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R-61-06 07/10/2006RESOLUTION R A RESOLUTION AUTHORIZING THE VILLAGE ADMINISTRATOR TO ENTER INTO AN AUDITING SERVICES AGREEMENT WITH MULCAHY, PAURITSCH, SALVADOR & CO., LTD. NOW THEREFORE, BE IT RESOLVED BY THE PRESIDENT AND MEMBERS OF THE BOARD OF TRUSTEES OF THE VILLAGE OF LEMONT, COOK, WILL & DU PAGE COUNTIES, ILLINOIS that: Section 1: The Village Administrator is authorized to execute the Auditing Services Agreement with Mulcahy, Pauritsch, & Salvador & Co., Ltd. attached hereto as Exhibit "A ". Section 2: Effective Date: This Resolution shall become effective upon passage, approval and publication, in Book and Pamphlet form as provided by law. PASSED AND APPROVED BY THE PRESIDENT AND BOARD OF TRUSTEES OF THE VILLAGE OF LEMONT, COOK, WILL AND DU PAGE COUNTIES ILLINOIS on this to Day of (?) 0 , 2006 AYES NAYS PASSED ABSENT Debby Blatzer Peter Coules Brian Reaves Cliff Miklos Ronald Stapleton Jeanette Virgilio Auest: JOHN F. PIAZZA, Village Pres s ent ARLENE SMOL EN, illage Clerk AUDITING SERVICES AGREEMENT THIS AGREEMENT, made this 6 date of June , 2006, by and between Mulcahy. Pauritsch, Salvador & Co., Ltd., hereinafter referred to as "Auditor ", and the VILLAGE OF LEMONT, a municipal corporation in Cook, Will, and DuPage, County, Illinois, hereinafter referred to as "Village ". SECTION I. The Auditor agrees to furnish capable and efficient accountants to conduct a general audit of the books and financial records of the Village in accordance with Generally Accepted Auditing Standards (GAAS). SECTION II. The Auditor agrees to begin the examination as soon after the acceptance of this Agreement to the mutual convenience of the Village and the Auditor. The Auditor further agrees that he will conduct said examination with diligence as to insure its completion at the earliest possible date with such efficiency and thoroughness as is expected under GAAS. In any event, the examination and Auditor's report shall be completed and a report delivered prior to October l' of each year. SECTION III. The Auditor and the Village shall comply with Section II, Nature of Services Required and Section V, Proposal Requirements and incorporate those sections into the contract. SECTION IV. The Auditor agrees to adopt reasonable procedcures as to insure the safe custody of his working papers for a period of time sufficient to satisfy legal and administrative requirements. Furthermore, he agrees to make the working papers available for examination by the Village as requested, and to provide copies of such work papers that may be requested by the Village's accounting staff. SECTION V. The Auditor agrees to publish 40 copies of the Annual Finance Report, 20 copies of the financial statements of both TIF Reports, 20 copies of the Single Audit, if applicable, and one electronic copy for each report mentioned in this section. SECTION VI. The Village agrees to pay the Auditor for services rendered based on the following not -to- exceed fees: 2006/07 2007/08 2008/09 2009/10 2010 /11 Annual Financial Report $21,600 $22,600 $23,700 $24,800 $26,000 Single Audit Report 4,200 4,400 4,700 5,000 5,300 TIF Audit Report 1,200 1,200 1,200 1,200 1,200 Electronic Copies N/C N/C N/C N/C N/C Total Fees $27,00,Q $28.200 $29,600 $31,000 $32,500 Payment will be made upon receipt of progress billings with final payment made after receipt of the Annual Financial Report, Single Audit Report, and TIF Audit Reports. The Auditor and the Village agree that an equitable adjustment in the contract price may be negotiated if the cost or the time required for performance of the audit service is increased pursuant to a change in scope requested by the Village or required by State or Federal regulations. SECTION VII. If the Auditor is unable to complete the audit before the scheduled completion date provided in Section VII of the Agreement, or as agreed upon between Village and Auditor, written notice to the Village must be provided by the Auditor thirty (30) days prior to said date of completion. The Auditor agrees to deliver the Audit Report prior to October 1st of each year of the Agreement, or as agreed upon by Village and Auditor, unless the Village has caused the audit period to be longer. The Village reserves the right to cancel audit services for the remainder of the period covered by their agreement. Date Date Aidy4f1 067-1,1-(1‘,"_, Charlene Smollen Village Clerk Auditor Signature of Authorized Representative Gary C. Holmes Village Manager -12- VILLAGE OF LEMONT PROPOSAL FOR AUDIT SERVICES APRIL 30, 2006 THROUGH 2010 Submitted by Mulcahy, Pauritsch, Salvador & Co., Ltd. 14300 Ravinia Ave. Orland Park, Illinois 60462 #708 - 349 -6999 Contact Person: Edward T. McCormick, Partner TABLE OF CONTENTS Page Letter of Transmittal 1 Firm Qualifications and Experience 2 Peer Review Report 3 - 4 Partner, Supervisory and Staff Qualifications and Experience 5 Resumes of Principal Supervisory and Management Staff 6 - 7 Similar Engagements with Other Government Entities 8 Audit Plan 9 Other Service Capabilities 10 Auditing Services Agreement 11 - 12 Engagement Letter AllIpS MULCAHY, PAURITSCH, SALVADOR &oO LTO. Certified Public Accountants/ Business and Personal Consultants Mr. George Schafer Village of Lemont 418 Main Street Lemont, IL 60439 Dear Mr. Schafer: May 31, 2006 I would like to thank you for providing us the opportunity to provide a proposal for audit services. Hopefully the enclosed information will provide you the information you need to identify us as a firm that will be able to provide the services you deserve in an efficient and timely manner. I feel we are unique in our approach to the audit process, in that the audit partner with the firm will be directly involved in an active role throughout all stages of the audit. We take a very "hands on" approach with our clients and attempt to make the audit as useful a tool as possible for you from a management perspective, as well as provide an opinion on the financial statements. Our staff assigned to engagements is generally very experienced in the area of governmental accounting and auditing. I had the pleasure of meeting with Ms. Nona to discuss the approach and timing of the audit. She explained what she expected for this year, as well as how we can help the Village in the preparation of the submission to the Government Finance Officials Association for the certificate of excellence in financial reporting. Our goal is to help the Village achieve your goals as efficiently as possible, along those lines I provided her with a resource to update some of the statistical information requires for the report. We make every effort to minimize the impact on your accounting system, while still reporting your information in compliance with required standards. As an outgrowth of the audit we will issue a letter of comments and recommendations to assist you in adapting your systems to the ever- changing financial environment. We look on ourselves as a resource for you and your staff to rely on throughout the year; therefore, we do not charge for phone calls during the year, allowing you to seek our input in your decision process. Sincerely and T. cCormick 14300 Ravinia Ave. • Suite 200 • Orland Park, IL. 60462 • 708/349 -6999 • Fax 708/349 -6639 401 S. LaSalle St. • Suite 606 • Chicago, IL 60605 • 312/786 -5979 • Fax 708/349 -6639 835 McClintock Drive • Suite 100 • Burr Ridge, IL 60527 • 630/887 -7838 • Fax 630/887 -7895 L FIRM QUALIFICATIONS AND EXPERIENCE Mule.. • : alvador & . . ' -. .,_ III - n . -. ;ice firm servicin_ both local goverrunen - - a - Q1972. Our firm's philosophy is to provide top quality service to all of our clients and to anticipate their needs and not just react to them. By applying this philosophy we have grown to a firm of' over 50 individuals with experience in auditing, computer applications, taxation and advisory services. ` Mulcahy, Pauritsch, Salvador & Co., Ltd. has taken great steps to maintain and improve the high level of service provided to its clients. Through participation in the American Institute of Certified Public Accountants' peer review program since 1982 we have voluntarily submitted our policies and procedures to review by an independent outside reviewer to help ensure we are providing services in accordance with all prescribed standards. The results of our most recent external review resulted in an unqualified opinion (a copy of our most recent peer review letter is included). All professional staff members complete a minimum of forty hours of continuing professional education each year, auditors assigned to governmental work have twenty four of the forty hours concentrated on local government related topics, to assist them in maintaining their ability to address our client's needs. Mulcahy, Pauritsch, Salvador & Co., Ltd.'s commitment to quality and personal involvement with each client allows us to continue to grow and expand the services provided to our clients as they encounter the ever - changing challenges presented by business today. Mulcahy Pauritsch, Salvador & Co., Ltd is a member of the American Institute of Certified Public Accountants Government Audit Quality Center with Edward T. McCormick designated as the audit quality partner. Mulcahy, Pauritsch, Salvador & Co., Ltd. is reg tered with the Illinois Department of Professional Regulation #060 - 003012 and has never been party to proceedings - regarding substandard audit -2- MUFT ,1 FR & Co, LLP M' E'LLER CCNSU T J NO, LU 1750 Grandstand Place m Elgin, Illinois 60123 647.888.8600 Pax: 847.88E,0635 www.muellercpa,com July 6, 2004 Elgin, Illinois Mulcahy, Pauritsch, Salvador & Co., Ltd. 9661 West 143rd Street Orland Park, Illinois 60462 Gentlemen: Congratulations on the completion of your peer review for the year ended March 31, 2004. The result of the review was an unmodified report without a letter of comments. Enclosed•are six (.6) copies of your peer review report for the year ended March 31, 2004. If you have any questions, please contact me. Sincerely, MUELLER & CO., LLP Michael A, Stephens Partner —3— Certified Public Accountants E Management Consultants Offices in Elgin, St. Charles and Willowbrook rW".•/PALE . Co., ,P MLIaLLER, CONSULTING, LLC 1750 Grandstand Place ® Elgin, Illinois 60123 847.888.8600 Fax: 847,813B.0635 www.muellercpa.com To the Shareholders Mulcahy, Pauritsch, Salvador & Co., Ltd. We have reviewed the system of quality control for the accounting and auditing practice of Mulcahy, Pauritsch, Salvador & Co., Ltd. the firm) in effect for the year ended March 31, 2004. 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 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 Pear 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 Mulcahy, Pauritsch, Salvador & Co., Ltd. in effect for the year ended March 31, 2004, has been designed to meat 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 complying with professional standards. Elgin, Illinois July 1, 2004 1114411/4- Ef4,, -4- Certified Public Accountants is Management Consultants Offices in Elgin, St. Charles and Willowbrook PARTNER, SUPERVISORY AND STAFF QUALIFICATIONS AND EXPERIENCE In conjunction with membership in the AICPA Peer Review Program, Mulcahy, Pauritsch, Salvador & Co., Ltd. has established intemal guidelines to ensure conformance with the requirements set forth by U.S. General Accounting Office's Standards for Audit of Governmental Organizations, Programs, Activities and Functions. Audit teams are normally comprised of a senior auditor and a staff accountant. Ed McCormick will review the Annual Financial Report before it is finalized. All of these people have completed a minimum twenty -four hours of governmental audit related continuing professional education during the past two years. All members of the audit team are versed in the use of computerized accounting and auditing systems, which will be utilized in the performance of the audit. In addition to these people the firm has several members whose focus is entirely on computer hardware and software application, who are available to the audit staff to assist on computer related issues. Resumes of the principal supervisory and management staff are included on the following pages. -5- EDWARD T. MC CORMICK, CPA Edward T. Mc McCormick is a shareholder of Mulcahy, Pauritsch, Salvador & Co., Ltd. (MPS). He has been with the firm since 1982. Ed is responsible for accounting and audit engagements for commercial, not - for - profit and governmental entities. He is also responsible for compliance with generally accepted auditing standards for all clients. Ed provides accounting, tax, and consulting services to closely held businesses in various industries as well as to their owners. Ed graduated from Illinois State University, Normal, Illinois in 1979 with a Bachelor of Science degree in Accounting. Ed is a member of the American Institute of Certified Public Accountants and the Illinois CPA Society. He is also a member of The Government Finance Officers' Association and the Association of School Business Officials International. He currently serves as a panel reviewer for the Association of School Business Officials International Certificate of Excellence in Financial Reporting and is the audit quality partner for the firm with the AICPA's Government Audit Quality Center. Ed has been a presenter at the Northern Illinois Association of Fire Protection District's and the Illinois Association of Fire Protection District's. Ed has also taught accounting and auditing classes at several area colleges. -6- JOSEPH J. STASTNY, CPA Joseph J. Stastny is a principal of Mulcahy, Pauritsch, Salvador & Co., Ltd. (MPS). He has been with the firm since 1987. Joe specializes in accounting and audit engagements for commercial, not - for - profit, and governmental entities. He is responsible for quality control and the firm's compliance with the AICPA peer review requirements. Joe graduated from Dominican University, River Forest, Illinois in 1981 with a Bachelor of Science degree in Accounting. Joe is a member of the American Institute of Certified Public Accountants and the Illinois CPA Society. He is a board member of the Willowbrook/Burr Ridge Chamber of Commerce and a member of the Contractor's Association of Will & Grundy Counties. -7- SIMILAR ENGAGEMENTS WITH OTHER GOVERNMENT ENTITIES Engagement Partner for the following Entities — Edward T. McCormick Telephone Number Contact Person Village of Orland Park (1) 708 — 403 -6000 Ms. Annemarie Mampe Audit of the financial statements for September 30, 2005, TIF reporting DCCA reporting, 479 total hours Village of Frankfort (1) Audit of the financial statements for April 30, 2005, 165 total hours 815 - 469 -2177 Mrs. Sandy Babka Village of Homer Glen (1) 708 - 301 -0632 Mr. John Sawyers Audit of the financial statements for April 30, 2005 95 total hours Lisle- Woodridge Fire Protection District (1) 630 — 353 -3069 Ms. Barb Beshears Audit of the financial statements for December 31, 2004 165 total hours Woodridge Park District 630 — 985 -0300 Mr. Keith Franidand Audit of the financial statements for April 30, 2005 125 total hours Lemont Fire Protection District 630 — 257 -2376 Chief Carl Churulo Audit of the financial statements for December 31, 2005 100 total hours Village of Mokena 708 - 479 -3900 Ms. Barbara Damron Audit of the financial statements for June 30, 2005, 124 total hours (1) Recipient of GFOA Certificate of Achievement -8- AUDIT PLAN Based upon our preliminary review of your records and discussions, the total anticipated hours to complete the audit are as follows: Audit planning Field work Report matters Meetings and preparation Total Senior Staff Total Partners Accountants Accountants 20 8 8 4 130 30 60 40 46 12 26 8 13 8 5 0 .I.QQ% 99 52 28% 17% Based upon our past experience audit procedures concentrate mainly on substantive testing of account balances along with an evaluation of intemal controls to the extent necessary to properly plan our tests. We will utilize the various budget and appropriation reports to perform both preliminary and ending analytical review procedures to assist in the development of our audit programs designed specifically for the audit. As part of our preliminary fieldwork, we will discuss the internal controls in place in order to gain an understanding of the systems. The study will be documented through the use of checklists, flow charts and narrative summaries. It is anticipated that the reliance on internal controls will be relatively low due to the size of the staff in the finance department. This will allow us to emphasize our substantive tests of account balances. An additional part of our preliminary fieldwork will be the review of ordinances pertaining to financial matters to ensure all legal requirements are being considered in our audit procedures. The use of computerized audit software, such as audit programs, spreadsheets and word processing is incorporated into our audit program as much as possible in order to streamline the audit as much as we can. As part of our ongoing engagements we do not charge for phone calls in order to encourage consultation during the year and to help make the year end audit progress as smoothly as possible. We feel we take a thorough approach in our audits, but we make every attempt not to disrupt the workflow of your office. We would anticipate that you and your staff would assist in the preparation of account analysis schedules, locate invoices and other records selected for testing. We tend to take a substantive audit approach for the other entities we audit, which I would expect to apply to your audit as well The quoted audit fee would be increased only if circumstances change substantially from those we observed and discussed as part of this audit proposal. Examples include substantial growth of the Village's activities, implementation of new reporting standards, or significant unusual transactions which would require us to substantially increase our audit tests. If a fee increase is necessary, we will discuss it with you in advance and arrive at a new fee estimate before beginning the additional work. -9- OTHER SERVICE CAPABILITIES Following is a list of some of the additional services we have provided to our government clients: - Completion of successful submissions to ASBO and GFOA for certification of excellence in i mretai reporting. We currently have our clients who have achieved the certificate. As part of our engagement wi ese entities we are response . e or responding to the annual review comments and the review of their submission each year to help insure award of the certificate each year. Preparation of guidelines regarding accounting for transactions and development of accounting procedures manuals. Needs analysis regarding accounting software purchases. Software training. Additional services would be discussed and a fee would be discussed prior to the start of any project. Our standard hourly rates would be as follows for any services required above the engagement letter: Partners $180 Senior Accountants 120 Staff Accountants 88 -10- ivpS MULCAHY, PAURITSCH, SALVADOR &co.,Lro, Certified Public Accountants/ Business and Personal Consultants May 31, 2006 Village of Lemont 418 Main Street Lemont, IL 60439 We are pleased to confirm our understanding of the services we are to provide Village of Lemont for the years ended April 30, 2006 through 2010. We will audit the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information, which collectively comprise the entity's basic financial statements, and the individual fund financial statements of Village of Lemont as of and for the years ended April 30, 2006 through 2010. 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. Statistical Information Also, the document we submit to you will include the following additional information that will be subjected to the auditing procedures applied in our audit of the financial statements upon which we will provide an opinion in relation to the basic financial statements: 1. Schedule of expenditures of federal awards. 2. Schedule of expenditures - actual and budget 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 financial statements taken as a whole. The objective also includes reporting 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 fmancial statements in accordance with Government Auditing Standards. • Internal control related to major programs and an opinion (or disclaimer of opinion) on compliance with laws, regulations, and the provisions of contracts or grant agreements that could have a direct and material effect on each major program in accordance with the Single Audit Act Amendments of 1996 and OMB Circular A -133, Audits of States, Local Governments, and Non - Profit Organizations. 14300 Ravinia Ave. • Suite 200 • Orland Park, IL. 60462 • 708/349 -6999 • Fax 708/349 -6639 401 S. LaSalle St. • Suite 606 • Chicago, IL 60605 • 312/786 -5979 • Fax 708/349 -6639 835 McClintock Drive • Suite 100 • Burr Ridge, IL 60527 • 630/887 -7838 • Fax 630/887 -7895 The reports on internal control and compliance will each include a statement that the report is intended for the information and use of the audit committee, management, specific legislative or regulatory bodies, federal awarding agencies, and if applicable, pass - through entities and is not intended to be and should not be used by anyone other than these specified parties. Our audit will be conducted in accordance with U.S. generally accepted auditing standards; the standards for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; the Single Audit Act Amendments of 1996; and the provisions of OMB Circular A- 133, and will include tests of accounting records, a determination of major program(s) in accordance with Circular A -133, and other procedures we consider necessary to enable us to express such an opinion and to render the required reports. If our opinion on the financial statements or the Single Audit compliance opinion 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. Management Responsibilities Management is responsible for establishing and maintaining effective internal control and for compliance with the provisions of applicable laws, regulations, contracts, agreements, and grants. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of the controls. The objectives of internal control are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, that transactions are executed in accordance with management's authorizations and recorded properly to permit the preparation of fmancial statements in accordance with generally accepted accounting principles, and that federal award programs are managed in compliance with applicable laws and regulations and the provisions of contracts and grant agreements. Management is responsible for making all financial records and related information available to us, including any significant vendor relationships in which the vendor has the responsibility for program compliance. 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 assist in the preparation of your financial statements, including the schedule of expenditures of federal awards, but the responsibility for the financial statements remains with you. 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 and compliance, 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, grantors, 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. Additionally, as required by OMB Circular A -133, it is management's responsibility to follow up and take corrective action on reported audit findings and to prepare a summary schedule of prior audit findings and a corrective action plan. The summary schedule of prior audit findings should be available for our review on the first day of our audit fieldwork. As part of the audit, we will prepare a draft of your financial statements, schedule of expenditures of federal awards, and related notes. In accordance with Government Auditing Standards, you will be required to review and approve those financial statements prior to their issuance and have a responsibility to be in a position in fact and appearance to make an informed judgment on those financial statements. Further, you are required to designate a qualified management -level individual to be responsible and accountable for overseeing our services. I 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 the determination of abuse is subjective, Government Auditing Standards do not expect auditors to provide reasonable assurance of detecting abuse. As required by the Single Audit Act Amendments of 1996 and OMB Circular A -133, our audit will include tests of transactions related to major federal award programs for compliance with applicable laws and regulations and the provisions of contracts and grant agreements. 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 or noncompliance 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 or major programs. However, we will inform you of any material errors and 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. We will include such matters in the reports required for a Single Audit. Our responsibility as auditors is limited to the period covered by our audit and does not extend to 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. Audit Procedures - Internal Controls In planning and performing our audit, 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 opinions on Village of Lemont's financial statements and on its compliance with requirements applicable to major programs. We will obtain an understanding of the design of the relevant controls and whether they have been placed in operation, and we will assess control risk. Tests of controls may be performed to test the effectiveness of certain controls that we consider relevant to preventing and detecting errors and fraud that are material to the financial statements and to preventing and detecting misstatements resulting from illegal acts and other noncompliance matters that have a direct and material effect on the financial statements. Tests of controls relative to the financial statements are required only if control risk is assessed below the maximum level. Our tests, if performed, will be less in scope than would be necessary to render an opinion on internal control and, accordingly, no opinion will be expressed in our report on intemal control issued pursuant to Government Auditing Standards. As required by OMB Circular A -133, we will perform tests of controls over compliance to evaluate the effectiveness of the design and operation of controls that we consider relevant to preventing or detecting material noncompliance with compliance requirements applicable to each major federal award program. However, our tests will be less in scope than would be necessary to render an opinion on those controls and, accordingly, no opinion will be expressed in our report on intemal control issued pursuant to OMB Circular A -133. 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. We will also inform you of any nonreportable conditions or other matters involving internal control, if any, as required by Government Auditing Standards and OMB Circular A -133. Audit Procedures - Compliance Our audit will be conducted in accordance with the standards referred to in the section titled Audit Objectives. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we will perform tests of Village of Lemont's compliance with applicable laws and regulations and the provisions of contracts and agreements, including grant agreements. However, the objective of those procedures will not be to provide an opinion on overall compliance and we will not express such an opinion in our report on compliance issued pursuant to Government Auditing Standards. OMB Circular A -133 requires that we also plan and perform the audit to obtain reasonable assurance about whether the auditee has complied with applicable laws and regulations and the provisions of contracts and grant agreements applicable to major programs. Our procedures will consist of the applicable procedures described in the OMB Circular A -133 Compliance Supplement for the types of compliance requirements that could have a direct and material effect on each of Village of Lemont's major programs. The purpose of those procedures will be to express an opinion on Village of Lemont's compliance with requirements applicable to each of its major programs in our report on compliance issued pursuant to OMB Circular A -133. Audit Administration, Fees, and Other We understand that your employees will prepare all cash, accounts receivable, or other confirmations we request and will locate any documents selected by us for testing. At the conclusion of the engagement, we will complete the appropriate sections of and sign the Data Collection Form that summarizes our audit findings. We will provide copies of our reports to Village of Lemont; however, it is management's responsibility to submit the reporting package (including financial statements, schedule of expenditures of federal awards, summary schedule of prior audit findings, auditors' reports, and a corrective action plan) along with the Data Collection Form to the designated federal clearinghouse and, if appropriate, to pass - through entities. The Data Collection Form and the reporting package must be submitted within the earlier of 30 days after receipt of the auditors' reports or nine months after the end of the audit period, unless a longer period is agreed to in advance by the cognizant or oversight agency for audits. At the conclusion of the engagement, we will provide information to management as to where the reporting packages should be submitted and the number to submit. The audit documentation for this engagement is the property of Mulcahy, Pauritsch, Salvador & Co., Ltd. and constitutes confidential information. However, pursuant to authority given by law or regulation, we may be requested to make certain audit documentation available to a Cognizant or Oversight Agency for Audit or its designee, a federal agency providing direct or indirect funding, or the U.S. Government Accountability Office for purposes of a quality review of the audit, to resolve audit findings, or to carry out oversight responsibilities. We will notify you of any such request. If requested, access to such audit documentation will be provided under the supervision of Mulcahy, Pauritsch, Salvador & Co., Ltd, personnel. Furthermore, upon request, we may provide copies of selected audit documentation to the aforementioned parties. These parties may intend, or decide, to distribute the copies or information contained therein to others, including other governmental agencies. The audit documentation for this engagement will be retained for a minimum of three years after the date the auditors' report is issued or for any additional period requested by the Cognizant Agency, Oversight Agency for Audit, or Pass - through Entity. If we are aware that a federal awarding agency, pass - through entity, or auditee is contesting an audit finding, we will contact the party(ies) contesting the audit finding for guidance prior to destroying the audit documentation. Our fees for the audits are estimated to be as follows: Village Single CAFR Year Ended Audit Audit Submission Total April 30, 2006 $20,900 $4,200 $1,900 $27,000 April 30, 2007 $21,900 $4,400 $1,900 $28,200 April 30, 2008 $23,000 $4,700 $1,900 $29,600 April 30, 2009 $24,100 $5,000 $1,900 $31,000 April 30, 2010 $25,300 $5,300 $1,900 $32,500 The above fee estimates are based on anticipated cooperation from your personnel and the assumption that your operations will not change significantly during the years covered by this engagement letter. Examples of significant changes in your operations are as follows: Additional grant compliance and reporting requirements Debt defeasance Issuance of new debt Change in fund structure and/or chart of accounts Significant increase in capital outlay expenditures 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. Our invoices for these fees will be rendered each month as work progresses and are payable within 30 days of the invoice date. Interest will accrue thereafter at 1.5 % per month. Neither Mulcahy, Pauritsch, Salvador & Co., Ltd. nor Village of Lemont shall institute a proceeding before any court to resolve any controversy or claim ( "dispute ") arising out of or relating to this engagement until the parties have sought to resolve the dispute through direct, good faith, and negotiation. The key principals of each party shall participate in such direct negotiations. If the dispute is not resolved within 30 days after a written demand for direct negotiations the parties shall attempt to resolve the dispute through non - binding mediation. If the parties do not promptly agree on a mediator, either party may request that a mediator be appointed. All mediation proceedings hereunder shall be held at 14300 Ravinia Avenue, Orland Park, Illinois. All matters raised or discussed in the course of the mediation will not be admissible as evidence in connection with any litigation that may be instituted by the parties if the dispute is not resolved. If the mediator is unable to facilitate a settlement of the dispute within a reasonable period of time, as determined by the mediator, the mediator shall issue a written statement to the parties to that effect and the aggrieved party may then seek any form of relief to which it may be entitled. Unless otherwise agreed the mediator's fees and expenses shall be paid by the party initiating the mediation. 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 2004 peer review report accompanies this letter. We did not receive a letter of comment. We appreciate the opportunity to be of service to Village of Lemont 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, MULCAHY, PAURITSCH, SALV OR & CO., LTD. By: Edward % cCo ick RESPONSE: This letter correctly sets forth the understanding of Village of Lemont. By: Title: Date: