Resolution No. 93941
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RESOLUTION NO. 9394
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
VERNON APPROVING AND RATIFYING THE EXECUTION OF AN
ENGAGEMENT LETTER AGREEMENT FOR AUDITING SERVICES
BY AND BETWEEN THE CITY OF VERNON AND MACIAS GINI &
O'CONNELL LLP
WHEREAS, on September 15, 2004, the City�Council of the City
of Vernon adopted Resolution No. 8533 approving an Engagement Letter
(Agreement with Macias Gini & Company for auditing services for the
fiscal year ending June 30, 2004 for both the City and the
Redevelopment Agency of the City of Vernon• and
WHEREAS, in order to safeguard Vernon's rights and in order
to meet the urgent need for the auditing services, the Finance
Director executed the Engagement Letter Agreements dated September 19,
2005 and March 21, 2006 for auditing services for the fiscal years
ending June 30, 2005 and June 30, 2006, and authorized payment in
accordance with the terms thereof, subject to ratification by the City
Council; and
WHEREAS, the City of Vernon ("City") desires to retain the
services of an auditing service to perform the audit for the fiscal
year ending June 30, 2007 for both the City and the Redevelopment
Agency of the City of Vernon; and
WHEREAS, Macias Gini & O'Connell LLP ("Macias"), formerly
known as Macias Gini & Company LLP, has performed financial auditing
services for the City in the past and therefore can provide the
financial auditing services required by the City in a more efficient
and effective manner; and
WHEREAS, in order to meet the urgent need to commence the
1 auditing services on August 27, 2007 and in order to expedite the
2 development of the financial statements, the Finance Director executed
3 an Engagement Letter Agreement (the "Agreement") with Macias on
4 August 7, 2007, subject to ratification by the City Council; and
5 WHEREAS, the City Council of the City of Vernon desires to
6 approve and ratify the execution of the Engagement Letter Agreement
7 dated August 2, 2007, by the Finance Director, the Engagement Letter
8 Agreement dated September 19, 2005, by the Finance Director and the
9 Engagement Letter Agreement dated March 21, 2006, by the Finance
10 Director (collectively, the "Engagement Letter Agreements"); and
11 WHEREAS, the City Council of the City of Vernon also desires
12 to ratify any other action taken pursuant to said Engagement Letter
13 Agreements; and
14 WHEREAS, the City Council of the City of Vernon has
15 determined that, pursuant to the provisions of subsection (a) of
16 Section 2.27 of the Vernon City Code, it is in the public interest and
17 necessity to ratify entering into the Agreement with Macias.
18 NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
19 CITY OF VERNON AS FOLLOWS:
20 SECTION 1: The City Council of the City of Vernon hereby
21 finds and determines that the recitals contained hereinabove are true
22 and correct.
23 SECTION 2: The City Council of the City of Vernon hereby
24 ratifies the execution of the Engagement Letter Agreements dated
25 August 2, 2007, March 21, 2006 and September 19, 2005 by the Finance
26 Director with Macias Gini & O'Connell LLP and Macias Gini & Company
27 LLP, copies copy of which are attached hereto as Exhibits A, B and C,
28 respectively, and incorporated by reference.
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SECTION 3: The City Council of the City of Vernon hereby
approves and ratifies all actions taken by the Finance Director
pursuant to the terms and conditions of the Engagement Letter
Agreements and approves and ratifies all payments made in accordance
with said Engagement Letter Agreements.
SECTION 4: The City Council of the City of Vernon hereby
authorizes the City Administrator, or his designee, to take whatever
action necessary for the purpose of implementing and carrying out the
purposes specified in the Engagement Letter Agreement dated August 2,
2007.
SECTION 5: The City Clerk of the City of Vernon shall
certify to the passage of this resolution, and thereupon and
thereafter the same shall be in full force and effect.
APPROVED AND ADOPTED this 27th day of August, 2007.
TTEST:
NUELA GIRO' C' y Clerk
Name:
Leonis C. Malburg
Title: Mayor
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1 STATE OF CALIFORNIA )
) ss
2 COUNTY OF LOS ANGELES )
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4 I, MANUELA GIRON, City Clerk of the City of Vernon, do hereby
5 certify that the foregoing Resolution, being Resolution No. 9394, was.
6 duly adopted by the City Council of the City of Vernon at a special
7 meeting of the City Council duly held on Monday, August 27, 2007, and
8 thereafter was duly signed by the Mayor or Mayor Pro-Tem of the City of
9 Vernon.
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MANUELA -IRO, City Clerk
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13 (SEAL)
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EXHIBIT A
qq;t
Gz 'l 1 a €
MACIAs GINi & O'CONNELL LLP
CERTIFIED PUBLIC ACCOUNTANTS S MANAGEMENT CONSULTANTS
August 2, 2007
Mr. Rory Burnett
Director of Finance
City of Vernon
4305 S. Santa Fe Avenue
Vernon, CA 90058
3000 S Street, Suite 300
Sacramento CA 95816
9i 6 918,11600
2175 N. California Boulevard, Suite 645
Walnut Creek, CA 94596
925.274.0170
5I S S. Figueroa Street, Suite 325
Los Angeles, CA 90071
213.286.6e00
402 West Broadway, Suite 400
San Diego, CA 92101
61 °.57:s.1 1 12
We are pleased to confirm our understanding of the services we are to provide the City of Vernon
(Vernon) for the year ended June 30, 2007. We will audit the financial statements of the
governmental activities, the business -type activities, each major fund, and the aggregate
remaining fund information, which collectively comprise the basic financial statements of Vernon
as of and for the year ended June 30, 2007. The document we submit to you will include the
following supplemental information required by generally accepted accounting principles that
will be subjected to certain limited procedures, but will not be audited:
1. Management's Discussion and Analysis.
2. Budgetary Comparison Schedule.
We will also audit, the financial statements of the governmental activities and the major fund;
which collectively comprise the basic financial statements of the Vernon Redevelopment Agency
as of and for the year ended June 30, 2007. The document we submit to you will include the
following supplemental information required by generally accepted accounting principles that
will be subjected to certain limited procedures, but will not be audited:
1. Management's Discussion and Analysis.
Audit Objectives
The objective, of our audit is the expression of an opinion as to whether your 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 additional information referred to in the
first paragraph when considered in relation to the financials statements taken as a whole. Our
audit will be conducted in accordance with U.S. generally accepted auditing standards and will
include tests of the accounting records and other procedures we consider necessary to enable us to
express such an opinion. If our opinion on the financial statements is other than unqualified, we
will fully 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 an opinion, we may decline to express an
opinion or to issue a report as a result of this engagement.
www.mgocpa.corn An Independent Member of the BDO Seidman Alliance
For the Vernon Redevelopment Agency, our audit will also be conducted in accordance with the
standards for financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States, and will include tests of the accounting records of the
Vernon Redevelopment Agency and other procedures we consider necessary to enable us to
express such an opinion. We will also provide a report (that does not include an opinion) on
internal control related to the financial statements and compliance with laws, regulations, and the
provisions of contracts or grant agreements, noncompliance with which could have a material
effect on the financial statements as required by Government Auditing Standards. This report
will include a statement that the report is intended solely for the information and use of the audit
committee, management, and specific, legislative or regulatory bodies and is not intended to be
and should not be used by anyone other that these specified parties.
Management Responsibilities
Management is responsible for making all financial records and related information available to
us. We understand that you will provide us with such information required for our audit and that
you are responsible for the accuracy and completeness of that information. We will advise you
about appropriate accounting principles and their application and will advise you in the
preparation of your financial statements, but the responsibility for the financial statements
remains with you. You are responsible for making all management decisions, performing all
management functions, and designating a management -level individual with sufficient skills,
knowledge or experience to oversee our financial statement preparation services and to evaluate
the adequacy and the results of those services. As part of our engagement, we may propose
standard, adjusting, or correcting journal entries to your financial statements. You are responsible
for reviewing the entries and understanding the nature of any proposed entries and the impact
they have on the financial statements. That responsibility includes the establishment and
maintenance of adequate records and effective internal control over financial reporting, the
selection and application of accounting principles, and the safeguarding of assets. Management is
responsible for adjusting the financial statements to correct material misstatements and for
confirming to us in the 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.
You are 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 or illegal acts affecting the
government involving (a) management, (b) employees who have significant roles in internal
control, and (c) others where the fraud could have a material effect on the financial statements.
You are also responsible for informing us of your knowledge of any allegations of fraud or
suspected fraud or illegal acts affecting the government received in communications from
employees, former employees, regulators, or others. In addition, you are responsible for
identifying and ensuring that the entity complies with applicable laws and regulations and for
taking timely and appropriate steps to remedy any fraud, illegal acts, violations of contracts or
grant agreements, or abuse that we may report.
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. 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
2
assets, or (4) violations of laws or governmental regulations that are attributable to the entity or to
acts by management or employees acting on behalf of the entity.
Because an audit is designed to provide reasonable, but not absolute, assurance and because we
Will not perform a detailed examination of all transactions, there is a risk that material
misstatements may exist and not be detected by us. 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. However, we will inform you of any
material errors that come to our attention, and we will inform you of any fraudulent financial
reporting or misappropriation of assets that comes to our attention. We will also inform you of
any violations of laws or governmental regulations that come to our attention, unless clearly
inconsequential. Our responsibility as auditors is limited to the period covered by our audit and
does not extend to matters that might arise during 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, creditors, and financial institutions. We will request written representations
from your attorneys as part of the engagement, and they may bill you for responding to this
inquiry. At the conclusion of our audit, we will also require certain written representations from
you about the financial statements and related matters.
Identifying and ensuring that Vernon complies with laws, regulations, contracts, and agreements
is the responsibility of management. As' part of obtaining reasonable assurance about whether the
financial statements are free of material misstatement, we will perform tests of Vernon's
compliance with applicable laws and regulations and the provisions of 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.
Audit Procedures — Internal Control
In planning and performing our audits, we will obtain an understanding of internal control
sufficient to assess the risks of material misstatements of the financial statements and to design
the nature, timing, and extent of our auditing procedures for the purpose of expressing our
opinion on Vernon's financial statements.
An audit is not designed to provide assurance on internal control or to identify significant
deficiencies. However, we will inform the governing body or audit committee of any matters
involving internal control and its operation that are required to be communicated under
professional standards and Governmental Auditing Standards.
Audit Administration, Fees, and Other
We understand that your employees will provide all items shown on the prepared by client (PBC)
schedule as well as supporting documents selected by us for testing.
We expect to begin our audit on approximately August 27, 2007 and to issue our report on the
basic financial statements of Vernon no later than October 30, 2007. We will issue the basic
financial statements of the Vernon Redevelopment Agency no later than December 15, 2007.
Our fee for these services will be at our standard hourly rate plus out-of-pocket costs (such as
report reproduction, word processing, postage, travel, copies, telephone, etc.) and will be billed
on a time and materials basis. 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 progresses and are payable on
presentation. In accordance with our firm policies, work may be suspended if your account
becomes 30 days or more overdue and may not be resumed until your 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.
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.
Peer Review Report
Government Auditing Standards require that we provide you with a copy of our most recent
external peer review report and any letter of comment, and any subsequent peer review reports
and letters of comment received during the period of the contract. Our 2006 peer review report
accompanies this letter.
We appreciate the opportunity to be of service to the City of Vernon and believe this letter
accurately summarizes the significant terms of our engagement. If you have any questions, please
let us know. If you agree with the terms of our engagement as described in this letter, please sign
the enclosed copy and return it to us.
Very truly yours,
Macias Gini & O'Connell LLP
James V. Godsey
Partner
El
RESPONSE:
This letter correctly sets forth the understanding of the City of Vernon.
By:
Title
Dab
5
DAVIS
MONK
Company
Certified Public Acanuuaots
& Ciuxincsti C•UINU1knn5
l Pelftirra vhip (`rrErsi.;rirY: ,;j
1', t!fe� < <i,,r+nr As_vuiur� nr1 s
taint,svilie
/010 N.W. ih Place
P.O. lioy i ,49� t ?"2(04 )
Ciamesvilic. Florida 2rY)6
Phone i;i'I 3 ,46110
(500) 3-11->031
Fat: (33 it ?7;_ I lh
Palatka
W6 Snuth Suite Road Iri
Rdatka. Ploilda 121 Ti
Phonc:l?S6)325-4561
Fax: OM) 3-IS-1014
May 26, 2006
To the Partners of
Macias, Gini & O'Connell, LLP
and the Center for Public Company Audit Firms Peer Review Committee
We have reviewed the system of quality control for the accounting and
auditing practice of Macias, Gini & O'Connell, LLP (the "firm")
applicable to non -SEC issuers in effect for the year ended March 31,
2006. The firm's accounting and auditing practice applicable to SEC
issuers was not reviewed by us since the Public Company Accounting
Oversight Board (PCAOB) is responsible for inspecting that portion of
the firm's accounting and auditing practice in accordance with PCAOB
requirements. A system of quality control encompasses the firm's
organizational structure, and the policies adopted and procedures
established to provide it with reasonable assurance of complying with
professional standards. The elements of quality control are described in
the Statements on Quality Control Standards issued by the American
Institute of Certified Public Accountant's (AICPA). The design of the
system, and compliance with it, are the responsibilities of the firm. Our
responsibility is to express an opinion on the design of the system and the
f rm!s compliance with that system based on our review.
Our review was conducted in accordance with standards established by the
Peer Review Committee of the Center for Public Company Audit Fimis and
St. Augu.slhte
13Q 1 Plantation Island Dr. included procedures to plan and perform the review~ that are siuiunarized in
Suite _10.A the attached description of the peer review process. Our review would not
St. Augusune_ 1 Ittrida >t;t, necessarily disclose all weaknesses in the system of quality control or all
Phone: t9lkl,471- 3445 instances of lack of compliance with it since it was based onselectivetests.
r:,,: r 901;17 1-_I Because there are inherent limitations in the effectiveness of any system of
quality control, departures fi•om the system may occur and not be detected.
luet�sf,e: Also, projection of any evaluation of a system of quality control to future
we �uikn unxilik.com
periods is subject to the risk that the system of quality control may become
inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
CPAnierit:a Ime.rnalional
1=1111 ida Institute of
Uertilt:•d Public Accountalits
American Institute of
Certified Public Aciotuvmits
Hovwziih International
In our opinion, the system of quality control for the accounting and
auditing practice applicable to the non -SEC issuers of Macias, Gini &
O'Connell, LLP in effect for the year ended March 31, 2006, has been
designed to meet the requirements of the quality control standards for an
accounting and auditing practice established by the AICPA and was
complied with during the year then ended to provide the firm with
reasonable assurance of conforming with professional standards.
361
I
3000 S Street, Suite 300
wwrn
Sacramento, CA 95816
916.928.4600
2175 N. Califomla Boulevard, Suite 645
Walnut Creek CA 94596
MAC IAS G I N I OICO N N ELL LLP
92S.274.0190
5IS S. Figueroa Street, Suite 325
CERTIFIED PUBLIC ACCOUNTANTS S MANAGEMENT CONSULTANTS
Los Angeles, CA90071
213.286.6400
402 West Broadway, Suite 400
San Diego, CA 92101
619.S73.1112
March 21, 2006
Mr. Rory Burnett
City Finance Director
City of Vernon, California
4305 Santa Fe Avenue
Vernon, California 90058
This letter will confirm our understanding of the services we are to provide for the City of
Vernon, California, (City) on an on -going basis., until which time either party determines that the
services are no longer required. These services will include auditing the City's accounting
records and interim financial statements in accordance with auditing standards generally accepted
in the United States of America. The audit procedures will be performed on a periodic..or
quarterly basis, throughout the fiscal year, as determined by mutual agreement between the City
and Macias Gini & Company LLP, We will also perform other assignments as requested by the
City, within professional independence guidelines.
Audit Services
We will audit the financial statements of the governmental activities, the business -type activities,
each major fund, and the aggregate remaining fund information, which collectively comprise the
City's basic financial statements as of and for the City's fiscal year ended June 30. The document
we submit to you will include the following supplementary information required by generally
accepted accounting principles that will be subjected to certain limited procedures, but will not be
audited:
1. Management's Discussion and Analysis
2. Budgetary Comparison Information
Audit Objective
The objective of our audit is the expression of an opinion as to whether your financial statements
are fairly presented, in all material respects, in conformity with U.S. generally accepted
accounting principles. Our audit will be conducted in accordance with U.S. generally accepted
auditing standards and will include tests of the accounting records and other procedures we
consider necessary to enable us to express such an opinion. If our opinion on the financial
statements is other than unqualified, we will fully discuss the reasons with you in advance. If, for
any reason, we are unable to complete the audit or are unable to fonn or have not formed an
opinion, we may decline to express an opinion or to issue a report as a result of this engagement.
www.mgocpa.com An Independent Member of the 81130 Seidman Alliance
Management Responsibilities
Management is responsible for making all financial records and related information available to
us. We understand that you will provide us with such information required for our audit and that
you are responsible for the accuracy and completeness of that information. We will advise you
about appropriate accounting principles and their application in the preparation of your financial
statements, but the responsibility for preparing the financial statements remains with you. You are
responsible for making all management decisions, performing all management functions, and
designating a management -level employee with sufficient skills, knowledge, or experience to
oversee financial statement preparation. As part of our engagement, we may propose standard,
adjusting, or correcting journal entries to your financial statements. You are responsible for
reviewing the entries and understanding the nature of any proposed entries and the impact they
have on the financial statements. That responsibility includes the establishment and maintenance
of adequate records and effective internal control over financial reporting, the selection and
application of accounting principles, and the safeguarding of assets. Management is responsible
for adjusting the financial statements to correct material misstatements and for confirming to us in
the 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.
You are 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 or illegal acts affecting the
government involving (1) management, (2) employees who have significant roles in internal
control, and (3) others where the fraud or illegal acts could have a material effect on the financial
statements. You are also responsible for informing us of your knowledge of any allegations of
fraud or suspected fraud or illegal acts affecting the government received in communications
from employees, former employees, regulators, or others. In addition, you are responsible for
identifying and ensuring that the entity complies with applicable laws and regulations and for
taking timely and appropriate steps to remedy any fraud, illegal acts, or violations of contracts or
grant agreements that we may report.
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. 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, or (4) violations of laws or governmental regulations that are
attributable to the entity or to acts by management or employees acting on behalf of the entity.
Because an audit is designed to provide reasonable, but not absolute, assurance and because we
will not perform a detailed examination of all transactions, there is a risk that material
misstatements may exist and not be detected by us. 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. However, we will inform you of any
material errors that come to our attention, and we will inform you of any fraudulent financial
reporting or misappropriation of assets that come to our attention. We will also inform you of
any violations of laws or governmental regulations that come to our attention, unless clearly
inconsequential. Our responsibility as auditors is limited to the period covered by our audit and
does not extend to matters that might arise during 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, creditors, and financial institutions. We will request written representations
from your attorneys as part of the engagement, and they may bill you for responding to this
inquiry. At the conclusion of our audit, we will also require certain written representations from
you about the financial statements and related matters.
Identifying and ensuring that the City complies with laws, regulations, contracts, and agreements
is the responsibility of management. 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 applicable laws and regulations and the provisions of 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.
Audit Procedures —Internal Control
In planning and performing our audits, we will consider the internal control sufficient to plan the
audit in order to determine the nature, timing, and extent of our auditing procedures for the
purpose of expressing our opinion on the City's financial statements.
An audit is not designed to provide assurance on internal control or to identify reportable
conditions. However, we will inform the governing body or audit committee of any matters
involving internal control and its operation that we consider to be reportable conditions under
standards established by the American Institute of Certified Public Accountants. Reportable
conditions involve matters coming to our attention relating to significant deficiencies in the
design or operation of the internal control that, in our judgment, could adversely affect the
entity's ability to record, process, summarize, and report financial data consistent with the
assertions of management in the financial statements.
Other Assignments
Macias Gini & Company LLP will perform other assignments requested by the City (i.e., periodic
attestation work, etc.), within the parameters of professional independence guidelines.
Fees
All services under this agreement will be billed to the City at our hourly rates currently in place at
the time, in addition to any out-of-pocket expenses.
We appreciate the opportunity to be of service to the City of Vernon, California, and believe this
letter accurately summarizes the significant terms of our engagement. If you have any questions,
please let us know. If you agree with the terms of our engagement as described in this letter,
please sign the enclosed acknowledgement and return it to us.
Very truly yours,
Macias Gini &. Company LLP
f � e-4- /,0
RESPONSE:
This letter correctly sets forth the understanding of the City of Vernon, California.
By:_
Title:
Date:
EXHIBIT C
MACIAS GINI & COMPANYLLP
515 S. Figueroa Street, Ste. 325
Los Angeles, California 90071
2 13.6 12.0200 PHONE
213.286.6426 FAx
September 19, 2005
Mr. Rory Burnett
Director of Finance
City of Vernon
4305 Santa Fe Avenue
Vernon, CA 90058
We are pleased to confirm our understanding of the services we are to provide the City of
Vernon, California (Vernon) for the year ended June 30, 2005. We will audit the financial
statements of the governmental activities, the business -type activities, each major fund, and the
aggregate remaining fund information, which collectively comprise the basic financial
statements, of Vernon as of and for the year ended June 30, 2005. The document we submit to
you will include the following supplementary information required by generally accepted
accounting principles that will be subjected to certain limited procedures, but will not be audited:
1. Management's Discussion and Analysis.
2. Budgetary Comparison Schedule.
We will also audit the financial statements of the governmental activities and the major fund,
which collectively comprise the basic financial statements of the Vernon Redevelopment Agency
as of and for the year ended June 30, 2005. The document we submit to you will include the
following supplementary information required by generally accepted accounting principles that
will be subjected to certain limited procedures, but will not be audited:
1. Management's Discussion and Analysis.
We will audit the fund financial statements of the City of Vernon Light and Power Fund as of
and for the year ended June 30, 2005.
Audit Objective
audit will be conducted in accordance with U.S. generally accepted auditing standards and will
include tests of the accounting records and other procedures we consider necessary to enable us
to express such an opinion. If our opinion on the financial statements is other than unqualified,
we will fully 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 fonned an opinion, we may decline to
express an opinion or to issue a report. as a result of this engagement.
For the Vernon Redevelopment Agency, our audit will also be conducted in accordance with the
standards for financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States, and will include tests of the accounting records of the
Vernon Redevelopment Agency and other procedures we consider necessary to enable us to
express such an opinion. We will also provide a report (that does not include an opinion) on
internal control related to the financial statements and compliance with laws, regulations, and the
provisions of contracts or grant agreements, noncompliance with which could have a material
effect on the financial statements as required by Government Auditing Standards. This report
will include a statement that the report is intended solely for the information and use of the audit
committee, management, and specific legislative or regulatory bodies and is not intended to be
and should not be used by anyone other than these specified parties.
Management Responsibilities
Management is responsible for making all financial records and related information available to
us. We understand that you will provide us with such information required for our audit and that
you are responsible for the accuracy and completeness of that information. We will advise you
about appropriate accounting principles and their application and if requested, may assist in the
preparation of your financial statements, but the responsibility for the financial statements
remains with you. You are responsible for making all management decisions, performing all
management functions, and designating a management -level employee with sufficient skills,
knowledge, or experience to oversee our financial statement preparation services and to evaluate
the adequacy and results of those services. As part of our engagement, we may propose standard,
adjusting, or correcting journal entries to your financial statements. You are responsible for
reviewing the entries and understanding the nature of any proposed entries and the impact they
have on the financial statements. That responsibility includes the establishment and maintenance
of adequate records and effective internal control over financial reporting, the selection and
application of accounting principles; and the safeguarding of assets. Management is responsible
for adjusting the financial statements to correct material misstatements and for confirming to us
in the 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.
You are 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 or illegal acts affecting the
government involving (1) management, (2) employees who have significant roles in internal
control, and (3) others where the fraud or illegal acts could have a material effect on the financial
statements. You are also responsible for informing us of your knowledge of any allegations of
fraud or suspected fraud or illegal acts affecting the government received in communications
from employees, former employees, regulators, or others. In addition, you are responsible for
identifying and ensuring that the entity complies with applicable laws and regulations and for
taking timely and appropriate steps to remedy any fraud, illegal acts, or violations of contracts. or
grant agreements that we may report.
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. 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, or (4) violations of laws or governmental regulations that are
attributable to the entity or to acts by management or employees acting on behalf of the entity.
Because an audit is designed to provide reasonable, but not absolute, assurance and because we
will not perform a detailed examination of all transactions, there is a risk that material
misstatements may exist and not be detected by us. 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. However, we will inform you of any
material errors that come to our attention, and we will inform you of any fraudulent financial
reporting or misappropriation of assets that come to our attention. We will also inform you of
any violations of laws or governmental regulations that come to our attention, unless clearly
inconsequential; Our responsibility as auditors is limited to the period covered by our audit and
does not extend to matters that might arise during 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, creditors, and financial institutions. We will request written representations
from your attorneys as part of the engagement, and they may bill you for responding to this
inquiry. At the conclusion of our audit, we will also require certain written representations from
you about the financial statements and related matters.
Identifying and ensuring that Vernon complies with laws, regulations, contracts, and agreements
is the responsibility of management. As part of obtaining reasonable assurance about whether the
financial statements are free of material misstatement, we will perform tests of Vernon's
compliance with applicable laws and regulations and the provisions of 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.
Audit Procedures —Internal Control
In planning and performing our audits, we will consider the internal control sufficient to plan the
audit in order to determine the nature, timing, and extent of our auditing procedures for the
purpose of expressing our opinion on Vernon's financial statements.
An audit is not designed to provide assurance on internal control or to identify reportable
conditions. However, we will inform the governing body or audit committee of any matters
involving internal control and its operation that we consider to be reportable conditions under
standards established by the American Institute of Certified Public Accountants. Reportable
conditions involve matters coming to our attention relating to significant deficiencies in the
design or operation of the internal control that, in our judgment,could adversely affect the
entity's ability to record, process, summarize, and report financial data consistent with the
assertions of management in the financial statements.
Audit Administration, Fees, and Other
We understand that your employees will prepare all cash or other confirmations we request and
will locate any documents selected by us for testing.
We expect to begin our audit on approximately September 19, 2005 and to issue our reports no
later than November 30, 2005.
Our fee for these services will be at our standard hourly rates plus out-of-pocket costs (such as
report reproduction, word processing, postage, travel, copies, telephone, etc.) except that we
agree that our gross fee, including expenses will not exceed $130,000. 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
progresses and are payable on presentation. In accordance with our firm policies, work may be
suspended if your account becomes 30 days or more overdue and may not be resumed until your
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. 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. If significant additional time is
necessary, we will discuss it with you and arrive at a new fee estimate before we incur the
additional costs.
We appreciate the opportunity to be of service to the City of Vernon and believe this letter
accurately summarizes the significant terms of our engagement. If you have any questions,
please let us know. If you agree with the terms of our engagement as described in this letter,
please sign the enclosed copy and return it to us.
Very truly yours;
Macias Gini & Company LLP
James V. Godsey, CPA
Partner
RESPONSE:
This letter correctly sets forth the understanding of the City of Vernon.
By: VICI-7V
Title: D l e e c 4m, D Ft tjg fjc-r
Date: q /.a(o 10
a
WILLIAM V. ALLEN, Jr.
Certified Public Accountants
PEER REVIEW REPORT
June 13, 2003
To the Partners
Macias, Gini & Company LLP
We have reviewed the system of quality control for the accounting and auditing practice of Macias, Gini
& Company LLP (the firm) in effect for the year ended March 31, 2003. A system of quality control
encompasses the firm's organizational structure and the policies adopted and procedures established to
provide it with reasonable assurance of conforming with professional standards. The elements of quality
control are described in the Statements on Quality Control Standards issued by the American Institute .of
Certified Public Accountants (AICPA). The design of the system and compliance with it are the
responsibility of the firm. Our responsibility is to express an opinion on the design of the system, and the
firm's compliance with the system based on our review.
Our review was conducted in accordance with standards established by the Peer Review Board of the
AICPA. In performing our review, we obtained an understanding of the system of quality control for the
firm's accounting and auditing practice. In addition, we tested compliance with the firm's quality control
policies and procedures to the extent we considered appropriate. These tests covered the application of the
firm's policies and procedures on selected engagements. Because our review was based on selective tests,
it would not necessarily disclose all weaknesses in the system of quality control or all instances of lack of
compliance with it.
Because there are inherent limitations in the effectiveness of any system of quality control, departures
from the system may occur and not be detected. Also, projection of any evaluation of a system of quality
control to future periods is subject to the risk that the system of quality control may become inadequate
because of changes in conditions, or because the degree of compliance with the policies or procedures
may deteriorate.
In our opinion, the system of quality control for the accounting and auditing practice of Macias, Gini &
Company LLP in effect for the year ended March.31, 2003, has. been designed to meet the requirements
of the quality control standards for an accounting and auditing practice established by the AICPA and was
complied with during the year then ended to provide the firm with reasonable assurance of conforming
with professional standards.
`William V Allen, Jr.
Peer Review Without Peer
2148 Margarita Drive ♦ The Villages, FL 32159 ♦ (352) 750-9636 ♦ billObillallen.com
3000 S Street, Suite 300
Sacramento, CA 95816
916.92&.4600
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MACIAS GINI & 01CONNELL LLP
CERTIFIED PUBLIC ACCOUNTANTS S MANAGEMENT CONSULTANTS
August 2, 2007
Mr. Rory Burnett
Director of Finance
City of Vernon
4305 S. Santa Fe Avenue
Vernon, CA 90058
2175 N. California Boulevard, Suite 6,45
Walnut Creek, CA 94596
925.2 74.0190
515 S. Figueroa Street, Suite 325
Los Angeles, CA 90071
2111.2a6.6400
402 West Broadway, Suite 400
San Diego, CA 92101
619373.1112.
We are pleased to confirm our understanding of the services we are to provide the City of Vernon
(Vernon) for the year ended June 30, 2007. We will audit the financial statements of the
governmental activities, the business -type activities, each major fund, and the aggregate
remaining fund information, which collectively comprise the basic financial statements of Vernon
as of and for the year ended June 30, 2007. The document we submit to you will include the
following supplemental information required by generally accepted accounting principles that
will be subjected to certain limited procedures, but will not be audited:
1. Management's Discussion and Analysis.
2. Budgetary Comparison Schedule.
We will also audit the financial statements of the governmental activities and the major fund,
which collectively comprise the basic financial statements of the Vernon Redevelopment Agency
as of and for the year ended June 30, 2007. The document we submit to you will include the
following supplemental information required by generally accepted accounting principles that
will be subjected to certain limited procedures, but will not be audited:
1. Management's Discussion and Analysis.
Audit Objectives
The objective of our audit is the expression of an opinion as to whether your 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 additional information referred to in the
first paragraph when considered in relation to the financials statements taken as a whole. Our
audit will be conducted in accordance with U.S. generally accepted auditing standards and will
include tests of the accounting records and other procedures we consider necessary to enable us to
express such an opinion. If our opinion on the financial statements is other than unqualified, we
will fully 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 an opinion, we may decline to 'express an
opinion or to issue a report as a result of this engagement.
www.rngocpa.corn An Independent Member of the 13130 Seidman Alliance
For the Vernon Redevelopment Agency, our audit will also be conducted in accordance with the
standards for financial audits contained' in Government Auditing Standards, issued by the
Comptroller General of the United States, and will include tests of the accounting records of the
Vernon Redevelopment Agency and other procedures we consider necessary to enable us to
express such an opinion. We will also provide a report (that does not include an opinion) on
internal control related to the financial statements and compliance with laws, regulations, and the
provisions of contracts or grant agreements, noncompliance with which could have a material
effect on the financial statements as required by Government Auditing Standards. This report
will include a statement that the report is intended solely for the information and use of the audit
committee, management, and specific legislative or regulatory bodies and is not intended to be
and should not be used by anyone other that these specified parties.
Management Responsibilities
Management is responsible for making all financial records and related information available to
us. We understand that you will provide us with such information required for our audit and that
you are responsible for the accuracy and completeness of that information. We will advise you
about appropriate accounting principles and their application and will advise you in the
preparation of your financial statements, but the responsibility for the financial statements
remains with you. You are responsible for making all management decisions, performing all
management functions, and designating a management -level individual with sufficient skills,
knowledge or experience to oversee our financial statement preparation services and to evaluate
the adequacy and the results of those services. As part of our engagement, we may propose
standard, adjusting, or correcting journal entries to your financial statements. You are responsible
for reviewing the entries and understanding the nature of any proposed entries and the impact
they have on the financial statements. That responsibility includes the establishment and
maintenance of adequate records and effective internal control over financial reporting, the
selection and application of accounting principles, and the safeguarding of assets. Management is
responsible for adjusting the financial statements to correct material misstatements and for
confirming to us in the 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.
You are 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 or illegal acts affecting the
government involving (a) management, (b) employees who have significant roles in internal
control, and (c) others where the fraud could have a material effect on the financial statements.
You are also responsible for informing us of your knowledge of any allegations of fraud or
suspected fraud or illegal acts affecting the government received in communications from
employees, former employees, regulators, or others. In addition, you are responsible for
identifying and ensuring that the entity complies with applicable laws and regulations and for
taking timely and appropriate steps to remedy any fraud, illegal acts, violations of contracts or
grant agreements, or abuse that we may report.
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. 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
OJI
assets, or (4) violations of laws or governmental regulations that are attributable to the entity or to
acts by management or employees acting on behalf of the entity.
Because an audit is designed to provide reasonable, but not absolute, assurance and because we
will not perform a detailed examination of all transactions, there is a risk that material
misstatements may exist and not be detected by us. 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. However, we will inform you of any
material errors that come to our attention, and we will inform you of any fraudulent financial
reporting or misappropriation of assets that comes to our attention. We will also inform you of
any violations of laws or governmental regulations that come to our attention, unless clearly
inconsequential. Our responsibility as auditors is limited to the period covered by our audit and
does not extend to matters that might arise during 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, creditors, and financial institutions. We will request written representations
from your attorneys as part of the engagement, and they may bill you for responding to this
inquiry. At the conclusion of our audit, we will also require certain written representations from
you about the financial statements and related matters.
Identifying and ensuring that Vernon complies with laws, regulations, contracts, and agreements
is the responsibility of management. As part of obtaining reasonable assurance about whether the
financial statements are free of material misstatement, we will perform tests of Vernon's
compliance with applicable laws and regulations and the provisions of 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.
Audit Procedures — Internal Control
In planning and performing our audits, we will obtain an understanding of internal control
sufficient to assess the risks of material misstatements of the financial statements and to design
the nature, timing, and extent of our auditing procedures for the purpose of expressing our
opinion on Vernon's financial statements.
An audit is not designed to provide assurance on internal control or to identify significant
deficiencies. However, we will inform the governing body or audit committee of any matters
involving internal control and its operation that are required to be communicated under
professional standards and Governmental Auditing Standards.
Audit Administration, Fees, and Other
We understand that your employees will provide all items shown on the prepared by client (PBC)
schedule as well as supporting documents selected by us for testing.
We expect to begin our audit on approximately August 27, 2007 and to issue our report on the
basic financial statements of Vernon no later than October 30, 2007. We will issue the basic
financial statements of the Vernon Redevelopment Agency no later than December 15, 2007.
3
Our fee for these services will be at our standard hourly rate plus out-of-pocket costs (such as
report reproduction, word processing, postage, travel, copies, telephone, etc.) and will be billed
on a time and materials basis. 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 progresses and are payable on
presentation. In accordance with our firm policies, work may be suspended if your account
becomes 30 days or more overdue and may not be resumed until your 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.
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.
Peer Review Report
Government Auditing Standards require that we provide you with a copy of our most recent
external peer review report and any letter of comment, and any subsequent peer review reports
and letters of comment received during the period of the contract. Our 2006 peer review report
accompanies this letter.
We appreciate the opportunity to be of service to the City of Vernon and believe this letter
accurately summarizes the significant terms of our engagement. If you have any questions, please
let us know. If you agree with the terms of our engagement as described in this letter, please sign
the enclosed copy and return it to us.
Very truly yours, �
Macias Gini & O'Connell LLP
James V. Godsey
Partner
4
RESPONSE:
This letter correctly sets forth the understanding of the City of Vernon.
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Datf
26, 2000
DAVISMay
MONK
To the Partners of
Macias, Gini & O'Connell, LLP
and the Center for Public Company Audit Firms Peer Review Committee
Company
Ce,iified Public Accountants
We have reviewed the system of quality control for the accounting and
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auditing practice of Macias, Gini & O'Connell, LLP (the "firm'')
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applicable to non -SEC issuers in effect for the year ended March 31,
2006. The firm's accounting and auditing practice applicable to SEC
issuers was not reviewed by us since the Public Company Accounting
Gainesville
Oversight Board (PCAOB) is responsible for inspecting that portion of
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the firm's accounting and auditing practice in accordance with PCAOB
P.O. Box 13494 t a>>W-o
requirements. A system of quality control encompasses the firm's
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organizational structure, and the policies adopted and procedures
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established to provide it with reasonable assurance of complying with
(1,00) 34 k, 03.1
Fax (372) 371-I �83
professional standards. The elements of quality control are described in
the Statements on Quality Control Standards issued by the American
Institute of Certified Public Accountant's (AICPA). The design of the
Palatka
system, and compliance with it, are the responsibilities of the firm. Our
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responsibility is to express an opinion on the design of the system and the
Palalb. Florida 3, 177
Phone: (380) 325-11561
finn's compliance with that system based on our review.
Fax: (,S61 ?8-1014
Our review was conducted in accordance with standards established by the
Peer Review Committee of the Center for Public Company Audit Firms and
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included procedures to plan and perform the reviewthat are summarized in
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the attached description of the peer review process. Our review would not
St. AL)pisune. Florida 201SO
necessarily disclose all weaknesses in the system of quality control or all
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instances of lack of compliance with it since it was based oil selective tests.
Fax: `904) -171 ,1R_'.5
Because there are inherent limitations in the effectiveness of any system of
quality control, departures from the system may occur and not be detected.
Wrbsite:
Also, projection of any evaluation of a system of quality control to future
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-
periods is subject to the risk that the system of quality control may become
inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
In our opinion, the system of quality control for the accounting and
auditing practice applicable to the non -SEC issuers of Macias, Gini &
O'Connell, LLP in effect for the year ended March 31, 2006, has been
designed to meet the requirements of the quality control standards for all
accounting and auditing practice established by the AICPA and was
complied with during the year then ended to provide the finn with
reasonable assurance of conforniing with professional standards.
CPAtn4rica lntettmti°nal
Florida fits(itute of
Certified Public Accommints
American Ins ilute of
Certified Public Accountants
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