HomeMy WebLinkAboutR-2020-041 Approving Engagement Letter with McGladrey LLP (RSM) for External Auditing Services RESOLUTION NO. R-2020-041
A RESOLUTION APPROVING AN ENGAGEMENT LETTER WITH MCGLADREY LLP
(RSM) FOR EXTERNAL AUDITING SERVICES
BE IT RESOLVED BY THE BOARD OF ALDERMEN OF THE CITY OF RIVERSIDE,
MISSOURI AS FOLLOWS:
THAT the Riverside Board of Aldermen hereby approves the engagement letter with
McGladrey LLP (RSM) for external auditing services, a copy of which is attached hereto, and
further authorizes the Mayor to sign the letter on behalf of the City; and
FURTHER THAT the Mayor, the City Administrator, the Finance Director and other
appropriate City officials are hereby authorized to take any and all actions as may be deemed
necessary or convenient to carry out and comply with the intent of this Resolution and to execute
and deliver for and on behalf of the City all certificates, instruments, agreements and other
documents, as may be necessary or convenient to perform all matters herein authorized.
PASSED AND ADOPTED by the Board of Aldermen of the City of Riverside,
Missouri,the anday of 92020.
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Mayor Kathleen L. Rose
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Robfx Kincaid, City Clerk
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May 18, 2020 RSM US LLP
4801 Main Street
City of Riverside, Missouri Suite 400
City Hall Kansas City, MO 64112-2930
2950 N.W.Vivion Road 0+1 816 753 3000
Riverside, MO 64150 F +1 816 751 1890
www.rsmus.com
Attention: Brian Koral, City Administrator
Nate Blum, Finance Director
The Objective and Scope of the Audit of the Financial Statements
You have requested that we audit the City of Riverside, Missouri's (the City) governmental activities, each
major fund and aggregate remaining fund information as of and for the year ending June 30, 2020,which
collectively comprise the basic financial statements.We are pleased to confirm our acceptance and our
understanding of this audit engagement by means of this letter.
Our audit will be conducted with the objective of our expressing an opinion on the financial statements.
We will also report on whether certain supplemental information (combining nonmajor fund financial
statements) is fairly stated in all material respects in relation to the financial statements as a whole. The
accounting principles generally accepted in the United States of America and Governmental Accounting
Standards Board require that the management's discussion and analysis and certain pension and other
postemployment benefit information be presented to supplement the basic financial statements.We will apply
certain limited procedures to this required supplementary information but will not express an opinion or provide
any assurance on this information.The accompanying introductory and statistical sections of the
Comprehensive Annual Financial Report(CAFR) are presented for the purpose of additional analysis and is not
a required part of the basic financial statements.Accordingly,we will not express an opinion on this
supplemental information.
The Responsibilities of the Auditor
We will conduct our audit in accordance with auditing standards generally accepted in the United States of
America (GARS); and Government Auditing Standards issued by the Comptroller General of the United States
(GAS).Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the 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 fraud or error. 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.
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 GARS.Also, an audit is not designed to detect errors or
fraud that are immaterial to the financial statements. The determination of abuse is subjective;therefore, GAS
does not expect us to provide reasonable assurance of detecting abuse.
In making our risk assessments,we consider internal control relevant to the City'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 entity'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.
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City of Riverside, Missouri
May 18, 2020
Page 2
We will also communicate to the Board of Aldermen (a)any fraud involving senior management and fraud
(whether caused by senior management or other employees)that causes a material misstatement of the
.financial statements that becomes known to us during the audit, and (b)any instances of noncompliance with
laws and regulations that we become aware of during the audit(unless they are clearly inconsequential).
The funds that you have told us are maintained by the City and that are to be included as part of our audit are
listed significantly similar to those listed in the City's June 30, 2019 basic financial statements.Any additional
funds or deleted funds will be communicated by you upon commencement of fieldwork.
The blended component unit whose financial statements you have told us are to be included as part of the
City's basic financial statements are the Tax Increment Financing Commission and the Riverside Industrial
Authority.
Our report on internal control will include any significant deficiencies and material weaknesses in controls of
which we become aware as a result of obtaining an understanding of internal control and performing tests of
internal control consistent with requirements of the standards and regulations identified above. Our report on
compliance matters will address material errors,fraud, abuse, violations of compliance obligations, and other
responsibilities imposed by state and federal statutes and regulations or assumed by contracts; and any state
or federal grant, entitlement or loan program questioned costs of which we become aware, consistent with
requirements of the standards and regulations identified above.
The Responsibilities of Management and Identification of the Applicable Financial Reporting
Framework
Our audit will be conducted on the basis that management and,when appropriate,those charged with
governance acknowledge and understand that they have responsibility:
1. For the preparation and fair presentation of the financial statements in accordance with accounting
principles generally accepted in the United States of America;
2. To evaluate subsequent events through the date the financial statements are issued or available to be
issued, and to disclose the date through which subsequent events were evaluated in the financial
statements. Management also agrees that it will not conclude on subsequent events earlier than the date
of the management representation letter referred to below;
3. 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 fraud or error;
4. For establishing and maintaining effective internal control over financial reporting, and for informing us of
all significant deficiencies and material weaknesses in the design or operation of such controls of which it
has knowledge;
5. For report distribution; and
6. To provide us with:
a. 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;
b. Additional information that we may request from management for the purpose of the audit; and
c. Unrestricted access to persons within the entity from whom we determine it necessary to obtain audit
evidence;
City of Riverside, Missouri
May 18, 2020
Page 3
As part of our audit process,we will request from management and,when appropriate, those charged with
governance written confirmation concerning representations made to us in connection with the audit, including
among other items:
1. That management has fulfilled its responsibilities as set out in the terms of this letter; and
2. That it believes 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 identifying and ensuring that the City complies with the laws and regulations
applicable to its activities, and for informing us about all known material violations of such laws or regulations.
In addition, management is responsible for the design and implementation of programs and controls to prevent
and detect fraud or abuse, and for informing us about all known or suspected fraud or abuse affecting the entity
involving management, employees who have significant roles in internal control, and others where the fraud or
abuse could have a material effect on the financial statements or compliance. Management is also responsible
for informing us of its knowledge of any allegations of fraud or abuse, or suspected fraud or abuse, affecting the
entity received in communications from employees, former employees, analysts, regulators or others.
Management is responsible for the preparation of the required supplementary information (RSI)and
supplementary information presented in relation to the financial statements as a whole in accordance with
accounting principles generally accepted in the United States of America and the Governmental Accounting
Standards Board. Management agrees to include the auditor's report on the RSI and supplementary
information in any document that contains the supplementary information and indicates that the auditor has
reported on such RSI and supplementary information. Management also agrees to present the supplementary
information with the audited financial statements or, if the supplementary information will not be presented with
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 of the supplementary information and the
auditor's report thereon.
The Board of Aldermen is responsible for informing us of its views about the risks of fraud or abuse within the
entity, and its knowledge of any fraud or abuse or suspected fraud or abuse affecting the City.
Our association with an official statement is a matter for which separate arrangements will be necessary.The
City agrees to provide us with printer's proofs or masters of such offering documents for our review and
approval before printing, and with a copy of the final reproduced material for our approval before it is
distributed. In the event our auditor/client relationship has been terminated when the City seeks such consent,
we will be under no obligation to grant such consent or approval.
The City agrees that it will not associate us with any public or private securities offering without first obtaining
our consent. Therefore, the City agrees to contact us before it includes our reports, or otherwise makes
reference to us, in any public or private securities offering.
Records and Assistance
If circumstances arise relating to the condition of the City's records,the availability of appropriate audit
evidence or indications of a significant risk of material misstatement of the financial statements because of
error,fraudulent financial reporting or misappropriation of assets which, in our professional judgment, prevent
us from completing the audit or forming an opinion,we retain the unilateral right to take any course of action
permitted by professional standards, including declining to express an opinion or issue a report, or withdrawing
from the engagement.
During the course of our engagement,we may accumulate records containing data that should be reflected in
the City's books and records.The City will determine that all such data, if necessary;will be so reflected.
Accordingly,the City will not expect us to maintain copies of such records in our possession.
City of Riverside, Missouri
May 18,2020
Page 4
The assistance to be supplied by City personnel, including the preparation of schedules and analyses of
accounts, has been discussed and coordinated with Nate Blum, Finance Director. The timely and accurate
completion of this work is an essential condition to our completion of the audit and issuance of our audit report.
Other Relevant Information
RSM US LLP may mention the City's name and provide a general description of the engagement in RSM US
LLP's client lists and marketing materials.
From time to time and depending upon the circumstances,we may use third-party service providers to assist
us in providing professional services to you. In such circumstances, it may be necessary for us to disclose
confidential client information to them.We enter into confidentiality agreements with all third-party service
providers and we are satisfied that they have appropriate procedures in place to prevent the unauthorized
release of your confidential information to others.
In accordance with GAS, a copy of our most recent peer review report is enclosed for your information.
Parties' Understandings Concerning Situation Around COVID-19
RSM US LLP and the City acknowledge that, at the time of the execution of this arrangement letter,federal,
state and local governments, both domestic and foreign, have restricted travel and/or the movement of their
citizens due to the ongoing and evolving situation around COVID-19. In addition, like many organizations and
companies in the United States and around the globe, RSM US LLP has restricted its employees from travel
and onsite work,whether at a client facility or RSM US LLP facility,to protect the health of both RSM US LLP's
and its clients' employees.Accordingly,to the extent that any of the services described in this arrangement
letter requires or relies on RSM US LLP or City personnel to travel and/or perform work onsite, either at the
City's or RSM US LLP's facilities, including, but not limited to, maintaining business operations and/or IT
infrastructure, RSM US LLP and the City acknowledge and agree that the performance of such work may be
delayed, significantly or indefinitely, and thus certain services described herein may need to be rescheduled
and/or suspended at either RSM US LLP's or the City's sole discretion. RSM US LLP and the City agree to
provide the other with prompt written notice (email will be sufficient) in the event any of the services described
herein will need to be rescheduled and/or suspended. RSM US LLP and the City also acknowledge and agree
that any delays or workarounds due to the situation surrounding COVID-19 may increase the cost of the
services described herein. RSM US LLP will obtain the City's prior written approval (email will be sufficient)for
any increase in the cost of RSM US LLP services that may result from the situation surrounding COVID-19.
Fees, Costs and Access to Workpapers
Our fees for the services described above are based upon the value of the services performed and the time
required by the individuals assigned to the engagement, including direct expenses. Our fee for the services
described in this letter will be$28,500, as well as a charge of 5%of fees for all other expenses, including
indirect administrative expenses.such as technology, research and library databases, communications,
photocopying, postage and clerical assistance. Our fee estimate and completion of our work are based upon
the following criteria:
1. Anticipated cooperation from City personnel
2. Timely responses to our inquiries
3. Timely completion and delivery of client assistance requests
4. Timely communication of all significant accounting and financial reporting matters
5. The assumption that unexpected circumstances will not be encountered during the engagement
6. No additional funds will be presented as major by management for public interest purposes
If any of the aforementioned criteria are not met,then fees may increase. Interim billings will be submitted as
work progresses and as expenses are incurred. Billings are due upon submission.
City of Riverside, Missouri
May 18,2020
Page 5
In the event you terminate this engagement, you will pay RSM US LLP for all services rendered (including
deliverables and products delivered), expenses incurred and commitments made by RSM US LLP through the
effective date of termination.
When an engagement has been suspended at the request of management or those charged with governance
and work on that engagement has not recommenced within 120 days of the request to suspend our work, RSM
US LLP may, at its sole discretion,terminate this arrangement letter without further obligation to the City.
Resumption of audit work following termination may be subject to our client acceptance procedures and, if
resumed,will necessitate additional procedures not contemplated in this arrangement letter.Accordingly, the
scope,timing and fee arrangement discussed in this arrangement letter will no longer apply. In order for RSM
US LLP to recommence work, a new arrangement letter would need to be mutually agreed upon and executed.
Our professional standards require that we perform certain additional procedures, on current and previous
years'engagements,whenever a partner or professional employee leaves the firm and is subsequently
employed by or associated with a client in a key position.Accordingly, the City agrees it will compensate RSM
US LLP for any additional costs incurred as a result of the City's employment of a partner or professional
employee of RSM US LLP.
The audit documentation for this engagement is the property of RSM US LLP and constitutes confidential
information.
Review of audit documentation by a successor auditor or as part of due diligence will be agreed to, accounted
for and billed separately.
In the event we are requested or authorized by the City or are required by government regulation, subpoena or
other legal process to produce our documents or our personnel as witnesses with respect to our engagement
for the City, the City will, so long as we are not a party to the proceeding in which the information is sought,
reimburse us for our professional time and expenses, as well as the fees and expenses of our counsel,
incurred in responding to such requests.
The documentation for this engagement is the property of RSM US LLP. However, you acknowledge and grant
your assent that representatives of the cognizant or oversight agency or their designee, other government audit
staffs, and the U.S. Government Accountability Office shall have access to the audit documentation upon their
request and that we shall maintain the audit documentation for a period of at least three years after the date of
the report, or for a longer period if we are requested to do so by the cognizant or oversight agency.Access to
requested documentation will be provided under the supervision of RSM US LLP audit personnel and at a
location designated by our firm.
You have informed us that you intend to prepare a comprehensive annual financial report(CAFR) and submit it
for evaluation by the Government Finance Officers Association's Certificate of Achievement for Excellence in
Financial Reporting Program. Our association with the CAFR is to consist of technical review for compliance
with the program requirements.
Indemnification and Claim Resolution
Because RSM US LLP will rely on the City and its management and Board of Aldermen to discharge the
foregoing responsibilities, the City holds harmless and releases RSM US LLP and its partners and employees
from all claims, liabilities, losses and costs arising in circumstances where there has been a knowing
misrepresentation by a member of the City's management that has caused, in any respect, RSM US LLP's
breach of contract or negligence.
The City and RSM US LLP agree that no claim arising out of services rendered pursuant to this arrangement
letter shall be filed more than the earlier of two years after the date of the audit report issued by RSM US LLP
or the date of this arrangement letter if no report has been issued. In no event shall either party be liable to the
other for claims of punitive, consequential, special, or indirect damages. RSM US LLP's liability for all claims,
damages and costs of the City arising from this engagement is limited to the amount of fees paid by the City to
RSM US LLP for the services rendered under this arrangement letter.
These provisions shall survive the termination of this arrangement for services.
City of Riverside, Missouri
May 18, 2020
Page 6
Information Security—Miscellaneous Terms
RSM US LLP is committed to the safe and confidential treatment of the City's proprietary information. RSM US
LLP is required to maintain the confidential treatment of client information in accordance with relevant industry
professional standards which govern the provision of services described herein.The City agrees that it will not
provide RSM US LLP with any unencrypted electronic confidential or proprietary information, and the parties
agree to utilize commercially reasonable measures to maintain the confidentiality of the City's information,
including the use of collaborate sites to ensure the safe transfer of data between the parties.
RSM US LLP may terminate this relationship immediately in its sole discretion if RSM US LLP determines that
continued performance would result in a violation of law, regulatory requirements, applicable professional
standards or RSM US LLP's client acceptance or retention standards, or if the City is placed on a verified
sanctioned entity list or if any director or executive of, or other person closely associated with,the City or its
affiliates is placed on a verified sanctioned person list, in each case, including but not limited to lists
promulgated by the Office of Foreign Assets Control of the U.S. Department of the Treasury,the U.S. State
Department,the United Nations Security Council,the European Union or any other relevant sanctioning
authority.
If any term or provision of this arrangement letter is determined to be invalid or unenforceable, such term or
provision will be deemed stricken and all other terms and provisions will remain in full force and effect.
Reporting
We will issue a written report upon completion of our audit of the City's financial statements. Our report will be
addressed to the Honorable Mayor and Members of the Board of Aldermen of the City.We cannot provide
assurance that an unmodified opinion will be expressed. Circumstances may arise in which it is necessary for
us to modify our opinion, add an emphasis-of-matter or other-matter paragraph(s), or withdraw from the
engagement.
In addition to our report on the City's financial statements,we will also issue the following types of reports:
1. Report on internal control related to the financial statements.This report will describe the scope of testing
of internal control and the results of our tests of internal control; and
2. Report on compliance with laws, regulations, and the provisions of contracts or grant agreements.We will
report on any noncompliance that could have a material effect on the financial statements;
This letter constitutes the complete and exclusive statement of agreement between RSM US LLP and the City,
superseding all proposals, oral or written, and all other communications with respect to the terms of the
engagement between the parties.
Electronic Signatures and Counterparts
Each party hereto agrees that any electronic signature of a party to this agreement or any electronic signature
to a document contemplated hereby(including any representation letter) is intended to authenticate such
writing and shall be as valid, and have the same force and effect, as a manual signature.Any such
electronically signed document shall be deemed (i)to be"written"or"in writing," (ii)to have been signed and
(iii)to constitute a record established and maintained in the ordinary course of business and an original written
record when printed from electronic files. Each party hereto also agrees that electronic delivery of a signature
to any such document(via email or otherwise)shall be as effective as manual delivery of a manual signature.
For purposes hereof, "electronic signature"includes, but is not limited to, (i)a scanned copy(as a"pdf'
(portable document format)or other replicating image)of a manual ink signature, (ii)an electronic copy of a
traditional signature affixed to a document, (iii)a signature incorporated into a document utilizing touchscreen
capabilities or(iv)a digital signature.This agreement may be executed in one or more counterparts, each of
which shall be considered an original instrument, but all of which shall be considered one and the same
agreement. Paper copies or"printouts,"of such documents if introduced as evidence in any judicial, arbitral,
mediation or administrative proceeding,will be admissible as between the parties to the same extent and under
the same conditions as other original business records created and maintained in documentary form. Neither
party shall contest the admissibility of true and accurate copies of electronically signed documents on the basis
of the best evidence rule or as not satisfying the business records exception to the hearsay rule.
City of Riverside, Missouri
May 18, 2020
Page 7
Please sign and return a copy of this letter to indicate your acknowledgment of, and agreement with, the
arrangements for our audit of the financial statements, including our respective responsibilities.
RSM US LLP
Kristen Hughes, Senior Manager
Confirmed on behalf of the City of Riverside, Missouri:
Brian Koral, City Administrator Date
Nate Blum, Finance Director Date
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910 E.St.Louis Street.Suite 2001 P.O.Box 1190 1 Springfield.MO 65801-1190
CPAs&Advisors 417.865.8701 1 Fax 417.865.0682 1 bkd.com
Report on the Firm's System of Quality Control
To the Partners of RSM US LLP and the National Peer Review Committee
We have reviewed the system of quality control for the accounting and auditing practice of RSM US LLP the
firm)applicable to engagements not subject to PCAOB permanent inspection in effect for the year ended
April 30,2019. 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(Standards).
A summary of the nature,objectives,scope,limitations of and the procedures performed in a System Review as
described in the Standards may be found at www-.aicpaorg/prsummary: The summary also includes an
explanation of how engagements identified as not performed or reported in conformity with applicable
professional standards,if any,are evaluated by a peer reviewer to determine a peer review rating.
Firm's Responsibility
The firm is responsible for designing a system of quality control and complying with it to provide the firm with
reasonable assurance of performing and reporting in conformity with applicable professional standards in all
material respects. The firm is also responsible for evaluating actions to promptly remediate engagements
deemed as not performed or reported in conformity with professional standards,when appropriate,and for
remediating weaknesses in its system of quality control,if any.
Peer Reviewer's Responsibility
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.
Required Selections and Considerations
Engagements selected for review included engagements performed under GovernmentAuditingStandards,
including compliance audits under the Single Audit Act;audits of employee benefit plans,audits performed
under FDICIA,audits of broker-dealers and examinations of service organizations[SOC 1 and SOC 2
engagements].
As a part of our peer review,we considered reviews by regulatory entities as communicated by the firm,if
applicable,in determining the nature and extent of our procedures.
Opinion
In our opinion,the system of quality control for the accounting and auditing practice of RSM US LLP
applicable to engagements not subject to PCAOB permanent inspection in effect for the year ended April 30,
2019,has been suitably designed and complied with to provide the firm with reasonable assurance of
performing and reporting in confornmity with applicable professional standards in all material respects. Finns
can receive a rating of pass,pass with defrciency(ies) or fail. RSM US LLP has received a peer review rating of
pass.
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