13 - AUDITOR COMMUNICATION LETTER 2011-12 FINANCIAL STATEMENT AUDITItem 13
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Memorandum
To: Board of Directors
Via: Scott Carroll, General Manage
From: Teresa Gonzalez, Accounting Manager
Date: August 20, 2012
Subject: Auditor Communication Letter for 2011 -12 Financial Statement Audit
Summary
On July 22, 2010 the Board approved a Professional Services Agreement for
Independent Audit services to Diehl Evans & Company, LLP for the total amount of
$26,930 for the three fiscal years ending June 30, 2010, 2011 and 2012. In
preparation of the start of the June 30, 2012 audit, the auditors have issued an Auditor
Communication Letter disclosing their responsibilities under U.S. Generally Accepted
Auditing Standards and Government Auditing Standards. The audit will begin on
approximately September 24, 2012 and the report will be issued on approximately
November 30, 2012.
Staff Recommendation
That the Board of Directors receive and file this report.
Analysis
The District has contracted for annual audit services with the firm Diehl, Evans &
Company, LLP since its separation from the City. Diehl Evans & Company, LLP
merged on September 30, 2011 with another audit firm to form a combined firm now
practicing as White Nelson Diehl Evans LLP. The first agreement covered the fiscal
years ended June 30, 2005 through June 30, 2009. The current agreement covers the
fiscal years ending June 30, 2010 through June 30, 2012, plus an option to extend the
term for two additional one -year periods at the sole discretion of the District. We are
currently on the third year of the agreement. At the completion of the third year, staff
will be reviewing its satisfaction with the audit services provided by White Nelson Diehl
Evans LLP and will determine whether or not to recommend to the Board the option to
extend the term for two additional one -year periods.
Protecting our community's (reap( andt(e environment 6y providing soWwaste andsewercoffection services.
www. crosdca.gov
Board of Directors
August 20, 2012
Page 2 of 2
Strategic Element & Goal
This item supports achieving Strategic Element No. 7.0, Finances and Strategic Goal
No. 7.4, Develop a Comprehensive Annual Financial Report.
Legal Review
Not applicable.
Financial Review
The audit fee for the fiscal year ending June 30, 2012 is $9,155, which is within the
budgeted amount for fiscal year 2012 -13.
Committee Recommendation
Not applicable
Public Notice Process
Copies of this report are on file and will be included with the entire agenda packet for
the August 20, 2011 Board of Directors regular meeting at District Headquarters and
on District website.
Alternative Actions
1. Refer the matter back to staff for additional information.
Attachments A: Auditor Communication Letter
July 31, 2012
Ms. Teresa Gonzalez
Accounting Manager
Costa Mesa Sanitary District
628 West 19`h Street
Costa Mesa, CA 92627
Dear Ms. Gonzalez:
AUG 0 12012
601A iwtsA SANI(AP OWN(
Enclosed is the Statement on Auditing Standards 114 "Communication with Those Charged with
Governance'' during the planning phase of the audit. Please forward the letter to the Board of
Directors.
If you have any questions, please feel free to call me.
Very truly yours,
Nitin P. Patel, CPA
2875 Michelle Drive, Suite 300, Irvine, CA 92606 • Tel: 714.978.1300 • Fax: 714.978.7893
Offices located in Orange and San Diego Counties
To the Board of Directors
Costa Mesa Sanitary District
Costa Mesa, California
We are engaged to audit the financial statements of Costa Mesa Sanitary District for the year ended
June 30, 2012. Professional standards require that we provide you with the following information
related to our audit.
Our Responsibilities under U.S. Generally Accepted Auditing Standards and Government Auditing
Standards
As stated in our professional services agreement dated July 30, 2010, our responsibility, as described
by professional standards, is to express an opinion about whether the financial statements prepared by
management with your oversight are fairly presented, in all material respects, in conformity with U.S.
generally accepted accounting principles. Our audit of the financial statements does not relieve you or
management of your responsibilities.
Our responsibility is to plan and perform the audit to obtain reasonable, but not absolute, assurance that
the financial statements are free of material misstatement.
As part of our audit, we will consider the internal control of Costa Mesa Sanitary District. Such
considerations are solely for the purpose of determining our audit procedures and not to provide any
assurance concerning such internal control.
As part of obtaining reasonable assurance about whether the financial statements are free of material
misstatement, we will also perform tests of the District's compliance with certain provisions of laws,
regulations, contracts, and grants. However, the objective or our tests is not to provide an opinion on
compliance with such provisions.
We are responsible for communicating significant matters related to the audit that are, in our
professional judgment, relevant to your responsibilities in overseeing the financial reporting process.
However, we are not required to design procedures specifically to identify such matters.
Planned Scope and Timing of the Audit
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.
2875 Michelle Drive, Suite 300, Irvine, CA 92606 • Tel: 714.978.1300 • Fax: 714.978.7893
Offices located in Orange and San Diego Counties
Planned Scope and Timing of the Audit (Continued)
Our audit will include obtaining an understanding of the District 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. Material misstatements may result
from (1) errors, (2) fi-audulent financial reporting, (3) misappropriation of assets, or (4) violations of
laws or governmental regulations that are attributable to the District or to acts by management or
employees acting on behalf of the District. We will communicate our significant findings at the
conclusion of the audit. We will also communicate any internal control related matters that are
required to be communicated under professional standards. If a member of the Board is aware of
matters that have a material bearing on the financial statements taken as a whole (such as those
described above in items 1 -4), please contact me at (714) 978 -1300 or by email at
npatelOwndecpa.com by September 24, 2012.
We expect to begin our audit on September 24, 2012 and issue our report on approximately
November 30, 2012.
This information is intended solely for the use of the Board of Directors and management of Costa
Mesa Sanitary District and is not intended to be and should not be used by anyone other than these
specified parties.
Very truly yours,
4 L� AU& a.'e� LLP
Irvine, California
July 31, 2012
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