public Accountants, to perform professional auditing services for the City of Pueblo for fiscal years 2014 and 2015. PREVIOUS COUNCIL ACTION : City Council approved an engagement with McPherson, Breyfogle, Daveline & Goodrich, PC, Certified Public Accountants (MBDG), on November 23, 2009, under Resolution No. 11750 to perform professional auditing services for fiscal years 2009 through 2013. BACKGROUND: The current engagement between the City and MBDG ends with the auditing services for the fiscal year ended December 31, 2013. There are two very significant changes that will affect the Finance Department and the City’s financial statements in fiscal years 2014 and 2015. The first is the conversion of the City’s entire financial ERP system from HTE to Tyler Munis on July 1, 2014. The second significant affect on the financial reporting for the City of Pueblo will be the implementation of two new Governmental Accounting Standards, GASB 67, Financial Reporting for Pension Plans, and GASB 68, Accounting and Financial Reporting for Pensions. These standards will be implemented in 2015 and will have a dramatic impact on the financial reporting for the City. MBDG has an in-depth knowledge of the City’s legacy system (HTE), which will be extremely beneficial when auditing the financial conversion. MBDG also has extensive knowledge of the five pension plans in which the City participates. Staff recommends extending the auditing services contract for the 2014 and 2015 fiscal years to maintain continuity during these major financial implementations. FINANCIAL IMPLICATIONS : The current engagement with MBDG provides that gross fees, including expenses, will not exceed $92,400 for fiscal years 2009 through 2013. Because of MBDG’s familiarity with the City’s financial systems and processes, MBDG was able to discount fees for fiscal years 2012 and 2013 to $88,000 each year, mainly due to their need to perform less field work than in previous years. The proposed engagement currently before the City Council would extend the current arrangement between the City of Pueblo and MBDG for two years. The engagement further reduces the fees for fiscal year ended December 31, 2014, to $85,000 and maintains the fees for fiscal year ended December 31, 2015, at $92,400 due to the additional services that will be required as a result of GASB 67 and GASB 68. BOARD/COMMISSION RECOMMENDATION : Not applicable. STAKEHOLDER PROCESS : None. ALTERNATIVES : Council could direct Administration to request proposals for auditing services. RECOMMENDATION : Approval of the Resolution. Attachments : Engagement Letter 503 N. Main St.,Suite 740 II � Pueblo,CO 81003-3131 It Phone(719)543-0516 Fax(719)544-2849 McPherson, Breyfogle, Daveline & Goodrich , PC Certified Public Accountants October 21, 2014 City Council City of Pueblo, Colorado We are pleased to confirm our understanding of the services we are to provide the City of Pueblo, Colorado (the City) for the years ended December 31, 2014 and 2015. We will audit the financial statements of the governmental activities, the business-type activities, each discretely-presented component unit except for Pueblo Urban Renewal Authority, each major fund, and the aggregate remaining fund information, including the related notes to the financial statements, which collectively comprise the basic financial statements of the City as of and for the years ended December 31, 2014 and 2015. Accounting standards generally accepted in the United States of America provide for certain required supplementary information (RSI), such as management's discussion and analysis (MD&A), to supplement the 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 statements 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. These limited procedures will consist of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtain during our audit of the basic financial statements. We will not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. The following RSI is required by generally accepted accounting principles and will be subjected to certain limited procedures, but will not be audited: 1. Management's Discussion and Analysis. 2. Budgetary comparison schedules—general fund and major special revenue funds. 3. Schedules of funding progress— old-hire pension plans and other post-employment benefit plans, as applicable. 4. Other RSI as required upon implementation of GASB 68 as of and for the year ended December 31, 2015. -1- We have also been engaged to report on supplementary information other than RSI that accompanies the City's financial statements. We will subject the following supplementary information to the auditing procedures applied in our audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America, and we will provide an opinion on it in relation to the financial statements as a whole in a separate written report accompanying our auditors' report on the financial statements or in a report combined with our auditors' report on the financial statements. 1. Schedule of expenditures of federal awards. 2. Combining and individual fund financial statements and schedules for the nonmajor governmental and enterprise funds and budget to actual comparison schedules as required for applicable funds, together with other required schedules. The following other information accompanying the financial statements will not be subjected to the auditing procedures applied in our audit of the financial statements and our auditors' report will not provide an opinion or any assurance on that other information: 1. Introductory section 2 Statistical section Audit Objectives The objective of our audit is the expression of opinions as to whether the financial statements are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles and to report on the fairness of the supplementary information referred to in the second paragraph when considered in relation to the financial statements as a whole. The objective also includes reporting on— • Internal control related to the financial statements and compliance with the provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a material effect on the financial statements in accordance with Government Auditing Standards. • Internal control related to major programs and an opinion (or disclaimer of opinion) on compliance with laws, regulations, and the provisions of contracts or grant agreements that could have a direct and material effect on each major program in accordance with the Single Audit Act Amendments of 1996 and OMB Circular A-133,Audits of States, Local Governments, and Non-Profit Organizations, as applicable and modified by the "Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards" which is effective for the year ended December 31, 2015. The Government Auditing Standards report on internal control over financial reporting and on compliance and other matters will include a paragraph that states (1) that the purpose of the report is solely to describe the scope of testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City's internal control or on compliance, and (2) that the report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City's internal control and compliance. The OMB Circular A-133 report on internal control over compliance is solely to describe the scope of testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133 as applicable and modified by the "Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards". Both reports will state that the report is not suitable for any other purpose. -2- Our audit will be conducted in accordance with auditing standards generally accepted in the United States of America; the standards for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; the Single Audit Act Amendments of 1996; and the provisions of OMB Circular A-133 and, as applicable, the "Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards", and will include tests of accounting records, a determination of major programs in accordance with OMB Circular A-133, and, as applicable, the "Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards", and other procedures we consider necessary to enable us to express such opinions. We will issue written reports upon completion of our Single Audit. Our reports will be addressed to City Council of the City. We cannot provide assurance that unmodified opinions will be expressed. Circumstances may arise in which it is necessary for us to modify our opinions or add emphasis-of- matter or other-matter paragraphs. If our opinions on the financial statements or the Single Audit compliance opinions are other than unmodified, we will discuss the reasons with you in advance. If, for any reason, we are unable to complete the audit or are unable to form or have not formed opinions, we may decline to express opinions or issue reports, or may withdraw from this engagement. Management Responsibilities Management is responsible for the financial statements, schedule of expenditures of federal awards, and all accompanying information, as well as all representations contained therein. Management is also responsible for identifying all federal awards received and understanding and complying with the compliance requirements, and for preparation of the schedule of expenditures of federal awards (including notes and noncash assistance received) in accordance with the requirements of OMB Circular A-133 and, as applicable, the "Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards". As part of the audit, we will assist with preparation of the financial statements, schedule of expenditures of federal awards, and related notes. 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. 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 preparation of the financial statements, schedule of expenditures of federal awards, and related notes and that they have reviewed and approved the financial statements, schedule of expenditures of federal awards, and related notes prior to their issuance and have accepted responsibility for them. Further, management agrees to oversee the nonaudit services by designating an individual, preferably from senior management, who possesses suitable skill, knowledge, or experience; evaluate the adequacy and results of those services; and accept responsibility for them. Management is responsible for (a) establishing and maintaining effective internal controls, including internal controls over compliance, and for evaluating and monitoring ongoing activities, to help ensure that appropriate goals and objectives are met; (b) following laws and regulations; (c) ensuring that there is reasonable assurance that government programs are administered in compliance with compliance requirements; and (d) ensuring that management is reliable 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 in conformity with U.S. generally accepted accounting principles, and for compliance with applicable laws and regulations and the provisions of contracts and grant agreements. -3- Management is also responsible for making all financial records and related information available to us and for the accuracy and completeness of that information. Management is also responsible for providing us with(1) access to all information of which they are aware that is relevant to the preparation and fair presentation of the financial statements, (2) additional information that we may request for the purpose of the audit, and (3) unrestricted access to persons within the City from whom we determine it necessary to obtain audit evidence. Management responsibilities also include identifying significant vendor relationships in which the vendor has responsibility for program compliance and for the accuracy and completeness of that information. Management 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 taken as a whole. 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 roles in internal control; and (3) others where the fraud could have a material effect on the financial statements. Management responsibilities include informing us of their knowledge of any allegations of fraud or suspected fraud affecting the City received in communications from employees, former employees, grantors, regulators, or others. In addition, management is responsible for identifying and ensuring that the City complies with applicable laws, regulations, contracts, agreements, and grants. Management is also responsible for taking timely and appropriate steps to remedy fraud and noncompliance with provisions of laws, regulations, contracts, and grant agreements, or abuse that we report. Additionally, as required by OMB Circular A- 133, and, as applicable, the "Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards", it is management's responsibility to follow up and take corrective action on reported audit findings and to prepare a summary schedule of prior audit findings and a corrective action plan, if necessary. Management is responsible for preparation of the schedule of expenditures of federal awards (including notes and noncash assistance received) in conformity with OMB Circular A-133, and, as applicable, the "Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards". 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 federal awards. Management also agrees to include the audited financial statements with any presentation of the schedule of expenditures of federal awards that includes our report thereon or make the audited financial statements readily available to intended users of the schedule of expenditures of federal awards no later than the date the schedule of expenditures of federal awards is issued with our report thereon. Management responsibilities include acknowledging to us in the written representation letter that (1) they are responsible for presentation of the schedule of expenditures of federal awards in accordance with OMB Circular A-133, and, as applicable, the "Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards"; (2) they believe the schedule of expenditures of federal awards, including its form and content, is fairly presented in accordance with OMB Circular A-133, and, as applicable, the "Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards"; (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) they have disclosed to us any significant assumptions or interpretations underlying the measurement or presentation of the schedule of expenditures of federal awards. -4- Management is also responsible for the preparation of other supplementary information, which we have been engaged to report on, in conformity with U.S. generally accepted accounting principles. 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 agrees to include the audited financial statements with any presentation of the supplementary information that includes our report thereon or make the audited financial statements readily available to users of the supplementary information no later than the date the supplementary information is issued with our report thereon. Management responsibilities include acknowledging to us in the written representation letter that (1) they are responsible for presentation of the supplementary information in accordance with GAAP; (2) they believe 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 they have changed,the reasons for such changes); and (4) they have disclosed to us any significant assumptions or interpretations underlying the measurement or presentation of the supplementary information. Management is responsible for establishing and maintaining a process for tracking the status of audit findings and recommendations. Management is also responsible for identifying for us previous financial audits, attestation engagements, performance audits, or other studies related to the objectives discussed in the Audit Objectives section of this letter. This responsibility includes relaying to us corrective actions taken to address significant findings and recommendations resulting from those audits, attestation engagements, performance audits, or studies. Management is also responsible for providing management's views on our current findings, conclusions, and recommendations, as well as their planned corrective actions, for the report, and for the timing and format for providing that information. Audit Procedures—General An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; therefore, our audit will involve judgment about the number of transactions to be examined and the areas to be tested. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We will plan and perform the audit to obtain reasonable rather than absolute assurance about whether the financial statements are free of material misstatement, whether from (1) errors, (2) fraudulent financial reporting, (3) misappropriation of assets, of(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 the determination of abuse is subjective, Government Auditing Standards do not expect auditors to provide reasonable assurance of detecting abuse. Because of the inherent limitations of an audit, combined with the inherent limitations of internal control, and because we will not perform a detailed examination of all transactions, there is a risk that material misstatements or noncompliance may exist and not be detected by us, even though the audit is properly planned and performed in accordance with U.S. generally accepted auditing standards and Government Auditing Standards. In addition, an audit is not designed to detect immaterial misstatements or violations of laws or governmental regulations that do not have a direct and material effect on the financial statements or major programs. However, we will inform the appropriate level of management of any material errors, any fraudulent financial reporting, or misappropriation of assets that come to our attention. We will also inform the appropriate level of management of any violations of -5- laws or governmental regulations that come to our attention, unless clearly inconsequential, and of any material abuse that comes to our attention. We will include such matters in the reports required for a Single Audit. Our responsibility as auditors is limited to the period covered by our audit and does not extend to any later periods for which we are not engaged as auditors. Our procedures will include tests of documentary evidence supporting the transactions recorded in the accounts and may include tests of the physical existence of inventories and direct confirmation of receivables and certain other assets and liabilities by correspondence with selected individuals, funding sources, creditors, and financial institutions. We will request written representations from the City attorney as part of the engagement. At the conclusion of our audit, we will require certain written representations from management about their responsibilities for the financial statements; schedule of expenditures of federal awards; federal award programs; compliance with laws, regulations, contracts, and grant agreements; and other responsibilities required by generally accepted auditing standards. Audit Procedures—Internal Control Our audit will include obtaining an understanding of the City and its environment, including internal control, sufficient to assess the risks of material misstatement of the financial statements and to design the nature, timing, and extent of further audit procedures. Tests of controls may be performed to test the effectiveness of certain controls that we consider relevant to preventing and detecting errors and fraud that are material to the financial statements and to preventing and detecting misstatements resulting from illegal acts and other noncompliance matters that have a direct and material effect on the financial statements. Our tests, if performed, will be less in scope than would be necessary to render an opinion on internal control and, accordingly,no opinion will be expressed in our report on internal control issued pursuant to Government Auditing Standards. As required by OMB Circular A-133, and, as applicable, the "Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards", we will perform tests of controls over compliance to evaluate the effectiveness of the design and operation of controls that we consider relevant to preventing or detecting material noncompliance with compliance requirements applicable to each major federal award program. However, our tests will be less in scope than 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 OMB Circular A-133, and, as applicable, the "Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards". An audit is not designed to provide assurance on internal control or to identify significant deficiencies or material weaknesses. However, during the audit, we will communicate to management and those charged with governance internal control related matters that are required to be communicated under AICPA professional standards, Government Auditing Standards, and OMB Circular A-133, and, as applicable, the "Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards". Audit Procedures—Compliance As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we will perform tests of the 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. -6- As required by OMB Circular A-133, and, as applicable, the "Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards", we will perform tests of controls over compliance to evaluate the effectiveness of the design and operation of controls that we consider relevant to preventing or detecting material noncompliance with compliance requirements applicable to each major federal award program. However, our tests will be less in scope than 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 OMB Circular A-133, and, as applicable, the "Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards". An audit is not designed to provide assurance on internal control or to identify significant deficiencies or material weaknesses. However, during the audit, we will communicate to management and those charged with governance internal control related matters that are required to be communicated under AICPA professional standards, Government Auditing Standards, and OMB Circular A-133, and, as applicable, the "Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards". Audit Procedures—Compliance As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we will perform tests of the 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. OMB Circular A-133, and, as applicable, the "Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards", requires that we also plan and perform the audit to obtain reasonable assurance about whether the auditee has complied with applicable laws and regulations and the provisions of contracts and grant agreements applicable to major programs. Our procedures will consist of tests of transactions and other applicable procedures described in the OMB Circular A-133 Compliance Supplement and, as applicable, the Compliance Supplement issued in conjunction with the "Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards" for the types of compliance requirements that could have a direct and material effect on each of the City's major programs. 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 OMB Circular A-133, and, as applicable, the "Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards". 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 submit the reporting package (including financial statements, schedule of expenditures of federal awards, summary schedule of prior audit findings, auditors' reports, and corrective action plan), along with the Data Collection Form to the federal audit clearinghouse. We will coordinate with management the electronic submission and certification. If applicable, we will provide copies of our report to include with the reporting package management will submit to pass-through entities. The Data Collection Form and the reporting package must be submitted within the earlier of 30 days after receipt of the auditors' reports or nine months after the end of the audit period, unless a longer period is agreed to in advance by the oversight agency for audits. -7- We will provide copies of our reports to the City; however, management is responsible for distribution of the reports and the financial statements. Unless restricted by law or regulations, or containing privileged and confidential information, copies of our reports are to be made available for public inspection. The audit documentation for this engagement is the property of McPherson, Breyfogle, Daveline & Goodrich, PC 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 the oversight agency for audit or its designee, a federal agency providing direct or indirect funding, or the U.S. Government Accountability Office for purposes of a quality review of the audit, to resolve audit findings, or to carry out oversight responsibilities. We will notify management of any such request. If requested, access to such audit documentation will be provided under the supervision of McPherson, Breyfogle, Daveline & Goodrich, PC personnel. Furthermore, upon request, we may provide copies of selected audit documentation to the aforementioned parties. These parties may intend, or decide, to distribute the copies or information contained therein to others, including other governmental agencies. The audit documentation for this engagement will be retained for a minimum of five years after the report release date or for any additional period requested by the oversight agency for audit or a pass- through entity. 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. Larry A. Daveline, C.P.A. is the engagement partner and is responsible for supervising the engagement and signing the reports or authorizing another individual to sign them. Our gross fee, including expenses, will not exceed $85,000 for the year ended December 31, 2014 and $92,400 for the year ended December 31, 2015. The fee increase for the year ended December 31, 2015 compared to the year ended December 31, 2014 is due to the required implementation of Governmental Accounting Standards Board statement 68, Accounting and Financial Reporting for Pensions. The above quoted fees are based on anticipated cooperation from City personnel and the assumption that unexpected circumstances will not be encountered during the audit. If significant additional time is necessary, we will discuss it with management and arrive at a new fee estimate before we incur the additional costs. With respect to professional fees for other accounting services, firm policy provides that such assistance is free of charge if the matter can be resolved with minimal effort. More extensive time requirements for these services will be billed at $153 per hour. We appreciate the opportunity to be of service to the City of Pueblo, Colorado and believe this letter accurately summarizes the significant terms of our engagements for the years ended December 31, 2014 and 2015. ilAmyttlYti pikkftAmk, tHtivok,t,a, -8- RESPONSE: This letter correctly sets forth the understanding of th- of Pueblo, Colorado. 4111111 Governance Signature: ,, . Title: PrPsideut of City Council Date: November 24, 2014 -9-