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Contract - Rogers, Anderson, Malody & Scott, LLP - 2016-06-13 RA ROGERS, ANDERSON, MALODY & SCOTT, LLP MCERTIFIED PUBLIC ACCOUNTANTS, SINCE 1948 735 E. Carnegie Dr. Suite 100 San Bernardino,CA 92408 9098890871T 909 889 5361 F ramscpa.net June 13,2016 PARTNERS • Brenda L.Odle,CPA,MST To the Board of Directors Terry P.Shea,CPA Costa Mesa Sanitary District Kirk A. Franks,CPA Costa Mesa,California Scott W. Manno,CPA.CGMA Leena Shanbhag,CPA,MST,CGMA Bradferd A.Welebir,CPA,MBA,CGMA Jay H. Zercher, CPA(Partner Emeritus) This letter is provided in connection with our engagement to audit the financial Phillip H.Waller,CPA(Partner Emeritus) statements of Costa Mesa Sanitary District(the District)as of and for the year ended June 30, 2016. Professional standards require that we communicate with you certain items MANAGERS/STAFF including our responsibilities with regard to the financial statement audit and the planned Jenny Liu,CPA,MST scope and timing of our audit. Seong-Hyea Lee,CPA,MBA Charles De Simoni,CPA Nathan Statham,CPA.MBA Our Responsibilities Gardenya Duran,CPA Juan Romero,CPA As stated in our engagement letter dated June 13,2016,we are responsible for conducting Ivan Gonzales.CPA,MSA our audit in accordance with auditing standards generally accepted in the United States of Brianna Schultz,CPA Daniel Hernandez,CPA.MBA America, Government Auditing Standards issued by the Comptroller General of the Ryan Smith,CPA United States, and the State Controller's Minimum Audit Requirements and Reporting Guidelines for Special Districts for the purpose of forming and expressing opinions about whether the financial statements that have been prepared by management, with your oversight, are prepared, in all material respects, in accordance with accounting principles generally accepted in the United States of America. Our audit of the financial statements does not relieve you or management of your respective responsibilities. Our responsibility as it relates to required supplementary information, is to evaluate its presentation for the purpose of forming and expressing an opinion as to whether the information is fairly stated in all material respects in relation to the financial statements as a whole. Our responsibility for other information included in the document containing the audited financial statements and out report thereon includes only the information identified in our report. We have no responsibility for determining whether the statistical section and the introductory section are properly stated. MEMBERS Planned Scope of the Audit American Institute of Certified Public Accountants Our audit will include examining, on a test basis, evidence supporting the amounts and PCPS The AICPA Alliance disclosures in the financial statements; therefore, our audit will involve judgment about for CPA Finns the number of transactions to be examined and the areas to be tested. Our audit is Governmental Audit designed to provide reasonable, but not absolute, assurance about whether the financial Quality Center statements as a whole are free of material misstatement, whether due to error, fraudulent California Society of financial reporting, misappropriation of assets, or violations of laws or governmental Certified Public Accountants regulations. Because of this concept of reasonable assurance and because we will not examine all transactions, there is a risk that material misstatements may exist and not be detected by us. STABILITY. ACCURACY. TRUST. Board of Directors June 13,2016 Costa Mesa Sanitary District Page 2 Our audit will include obtaining an understanding of the entity and its environment, including its internal control, sufficient to assess the risks of material misstatement of the financial statements and as a basis for designing the nature, timing, and extent of further audit procedures. Our audit is not designed to express an opinion or provide assurance on internal control over financial reporting. However, we will communicate to you at the conclusion of our audit, significant matters that are relevant to your responsibilities in overseeing the financial reporting process, including any material weaknesses, significant deficiencies, and violation of laws or regulations that come to our attention. We plan to begin our audit on September 26,2016. Scott W. Manno,CPA,CGMA is the engagement partner and is responsible for supervising the engagement and signing the report. This information is intended solely for the information and use of the Board of Directors and management of the District and is not intended to be and should not be used by anyone other than these specified parties. Respectfully, Roiers,Rntiers orl,N►Q1od &Scot LLP San Bernardino,California June 13,2016 Grant Bennett Associates A u A PROFESSIONAL CORPORATION - SYSTEM REVIEW REPORT June 30. 2015 To the owners of Rogers. Anderson. Malody & Scott. LLP and the Peer Review Committee of the California Societe of Certified Public Accountants We have reviewed the system of quality control for the accounting and auditing practice of Rogers. Anderson. Malody& Scott. I.LP (the firm)in effect for the year ended November 30,2014. Our peer review was conducted in accordance with the Standards for Performing and Reporting on Peer Reviews established by the Peer Review Board of the American Institute of Certified Public Accountants Ac part of our peer review see considered reviews by regulatory entities, if applicable. in determining the nature and extent of our procedures. The firm is responsible for designing a system of quality control and complying with it to provide the finn with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects. Our responsibility is to express an opinion on the design of the system of quality control and the firm's compliance therewith based on our review. The nature. objectives,scope. limitations of.and the procedures performed in a System Review are described in the standards at svww.aicpa.org/prsummar. As required by the standards, engagements selected for review included engagements performed under the Government Auditing Standards and audits of employee•benefit plans. in our opinion, the system of quality control for the accounting and auditing practice of Rogers.Anderson. Malody& Scott. LLP in effect for the year ended November 30. 2014.has been suitably designed and complied with to provide the firm with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects. Firms can receive a rating of pass,pass with defciencvtiest or fad Rogers. Anderson. Malody & Scott. LLP received a peer review rating of pass. GRANT BENNETT ASSOCIATES A PROFESSIONAL CORPORATION Certified Public Accountants G B A 1375 Exposition Boulevard. Suite 230 P.O. Box 223096 C P A Sacramento. CA 95815 Princeville. HI 96722 9'6/922-5109 FAX 916/€41-5200 888/769-7323 RA ROGERS, ANDERSON, MALODY & SCOTT, LLP MCERTIFIED PUBLIC ACCOUNTANTS, SINCE 1948 J RECEIVED 735 E.Carnegie Dr. Suite 100 JUN 2 0 2016 San Bernardino,CA 92408 909 889 0871 T Costa Mesa Saint l3itiiClCt 909 889 5361 F ramscpa.net June 13,2016 PARTNERS Brenda L.Odle,CPA.MST Terry P.Shea,CPA Costa Mesa Sanitary District Kirk A. Franks,CPA 628 W. 19th Street Scott W. Manno,CPA,CGMA Costa Mesa,CA 92627 Leena Shanbhag,CPA,MST,CGMA Bradferd A.Welebir,CPA,MBA,CGMA Jay H.Zercher,CPA(Partner Emeritus) Phillip H.Waller,CPA(Partner Emeritus) The following represents our understanding of the services we will provide Costa Mesa Sanitary District. MANAGERS/STAFF Jenny Liu,CPA.MST You have requested that we audit the financial statements of the business-type activities Seong-Hyea Lee,CPA,MBA of Costa Mesa Sanitary District(the District), as of June 30, 2016, and for the year then Charles De Simon',CPA ended and the related notes to the financial statements, which collectively comprise the Nathan Statham,CPA.MBA Gardenya Duran,CPA District's basic financial statements. We are pleased to confirm our acceptance and our Juan Romero,CPA understanding of this audit engagement by means of this letter. Our audit will be Ivan Gonzales,CPA.MSA conducted with the objective of our expressing an opinion on each opinion unit. Brianna Schultz,CPA Daniel Hernandez,CPA.MBA Ryan Smith,CPA Accounting principles generally accepted in the United States of America require that required supplementary information, such as Management's Discussion and Analysis, Schedule of the District's Proportionate Share of Plans' Net Pension Liability and Related Ratios as of the Measurement Date, Schedule of Plan Contributions, and Schedule of Funding Progress for Other Post-Employment Benefits Plan be presented to supplement the 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 required supplementary information (RSI) in accordance with auditing standards generally accepted in the United States of America. These limited procedures will consist primarily of inquiries of management regarding their methods of measurement and presentation, and comparing the information for consistency with management's responses to our inquiries. We will not express an opinion or provide any form of assurance on the RSI. The following RSI is required by accounting principles generally accepted in the United States of America. This RSI will be subjected to certain limited procedures but will not MEMBERS be audited: American Institute of Certified Public Accountants • Management's Discussion and Analysis PCPS The AICPA Alliance • Schedule of the District's Proportionate Share of Plans' Net Pension Liability for CPA Firms and Related Ratios as of the Measurement Date Governmental Audit • Schedule of Plan Contributions Quality Center • Schedule of Funding Progress for Other Post-Employment Benefits Plan California Society of Certified Public Accountants STABILITY. ACCURACY TRUST. Board of Directors June 13,2016 Costa Mesa Sanitary District Page 2 Also, the document we submit to you will include the following other additional information that will not be subjected to the auditing procedures applied in our audit of the financial statements: • Introductory Section of the Comprehensive Annual Financial Report • Statistical Section of the Comprehensive Annual Financial Report The Objective of an Audit The objective of our audit is the expression of opinions as to whether your basic financial statements are fairly presented, in all material respects, in accordance with generally accepted accounting principles and to report on the fairness of the supplementary information referred to in the third paragraph when considered in relation to the financial statements as a whole. Our audit will be conducted in accordance with auditing standards generally accepted in the United States of America and will include tests of the accounting records and other procedures we consider necessary to enable us to express such opinions. 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 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 to issue a report as a result of this engagement. In accordance with the requirements of Government Auditing Standards, we will also issue a written report describing the scope of our testing over internal control over financial reporting and over compliance with laws, regulations, and provisions of grants and contracts, including the results of that testing. However, providing an opinion on internal control and compliance will not be an objective of the audit and,therefore,no such opinion will be expressed. General Audit Procedures We will conduct our audit in accordance with auditing standards generally accepted in the United States of America(U.S. GAAS), in accordance with Government Auditing Standards issued by the Comptroller General of the United States, and the State Controller's Minimum Audit Requirements and Reporting Guidelines for Special Districts.Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the basic financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to error, fraudulent financial reporting, misappropriation of assets, or violations of laws, governmental regulations, grant agreements, or contractual agreements. 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. Internal Control Audit Procedures Because of the inherent limitations of an audit, together with the inherent limitations of internal control, an unavoidable risk that some material misstatements may not be detected exists, even though the audit is properly planned and performed in accordance with U.S. GAAS, in accordance with Government Auditing Standards, and the State Controller's Minimum Audit Requirements and Reporting Guidelines for Special Districts. In making our risk assessments, we consider internal control relevant to the District's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the District's internal control. However,we will communicate to you in writing concerning any significant deficiencies or material weaknesses in internal control relevant to the audit of the financial statements that we have identified during the audit. Board of Directors June 13,2016 Costa Mesa Sanitary District Page 3 Compliance with Laws and Regulations As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we will perform tests of the District's compliance with the provisions of applicable laws,regulations,contracts,and agreements. However, the objective of our audit will not be to provide an opinion on overall compliance and we will not express such an opinion. Management Responsibilities Our audit will be conducted on the basis that management acknowledge and understand that they have responsibility: a. For the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America; b. For the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to error, fraudulent financial reporting,misappropriation of assets, or violations of laws,governmental regulations, grant agreements,or contractual agreements; c. To provide us with: i. Access to all information of which management is aware that is relevant to the preparation and fair presentation of the financial statements such as records,documentation,and other matters; ii. Additional information that we may request from management for the purpose of the audit;and iii. Unrestricted access to persons within the District from whom we determine it necessary to obtain audit evidence. d. For including the auditor's report in any document containing financial statements that indicates that such fmancial statements have been audited by the District's auditor; e. For identifying and ensuring that the District complies with the laws and regulations applicable to its activities;and f. For 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 current year period under audit are immaterial, both individually and in the aggregate,to the financial statements as a whole. With regard to the supplementary information referred to above, you acknowledge and understand your responsibility: (a) for the preparation of the supplementary information in accordance with the applicable criteria; (b)to provide us with the appropriate written representations regarding supplementary information; (c) to include our report on the supplementary information in any document that contains the supplementary information and that indicates that we have reported on such supplementary information; and (d) to present the supplementary information with the audited financial statements, or if the supplementary information will not be presented with the audited financial statements,to make the audited financial statements readily available to the intended users of the supplementary information no later than the date of issuance by you of the supplementary information and our report thereon. As part of our audit process, we will request from management, written confirmation concerning representations made to us in connection with the audit. Reporting We will issue a written report upon completion of our audit of the District's basic financial statements. Our report will be addressed to the Board of Directors of the District. We cannot provide assurance that unmodified opinions will be expressed. Circumstances may arise in which it is necessary for us to modify our opinions, add an emphasis-of-matter or other-matter paragraph(s),or withdraw from the engagement. Board of Directors June 13,2016 Costa Mesa Sanitary District Page 4 Other We understand that your employees will prepare all confirmations we request and will locate any documents or support for any other transactions we select for testing. Government Auditing Standards require that we document an assessment of the skills, knowledge, and experience of management, should we participate in any form of preparation of the basic financial statements and related schedules or disclosures as these actions are deemed a non-audit service. With respect to any nonattest services we perform, the District's management is responsible for (a) making all management decisions and performing all management functions; (b) assigning a competent individual to oversee the services; (c) evaluating the adequacy of the services performed; (d) evaluating and accepting responsibility for the results of the services performed; and (e) establishing and maintaining internal controls, including monitoring ongoing activities. Provisions of Engagement Administration,Timing and Fees Our firm may transmit confidential information that you provided us to third parties in order to facilitate delivering our services to you. We have obtained confidentiality agreements with all our service providers to maintain the confidentiality of your information and we will take reasonable precautions to determine that they have the appropriate procedures in place to prevent the unauthorized release of confidential information to others. We will remain responsible for the work provided by any third-party service providers used under this agreement. By your signature below,you consent to having confidential information transmitted to entities outside the firm. Please feel free to inquire if you would like additional information regarding the transmission of confidential information to entities outside the firm. During the course of the engagement, we may communicate with you or your personnel via fax or e-mail, and you should be aware that communication in those mediums contains a risk of misdirected or intercepted communications. We expect to begin our audit on September 26,2016. Scott W. Manno,CPA, CGMA, is the engagement partner for the audit services specified in this letter. His responsibilities include supervising the services performed as part of this engagement and signing or authorizing another qualified firm representative to sign the audit report. Our fees for these services are $9,695. Invoices will be rendered monthly and are payable upon presentation. If we elect to terminate our services for nonpayment, our engagement will be deemed to have been completed upon written notification of termination, even if we have not completed our report. You will be obligated to compensate us for all time expended and to reimburse us for all out-of-pocket costs through the date of termination. The above fee is based on anticipated cooperation from your personnel and the assumption that unexpected circumstances will not be encountered during the audit. Further, we will be available during the year to consult with you on financial management and accounting matters of a routine nature. During the course of the audit we may observe opportunities for economy in, or improved controls over, your operations. We will bring such matters to the attention of the appropriate level of management, either orally or in writing. We agree to retain our audit documentation or work papers for a period of at least seven years from the date of our report. At the conclusion of our audit engagement, we will communicate to the Board of Directors of the District the following significant findings from the audit: • Our view about the qualitative aspects of the District's significant accounting practices; • Significant difficulties,if any,encountered during the audit; • Uncorrected misstatements,other than those we believe are trivial, if any; Board of Directors June 13,2016 Costa Mesa Sanitary District Page 5 • Disagreements with management,if any; • Other findings or issues, if any, arising from the audit that are, in our professional judgment, significant and relevant to those charged with governance regarding their oversight of the financial reporting process; • Material,corrected misstatements that were brought to the attention of management as a result of our audit procedures; • Representations we requested from management; • Management's consultations with other accountants,if any;and • Significant issues,if any,arising from the audit that were discussed,or the subject of correspondence,with management. The audit documentation for this engagement is the property of Rogers, Anderson, Malody & Scott, LLP, and constitutes confidential information. However,we may be requested to make certain audit documentation available to regulators pursuant to authority given to it by law or regulation,or to peer reviewers. If requested,access to such audit documentation will be provided under the supervision of Rogers, Anderson,Malody& Scott,LLP personnel. Furthermore, upon request, we may provide copies of selected audit documentation to regulators who may intend, or decide, to distribute the copies of information contained therein to others, including other governmental agencies. In accordance with the requirements of Government Auditing Standards, we have attached a copy of our latest external peer review report of our firm for your consideration and files. Please sign and return the original of this letter, and retain the copy for your records, to indicate your acknowledgment of, and agreement with, the arrangements for our audit of the financial statements including our respective responsibilities. We appreciate the opportunity to be your financial statement auditors and look forward to working with you and your staff Respectfully, ROGERS,ANDERSON,MALODY&SCOTT,LLP Scott W.Manno,CPA,CGMA Partner RESPONSE: This letter correctly sets forth our understanding. Acknowledged and agreed on behalf of Costa Mesa Sanitary District by: Name: ArOP ' General Manager Title: Date: June 30, 2016