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C19-51Grq-5t THE12 PUN GROUP ACCOUNTANTS & ADVISORS June 15, 2019 To City Council and Management of City of Beaumont 550 E 6th Street Beaumont, California 92223 RE: Engagement of The Pun Group LLP (the "Firm") We are pleased to confirm our understanding of the services we are to provide the City of Beaumont, California (the "City") for the year ending June 30, 2019. We will audit the financial statements of the governmental activities, business -type activities, each major fund, and the aggregate remaining fund information, including the related notes to the financial statements, which collectively comprise the basic financial statements, of the City as of and for the year ending June 30, 2019. Accounting standards generally accepted in the United States of America provide for certain Required Supplementary Information ("RSI"), such as Management's Discussion and Analysis ("MD&A"), to supplement the City's basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. As part of our engagement, we will apply certain limited procedures to the City's RSI in accordance with auditing standards generally accepted in the United States of America. These limited procedures will consist of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We will not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. The following RSI is required by U.S. generally accepted accounting principles and will be subjected to certain limited procedures, but will not be audited: 1) Management's Discussion and Analysis 2) Budgetary Comparison Schedules — General Fund and Major Special Revenue Funds 3) Schedule of the City's Proportionate Share of the Net Pension Liability and Related Ratios 4) Schedule of Contributions - Ca1PERS We have also been engaged to report on Supplementary Information other than RSI that accompanies the City's financial statements. We will subject the following Supplementary Information to the auditing procedures applied in our audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America, and we will provide an opinion on it in relation to the financial statements as a whole: 1) Schedule of Expenditures of Federal Awards 2) Combining Financial Statements 3) Individual Fund Financial Statements and Schedules 200 E. Sandpointe Avenue, Suite 600, Santa Ana, California 92707 Tel: 949-777-8800 • Fax: 949-777-8850 • www.pungroup.com City of Beaumont Engagement Letter June 15, 2019 Page 2 Audit Objectives The objective of our audit is the expression of opinions 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 supplementary information referred to in the second paragraph when considered in relation to the financial statements as a whole. The objective also includes reporting on— • Internal control over financial reporting and compliance with provisions of laws, regulations, contracts, and award agreements, noncompliance with which could have a material effect on the financial statements in accordance with Government Auditing Standards. • Internal control over compliance related to major programs and an opinion (or disclaimer of opinion) on compliance with federal statutes, regulations, and the terms and conditions of federal awards that could have a direct and material effect on each major program in accordance with the Single Audit Act Amendments of 1996 and Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). The Government Auditing Standards report on internal control over financial reporting and on compliance and other matters will include a paragraph that states that (1) the purpose of the report is solely to describe the scope of testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance, and (2) the report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. The Uniform Guidance report on internal control over compliance will include a paragraph that states that the purpose of the report on internal control over compliance is solely to describe the scope of testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Both reports will state that the report is not suitable for any other purpose. Our audit will be conducted in accordance with auditing standards generally accepted in the United States of America; 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 the Uniform Guidance, and will include tests of accounting records, a determination of major program(s) in accordance with the Uniform Guidance, and other procedures we consider necessary to enable us to express such opinions. We will issue written reports upon completion of our Single Audit. Our reports will be addressed to the City Council. We cannot provide assurance that unmodified opinions will be expressed. Circumstances may arise in which it is necessary for us to modify our opinions or add emphasis -of -matter or other -matter paragraphs. If our opinions are other than unmodified, we will discuss the reasons with you in advance. If, for any reason, we are unable to complete the audit or are unable to form or have not formed opinions, we may decline to express opinions or issue reports, or we may withdraw from this engagement. Management Responsibilities Management is responsible for (1) establishing and maintaining effective internal controls, including internal controls over federal awards, and for evaluating and monitoring ongoing activities, to help ensure that appropriate goals and objectives are met; (2) following laws and regulations; (3) ensuring that there is reasonable assurance that government programs are administered in compliance with compliance requirements; and (4) ensuring that management and financial information is reliable and properly reported. Management is also responsible for implementing systems designed to achieve compliance with applicable laws, regulations, contracts, and grant agreements. City of Beaumont Engagement Letter June 15, 2019 Page 3 You are also responsible for the selection and application of accounting principles; for the preparation and fair presentation of the financial statements, schedule of expenditures of federal awards, and all accompanying information in conformity with U.S. generally accepted accounting principles; and for compliance with applicable laws and regulations (including federal statutes) and the provisions of contracts and grant agreements (including award agreements). Your responsibilities also include identifying significant contractor relationships in which the contractor has responsibility for program compliance and for the accuracy and completeness of that information. Management is also responsible for making all financial records and related information available to us and for the accuracy and completeness of that information. You are also responsible for providing us with (1) access to all information of which you are aware that is relevant to the preparation and fair presentation of the financial statements, (2) access to personnel, accounts, books, records, supporting documentation, and other information as needed to perform an audit under the Uniform Guidance, (3) additional information that we may request for the purpose of the audit, and (4) unrestricted access to persons within the government from whom we determine it necessary to obtain audit evidence. Your responsibilities include adjusting the financial statements to correct material misstatements and confirming to us in the management representation letter that the effects of any uncorrected misstatements aggregated by us during the current engagement and pertaining to the latest period presented are immaterial, both individually and in the aggregate, to the financial statements 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 affecting the government involving (1) management, (2) employees who have significant roles in internal control, and (3) others where the fraud could have a material effect on the financial statements. Your responsibilities include informing us of your knowledge of any allegations of fraud or suspected fraud 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 government complies with applicable laws, regulations, contracts, agreements, and grants. Management is also responsible for taking timely and appropriate steps to remedy fraud and noncompliance with provisions of laws, regulations, contracts, and grant agreements, or abuse that we report. Additionally, as required by the Uniform Guidance, it is management's responsibility to evaluate and monitor noncompliance with federal statutes, regulations, and the terms and conditions of federal awards; take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings; promptly follow up and take corrective action on reported audit findings; and prepare a summary schedule of prior audit findings and a separate corrective action plan. You are responsible for identifying all federal awards received and understanding and complying with the compliance requirements and for the preparation of the schedule of expenditures of federal awards (including notes and noncash assistance received) in conformity with the Uniform Guidance. You agree to include our report on the schedule of expenditures of federal awards in any document that contains and indicates that we have reported on the schedule of expenditures of federal awards. You also agree to include the audited financial statements with any presentation of the schedule of expenditures of federal awards that includes our report thereon or make the audited financial statements readily available to intended users of the schedule of expenditures of federal awards no later than the date the schedule of expenditures of federal awards is issued with our report thereon. Your responsibilities include acknowledging to us in the written representation letter that (1) you are responsible for presentation of the schedule of expenditures of federal awards in accordance with the Uniform Guidance; (2) you believe the schedule of expenditures of federal awards, including its form and content, is stated fairly in accordance with the Uniform Guidance; (3) the methods of measurement or presentation have not changed from those used in the prior period (or, if they have changed, the reasons for such changes); and (4) you have disclosed to us any significant assumptions or interpretations underlying the measurement or presentation of the schedule of expenditures of federal awards. City of Beaumont Engagement Letter June 15, 2019 Page 4 You are also responsible for the preparation of the other supplementary information, which we have been engaged to report on, in conformity with U.S. generally accepted accounting principles. You agree to include our report on the supplementary information in any document that contains, and indicates that we have reported on, the supplementary information. You also agree to include the audited financial statements with any presentation of the supplementary information that includes our report thereon or make the audited financial statements readily available to users of the supplementary information no later than the date the supplementary information is issued with our report thereon. Your responsibilities include acknowledging to us in the written representation letter that (1) you are responsible for presentation of the supplementary information in accordance with GAAP; (2) you believe the supplementary information, including its form and content, is fairly presented in accordance with GAAP; (3) the methods of measurement or presentation have not changed from those used in the prior period (or, if they have changed, the reasons for such changes); and (4) you have disclosed to us any significant assumptions or interpretations underlying the measurement or presentation of the supplementary information. Management is responsible for establishing and maintaining a process for tracking the status of audit findings and recommendations. Management is also responsible for identifying and providing report copies of previous financial audits, attestation engagements, performance audits, or other studies related to the objectives discussed in the Audit Objectives section of this letter. This responsibility includes relaying to us corrective actions taken to address significant findings and recommendations resulting from those audits, attestation engagements, performance audits, or studies. You are also responsible for providing management's views on our current findings, conclusions, and recommendations, as well as your planned corrective actions, for the report, and for the timing and format for providing that information. You agree to assume all management responsibilities relating to the financial statements, schedule of expenditures of federal awards, and related notes, and any other non -audit services we provide. You will be required to acknowledge in the management representation letter our assistance with preparation of the financial statements, schedule of expenditures of federal awards, and related notes and that you have reviewed and approved the financial statements, schedule of expenditures of federal awards, and related notes prior to their issuance and have accepted responsibility for them. Further, you agree to oversee the non -audit services by designating an individual, preferably from senior management, with suitable skill, knowledge, or experience to evaluate the adequacy and results of those services and accept responsibility for them. You have designated Todd Parton, City Manager and Lisa Leach, CPA, Senior Accountant collectively with these responsibilities. 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. 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. 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 assets, or (4) violations of laws or governmental regulations that are attributable to the government or to acts by management or employees acting on behalf of the government. Because the determination of abuse is subjective, Government Auditing Standards do not expect auditors to provide reasonable assurance of detecting abuse. Because of the inherent limitations of an audit, combined with the inherent limitations of internal control, 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, even though the audit is properly planned and performed in accordance with U.S. generally accepted auditing standards and Government Auditing Standards. 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. City of Beaumont Engagement Letter June 15, 2019 Page 5 However, we will inform the appropriate level of management of any material errors, any fraudulent financial reporting, or misappropriation of assets that come to our attention. We will also inform the appropriate level of management of any violations of laws or governmental regulations that come to our attention, unless clearly inconsequential, and of any material abuse that comes to our attention. 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 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, funding sources, 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 require certain written representations from you about your responsibilities for the financial statements; schedule of expenditures of federal awards; federal award programs; compliance with laws, regulations, contracts, and grant agreements; and other responsibilities required by generally accepted auditing standards. Audit Procedures—Internal Control Our audit will include obtaining an understanding of the government and its environment, including internal control, sufficient to assess the risks of material misstatement of the financial statements and to design the nature, timing, and extent of further audit procedures. 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. 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 internal control issued pursuant to Government Auditing Standards. As required by the Uniform Guidance, 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 internal control issued pursuant to the Uniform Guidance. An audit is not designed to provide assurance on internal control or to identify significant deficiencies or material weaknesses. However, during the audit, we will communicate to management and those charged with governance internal control related matters that are required to be communicated under AICPA professional standards, Government Auditing Standards, and the Uniform Guidance. Audit Procedures—Compliance 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 provisions of applicable laws, regulations, 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. The Uniform Guidance requires that we also plan and perform the audit to obtain reasonable assurance about whether the auditee has complied with federal statutes, regulations, and the terms and conditions of federal awards applicable to major programs. City of Beaumont Engagement Letter June 15, 2019 Page 6 Our procedures will consist of tests of transactions and other applicable procedures described in the OMB Compliance Supplement for the types of compliance requirements that could have a direct and material effect on each of the City's major programs. The purpose of these procedures will be to express an opinion on the City's compliance with requirements applicable to each of its major programs in our report on compliance issued pursuant to the Uniform Guidance. Communication with Those Charged with Governance As part of our engagement, we are responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your responsibilities in overseeing the financial reporting process as well as other matters we believe should be communicated to those charged with governance. Generally accepted auditing standards do not require the auditor to design procedures for the purpose of identifying other matters to communicate with those charged with governance. Such matters include, but are not limited to, (1) the initial selection of and changes in significant accounting policies and their application; (2) the process used by management in formulating particularly sensitive accounting estimates and the basis for our conclusions regarding the reasonableness of those estimates; (3) all uncorrected audit adjustments that are material in nature; (4) any disagreements with management, whether or not satisfactorily resolved, about matters that individually or in the aggregate could be significant to the financial statements or our report; (5) our views about matters that were the subject of management's consultation with other accountants about auditing and accounting matters; (6) major issues that were discussed with management in connection with the retention of our services, including, among other matters, any discussions regarding the application of accounting principles and auditing standards; (7) serious difficulties that we encountered in dealing with management related to the performance of the audit; and (8) matters relating to our independence as your auditors. Third-Partv Service Providers We may from time to time, and depending on the circumstances, use third -party service providers in serving your account. We may share confidential information about you with these service providers but remain committed to maintaining the confidentiality and security of your information. Accordingly, we maintain internal policies, procedures, and safeguards to protect the confidentiality of your personal information. In addition, we will secure confidentiality agreements with all service providers to maintain the confidentiality of your information and we will take reasonable precautions to determine that they have appropriate procedures in place to prevent the unauthorized release of your confidential information to others. If we are unable to secure an appropriate confidentiality agreement, you will be asked to provide your consent prior to the sharing of your confidential information with the third -party service provider. Furthermore, we will remain responsible for the work provided by any such third -party service providers. Assistance by Your Personnel We will ask that your personnel, to the extent possible, prepare required schedules and analyses, and make selected invoices and other required documents available to our staff. This assistance by your personnel will serve to facilitate the progress of our work and minimize our time requirements. Data Collection Form At the conclusion of the engagement, we will complete the appropriate sections of the Data Collection Form that summarizes our audit findings. 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 corrective action plan) along with the Data Collection Form to the Federal Audit Clearinghouse. We will coordinate with you the electronic submission and certification. If applicable, we will provide copies of our report for you to include with the reporting package you will submit 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. City of Beaumont Engagement Letter June 15, 2019 Page 7 Independence Professional standards require that a firm and its members maintain independence throughout the duration of the professional relationship with a client. In order to preserve the integrity of our relationship, no offer of employment shall be discussed with any The Pun Group LLP professionals assigned to the audit, during the one-year period prior to the commencement of the year-end audit. Should such an offer of employment be made, or employment commences during the indicated time period, we will consider this an indication that our independence has been compromised. As such, we may be required to recall our auditors' report due to our lack of independence. In the event additional work is required to satisfy independence requirements, such work will be billed at our standard hourly rates. Access to Working Papers The audit documentation for this engagement is the property of The Pun Group LLP and constitutes confidential information. However, pursuant to authority given by law or regulation, we may be requested to make certain audit documentation available to the 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 The Pun Group LLP 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 seven years after the report release or for any additional period requested by the 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. The Firm is required to undergo a "peer review" every three years. During the course of a Peer Review engagement, selected working__ papers and financial reports, on a sample basis, will be inspected by an outside party on a confidential basis. Consequently, the accounting and/or auditing work we performed for you may be selected. Your signing this letter represents your acknowledgement and permission to allow such access should your engagement be selected for review. As a result of our prior or future services to you, we may be required or requested to provide information or documents to you or a third -party in connection with a legal or administrative proceeding (including a grand jury investigation) in which we are not a party. Our efforts in complying with such requests or demands are not deemed a part of the scope of services for this engagement and we shall be entitled to reasonable additional compensation for our time incurred (at the standard rates charged to our other public agency clients) and reimbursement for other reasonable out-of-pocket expenditures (including legal fees) in complying with such request or demand provided that the same are not caused by our failure to meet the appropriate standard of care. We will provide detailed statements of all such services and expenditures to the City for review and approval at least thirty days in advance of payment being due. This is not intended, however, to relieve us of our duty to observe the confidentiality requirements of our profession. Other Services We will also assist in preparing the financial statements and related notes, and the GASB 68 net pension liabilities worksheet of the City in conformity with U.S. generally accepted accounting principles based on information provided by you. These non -audit services do not constitute an audit under Government Auditing Standards and such services will not be conducted in accordance with Government Auditing Standards. We will perform the services in accordance with applicable professional standards. The other services are limited to the financial statements and related notes, and the GASB 68 net pension liabilities worksheet services previously defined. City of Beaumont Engagement Letter June 15, 2019 Page 8 We, in our sole professional judgment, reserve the right to refuse to perform any procedure or take any action that could be construed as assuming management responsibilities. We are always available to meet with you and/or other management personnel at various times throughout the year to discuss current business, operational, accounting and auditing matters affecting your City. Whenever you feel such meeting are desirable please let us know; we are prepared to provide services to assist you in any of these areas. Report Distribution and Other We will provide copies of our reports to the City; however, management is responsible for distribution of the reports and the financial statements. Unless restricted by law or regulation, or containing privileged and confidential information, copies of our reports are to be made available for public inspection. Most Recent External Oualitv Control Review 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. Accordingly, our most recent peer review report accompanies this letter. Fee We anticipate that our fees, inclusive of out-of-pocket expenses, for the annual financial statement audit and the Agreed Upon Procedures for GANN limit will not exceed a maximum of $86,500 for the year ending June 30, 2019. In addition, for the City's Single Audit under the Uniform Grant Guidance you will be billed a fixed fee of $4,080 for each major program. The number of programs that are determined to be a major program will be based on the requirements of the Single Audit Act Amendments of 1996 and the provisions of the Uniform Grant Guidance. The total major programs will be discussed with you prior to commencement of any audit work. Fees for these services for the year ending June 30, 2019 will be provided on an hourly basis and will be billed at the discounted hourly rates provided below, as presented in our technical proposal dated December 8, 2017: Auditor's Discounted Hourly Billing Rates Position FY 2018-19 Partner{s} $ 225 Senior Manager(s) $ 215 Manager(s) $ 200 Supervisor(s) $ 175 Senior Accountant(s) $ 150 Staff Accountant(s) $ 125 Clerical $ 75 The rates above include a Senior Manager rate which was not included in the prior proposal but was added within our firm since the proposal submission. Our fee estimate above is based on certain assumptions, including the required assistance outlined in this letter and in Appendix A. To the extent that certain circumstances included but not limited to those listed in Appendix A, arise during the engagement, our fee estimate may be significantly affected, and additional fees may be necessary. City of Beaumont Engagement Letter June 15, 2019 Page 9 Rates for Additional Professional Services Below are the Firm's standard hourly billing rates, delineated by staffing levels: Standard Hourly Billing Rates Position FY 2418-19 Partner(s) $ 250 Senior Manager(s) $ 225 Manager(s) $ 200 Supervisor(s) $ 175 Senior Accountant(s) $ 150 Staff Accountant(s) $ 125 Clerical $ 75 The Firm and the City will discuss and approve the scope and associated costs of these tasks. Any additional work will be performed at the above quoted hourly rates. Should additional services be provided beyond the described scope of services, these will be billed separately. Any supplemental reports, audits, or agreed-upon procedures not covered by this proposal may be added in a written agreement prior to commencing audit work. Manner of Payment All services will be billed monthly as work progresses based on time incurred by the various staff levels. 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 60 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(s). You will -be obligated to compensate us for all-time expended through the date of termination. In accordance with our firm policies, work may be suspended if your account becomes 60 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(s). 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. Planned Scope and Timing of the Audit We expect to begin our audit in July 2019 and to issue our reports no later than December 31, 2019. Vanessa Burke is the engagement partner and is responsible for supervising the engagement and signing the reports or authorizing another individual to sign them. We appreciate the opportunity to be of service to the City 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. *** City of Beaumont Engagement Letter June 15, 2019 Page 10 Agreement It is hereby understood and agreed that this engagement is being undertaken solely for the benefit of the City and that no other person or entity shall be authorized to enforce the terms of this engagement. If you agree with the terms of our engagement as described in this letter, please sign the enclosed copy and return it to us. We appreciate the opportunity to be of service to the City of Beaumont and believe this letter accurately summarizes the significant terms of our engagement. If you have any questions, please let us know. Very truly yours, The Pun Group LLP Vanessa Burke, CPA, CPFO Engagement Partner RESPONSE: This letter c By: Title: Date: h the understanding of the City of Beaumont. City of Beaumont Engagement Letter June 15, 2019 Page 11 APPENDIX A City of Beaumont Circumstances Affecting Timing and Fee Estimate Circumstances may arise during the engagement that may significantly affect the targeted completion dates and our fee estimate. As a result, additional fees may be necessary. Such circumstances include but are not limited to the following: 1. Changes to the timing of the engagement at your request. Changes to the timing of the engagement usually require reassignment of personnel used by The Pun Group, LLP (the "Firm") in the performance of services hereunder. However, because it is often difficult to reassign individuals to other engagements, the Firm may incur significant unanticipated costs. 2. All requested schedules are not (a) provided by the accounting personnel on the date requested, (b) completed in a format acceptable to the Firm (c) mathematically correct, or (d) in agreement with the appropriate underlying records (e.g., general ledger accounts). The Firm will provide the accounting personnel with a separate listing of required schedules and deadlines. 3. Weaknesses in the internal control structure. 4. Significant new issues or unforeseen circumstances as follows: a. New accounting issues that require an unusual amount of time to resolve b. Changes or transactions that occur prior to the issuance of our report c. Changes in the City's accounting personnel, their responsibilities, or their availability d. Changes in auditing requirements set by regulators 5. Significant delays in the accounting personnel's assistance in the engagement or delays by them in reconciling variances as requested by the Firm. All invoices, contracts and other documents which we will identify for the City, are not located by the accounting personnel or made ready for our easy access. 6. A significant level of proposed audit adjustments is identified during our audit. 7. Changes in audit scope caused by events that are beyond our control. 8. Untimely payment of our invoices as they are rendered. 9. Our attendance at City Council and Audit & Finance Committee Meetings typically is limited to presenting the final deliverables to the City and the results of our audit to those charged with governance, as well as, to respond to questions from those charged with governance. If unforeseen delays or other reasons require us to attend meetings in excess of two meetings, we will bill for our time incurred and expenses to attend those additional meetings. We estimate additional meeting costs is approximately $750-$1,200 which varies with earlier advance notification. We will provide an estimate of those charges in advance. City of Beaumont Engagement Letter June 15, 2019 Page 12 10. Our fee is dependent on the City having established procedures for periodic inventories of capital assets and maintain appropriate inventory and cost / estimated cost systems for their capital assets and infrastructure. The City's accounting records should be updated and adjusted to reflect additions and deletions of capital assets and infrastructure, and provide reliable information on current balances in capital asset and infrastructure accounts and related depreciation are properly and consistently reported. Estimated values of infrastructure or other assets should be adequately supported with verifiable records. 11. As a result of our services to you, we may be required or requested to provide information or documents to you or to a third -party in connection with governmental regulations or activities, or a legal, arbitration or administrative proceeding (including a grand jury investigation), in which we are not a party. As permitted, we will notify you as soon as we receive the request for such information. You may, within the time period permitted for our firm to respond to any such request, initiate such legal action as you deem appropriate to protect City information from discovery. If you take no action within the time period permitted for us to respond or if your action does not result in a judicial order protecting us from supplying requested information, we will construe your inaction or failure as consent to comply with the request. Our efforts in complying with such requests or demands are not deemed a part of the scope of services for this engagement and we shall be entitled to additional compensation for our time incurred (at the standard rates charges to our other public agency clients) and reimbursement for other reasonable out-of-pocket expenditures (including legal fees) in complying with such request or demand provided that the same are not caused by our failure to meet the appropriate standard of care. We will provide detailed statements of all such services and expenditures to the City for review and approval at least thirty days in advance of payment being due. GAIL eCauweraL Certified Public Actountanls *1:1, Business Consultants 4120 Concours Suite 100 Ontario, CA 91764 909.948.9990 800.644.0696 rAx. 909.948.9633 gy Id(a>nyldecautver_com www.gyklecauwcr.com vour 0.4‘&fai is our i TIATIO\ System Review Report The Pun Group, LLP Santa Ana, California; and the Peer Review Committee of the California Society of CPAs JOHN LreIAS, CPA Sn ln=NC.WIt1JA 1s, CPA JosEli 10. ROMMO, CPA We have reviewed the system of quality control for the accounting and auditing practice of The Pun Group, LLP (the firm) in effect for the year ended December 31, 2014. Our peer review was conducted in accordance with the Standards for Performing and Reporting on Peer Reviews established by the Peer Review Board of the American Institute of Certified Public Accountants. As part of our peer review, we considered reviews by regulatory entities, if applicable, in determining the nature and extent of our procedures. The firm is responsible for designing a system of quality control and complying with it to provide the firm with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects. Our responsibility is to express an opinion on the design of the system of quality control and the firm's compliance therewith based on our review. The nature, objectives, scope, limitations of, and the procedures performed in a System Review are described in the standards at www.aicpa.org/prsummarv. As required by the standards, engagements selected for review included an engagement performed under Government Auditing Standards. In our opinion, the system of quality control for the accounting and auditing practice of The Pun Group, LLP in effect for the year ended December 31, 2014, has been suitably designed and complied with to provide the firm with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects. Firms can receive a rating of pass, pass with deficiency(ies) or fail. The Pun Group, LLP has received a peer review rating of pass. 6,10tcaivItszLP Ontario, California October 13, 2015 CPAM ERICA INTERNATIONAL Crowe Hovvath International_ Attachment B Letter of Agreed -Upon Procedures for the City of Beaumont's GANN Limit ll -IE PUN GROUP ACCOUNIANTS & ADVISORS June 14, 2019 City of Beaumont 550 E 6th Street Beaumont, CA 92223 We are pleased to confirm our understanding of the nature and limitations of the services we are to provide for the City of Beaumont, California (the "City"). We will apply the agreed-upon procedures to the appropriation limit schedule of the City, which the City has specified, as listed in Exhibit A, for the fiscal year ending June 30, 2020. These procedures, which were agreed to by the City and the League of California Cities (as presented in the publication entitled Agreed -Upon Procedures Applied to the Appropriation Limitation Prescribed by Article XIII -B of the California Constitution) are solely to assist the City in meeting the requirement of Section 1.5 of the Article XIII -B of the California Constitution and will be conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of the procedures is solely the responsibility of those parties specified in the report. Consequently, we make no representation regarding the sufficiency of the procedures described in Exhibit A either for the purpose for which this report has been requested or for any other purpose. Because the agreed-upon procedures listed in Exhibit A do not constitute an examination or review, we will not express an opinion or conclusion the City's appropriation limit schedule. In addition, we have no obligation to perform any procedures beyond those listed in Exhibit A. We will issue a written report upon completion of our engagement that lists the procedures performed and our findings. Our report will be addressed to the City Council and management of the City. If, for any reason, we are unable to complete the procedures, we will describe any restrictions on the performance of the procedures in our report, or will not issue a report as a result of this engagement. You understand that the report is intended solely for the use of City Council and management of the City and should not be used by anyone other than the specified parties. Our reports will contain a paragraph indicating that had we performed additional procedures, other matters might have come to our attention that would have been reported to you. An agreed-upon procedures engagement is not designed to detect instances of fraud or noncompliance with laws or regulations; however, we will communicate to you any known and suspected fraud and noncompliance with laws or regulations affecting the City's appropriation limit schedule that come to our attention. In addition, if, in connection with this engagement, matters come to our attention that contradict the City's appropriation limit schedule, we will disclose those matters in our report. Such disclosures, if any, may not necessarily include all matters that might have come to our attention had we performed additional procedures or an examination or review. You are responsible for presentation of the City's appropriations limit schedule in accordance with Article XIII -B of the California Constitution and for selecting the criteria and determining that such criteria are appropriate for your purposes. You are also responsible for, and agree to provide us with, a written assertion about the City's appropriation limit schedule. In addition, you are responsible for providing us with (1) access to all information of which you are aware that is relevant to the performance of the agreed-upon procedures on the subject matter (2) additional information that we may request for the purpose of performing the agreed-upon procedures, and (3) unrestricted access to persons within the entity from whom we determine it necessary to obtain evidence relating to performing those procedures. 200 E. Sandpointe Avenue, Suite 600, Santa Ana, California 92707 Tel: 949-777-8800 • Fax: 949-777-8850 • www.pungroup.com City of Beaumont GANN Engagement Letter June 14, 2019 Page 2 Vanessa Burke is the engagement partner and is responsible for supervising the engagement and signing the report or authorizing another individual to sign it. We plan to begin our procedures in July 2019 and, unless unforeseeable problems are encountered, the engagement should be completed by December 31, 2019. At the conclusion of our engagement, we will require certain written representations in the form of a representation letter from management that, among other things, will confirm management's responsibility for the City's appropriation limit schedule in accordance with the requirement of Article XIII -B of the California Constitution. The documentation for this engagement is the property of The Pun Group, LLP and constitutes confidential information. However, we may be requested to make certain documentation available to certain government agencies pursuant to authority given to it by law or regulation. If requested, access to such documentation will be provided under the supervision of The Pun Group personnel. Furthermore, upon request, we may provide copies of selected documentation to certain government agencies. Certain government agencies may intend, or decide, to distribute the copies or information contained therein to others, including other governmental agencies. Our fee for these services is included in the engagement letter for the City's audit for the year ending June 30, 2019. Our fees are based on certain assumptions, including the required assistance described above. Additional services provided beyond the described scope of services will be billed separately. We appreciate the opportunity to assist you 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, The Pun Group, LLP /4/Rieot "."1,04:// Vanessa Burke, CPA, CPFO Engagement Partner RESPONSE: This letter correctly sets forth the understanding of the City of Beaumont. By: Title: Date: J c ,� Clr✓Y EXHIBIT A Agreed -Upon Procedures 1. Obtain completed worksheets used by the City to calculate its appropriations limit for the year ending June 30, 2020 and determine that the limit and annual calculation factors are adopted by resolution of the City Council. Also, determine that the population and inflation options are selected by a recorded vote of the City Council. 2. For the Appropriations Limit Schedule, we will add the prior year's limit to the total adjustments and agree the resulting amount to the current year's limit. 3. Agree the current year information presented in the June 30, 2020 Appropriation Limit Schedule to corresponding information in worksheets used by the City. 4. Agree the appropriations limit presented in the June 30, 2020 Appropriations Limit Schedule matches the appropriations limits adopted by the City Council during the year.