Addition_Schlenner Wenner 2020 Audit Engagement Letter
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www.swcocpas.com
October 28, 2020
Members of Governance
City of Scandia
Scandia, MN
Attention: City Council
The Objective and Scope of the Audit of the Financial Statements
You have requested that we audit the City of Scandia’s (the City) governmental activities, business-type activities,
each major fund and aggregate remaining fund information as of and for the year ending December 31, 2020,
which collectively comprise the basic financial statements. We are pleased to confirm our acceptance and our
understanding of this audit engagement by means of this letter.
Our audit will be conducted with the objective of our expressing an opinion on the financial statements.
The Responsibilities of the Auditor
We will conduct our audit in accordance with auditing standards generally accepted in the United States of
America (GAAS) and Government Auditing Standards issued by the Comptroller General of the United States
(GAS). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free from material misstatement. An audit involves performing procedures to obtain
audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on
the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements,
whether due to fraud or error. An audit also includes evaluating the appropriaten ess of accounting policies used
and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.
Because of the inherent limitations of an audit, together with the inherent limitations of internal control, an
unavoidable risk that some material misstatements may not be detected exists, even though the audit is properly
planned and performed in accordance with GAAS. Also, an audit is not designed to detect errors or fraud that are
immaterial to the financial statements. The determination of waste or abuse is subjective; therefore, GAS does
not expect us to provide reasonable assurance of detecting waste or abuse.
In making our risk assessments, we consider internal control relevant to the City’s preparation and fair
presentation of the financial statements in order to design audit procedures that are appropriate in the
circumstances but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control.
However, we will communicate to you in writing concerning any significant deficiencies or material weaknesses
in internal control relevant to the audit of the financial statements that we have identified during the audit.
We will also communicate to the Governing Board (a) any fraud involving senior management and fraud
(whether caused by senior management or other employees) that causes a material misstatement of the financial
statements that becomes known to us during the audit, and (b) any instances of noncompliance with laws and
regulations that we become aware of during the audit (unless they are clearly inconsequential).
The funds that you have told us are maintained by the City and that are to be included as part of our audit are
listed here:
• General Fund
• Capital Improvement Fund
• Local Road Improvement Fund
• Debt Service Fund
• Sewer Fund
• Sewer Uptown Fund
• Nonmajor Governmental Funds
Our report(s) on internal control will include any significant deficiencies and material weaknesses in controls of
which we become aware as a result of obtaining an understanding of internal control and performing tests of
internal control consistent with requirements of the standards and regulations identified above. Our report(s) on
compliance matters will address material errors, fraud, waste or abuse, violations of compliance obligations, and
other responsibilities imposed by state and federal statutes and regulations or assumed by contracts; and any state
or federal grant, entitlement or loan program questioned costs of which we become aware, consistent with
requirements of the standards and regulations identified above.
The Responsibilities of Management and Identification of the Applicable Financial Reporting Framework
Our audit will be conducted on the basis that management and, when appropriate, those charged with governance
acknowledge and understand that they have responsibility:
1. For the preparation and fair presentation of the financial statements in accordance with accounting
principles generally accepted in the United States of America;
2. To evaluate subsequent events through the date the financial statements are issued or availa ble to be
issued, and to disclose the date through which subsequent events were evaluated in the financial
statements. Management also agrees that it will not conclude on subsequent events earlier than the date of
the management representation letter referred to below;
3. For the design, implementation, and maintenance of internal control relevant to the preparation and fair
presentation of financial statements that are free from material misstatement, wh ether due to fraud or
error;
4. For establishing and maintaining effective internal control over financial reporting, and for informing us
of all significant deficiencies and material weaknesses in the design or operation of such controls of
which it has knowledge;
5. For report distribution; and
6. To provide us with:
a. Access to all information of which management is aware that is relevant to the preparation and
fair presentation of the financial statements such as records, documentation and other matters;
b. Additional information that we may request from management for the purpose of the audit; and
c. Unrestricted access to persons within the City from whom we determine it necessary to obtain
audit evidence;
As part of our audit process, we will request from management and, when appropriate, those charged with
governance written confirmation concerning representations made to us in connection with the audit, including
among other items:
a. That management has fulfilled its responsibilities as set out in the terms of this letter; and
b. That it believes the effects of any uncorrected misstatements aggregated by us during the current
engagement and pertaining to the latest period presented are immaterial, both individually and in the
aggregate, to the financial statements taken as a whole.
Management is responsible for identifying and ensuring that the City complies with the laws and regulations
applicable to its activities, and for informing us about all known material violations of such laws or regulations. In
addition, management is responsible for the design and implementation of programs and controls to prevent and
detect fraud, waste or abuse, and for informing us about all known or suspected fraud, waste or abuse affecting the
City involving management, employees who have significant roles in internal control, and others where the fraud,
waste or abuse could have a material effect on the financial statements or compliance. Management is also
responsible for informing us of its knowledge of any allegations of fraud, waste or abuse, or suspected fraud,
waste or abuse, affecting the City received in communications from employees, former employees, analysts,
regulators or others
Management is responsible for the preparation of the supplementary information in accordance with accounting
principles generally accepted in the United States of America. Management agrees to include the auditor’s report
on the supplementary information in any document that contains the supplementary information and indicates that
the auditor has reported on such supplementary information. Management also agrees to present the
supplementary information with the audited financial statements or, if the supplementary information will not be
presented with audited financial statements, to make the audited financial statements readily available to the
intended users of the supplementary information no later than the date of issuance of the supplementary
information and the auditor’s report thereon.
The Governing Board is responsible for informing us of its views about the risks of fraud, waste, or abuse within
the City, and its knowledge of any fraud, waste, or abuse or suspected fraud, waste, or abuse affecting the City.
City of Scandia agrees that it will not associate us with any public or private securities offering without first
obtaining our consent. Therefore, City of Scandia agrees to contact us before it includes our reports, or otherwise
makes reference to us, in any public or private securities offering. Our association with an official statement is a
matter for which separate arrangements may be necessary. City of Scandia agrees to provide us with printer’s
proofs or masters of such offering documents for our review and approval before printing, and with a copy of the
final reproduced material for our approval before it is distributed. In the event our auditor/client relationship has
been terminated when City of Scandia seeks such consent, we will be under no obligation to grant such consent or
approval.
Records and Assistance
If circumstances arise relating to the condition of the City’s records, the availability of appropriate audit evidence
or indications of a significant risk of material misstatement of the financial statements because of error, fraudulent
financial reporting or misappropriation of assets which, in our professional judgment, prevent us from completing
the audit or forming an opinion, we retain the unilateral right to take any course of action permitted by
professional standards, including declining to express an opinion or issue a report, or wi thdrawing from the
engagement.
During the course of our engagement, we may accumulate records containing data that should be reflected in the
City's books and records. The City will determine that all such data, if necessary, will be so reflected.
Accordingly, the City will not expect us to maintain copies of such records in our possession.
The assistance to be supplied by City personnel, including the preparation of schedules and analyses of accounts,
has been discussed and coordinated with Colleen Firkus, Treasurer. The timely and accurate completion of this
work is an essential condition to our completion of the audit and issuance of our audit reports.
Non-audit Services
In connection with our audit, you have requested us to perform certain non-audit services:
• Drafting the financial statements, including GASB 34 adjustments and
• Various year-end bookkeeping adjustments and
• Maintaining capital asset and depreciation schedules and
• Preparing and submitting the City’s annual report (and TIF reports, if applicable) to the Minnesota Office
of the State Auditor.
GAS independence standards require that the auditor m aintain independence so that opinions, findings,
conclusions, judgments and recommendations will be impartial and viewed as impartial by reasonable and
informed third parties. Before we agree to provide a non-audit service to City of Scandia, we determine whether
providing such a service would create a significant threat to our independence for GAS audit purposes, either by
itself or in aggregate with other non-audit services provided. A critical component of our determination is
consideration of management’s ability to effectively oversee the non-audit services to be performed. The City of
Scandia has agreed that Colleen Firkus, Treasurer possesses suitable skill, knowledge or experience and t hat the
individual understands the non-audit services listed above to be performed sufficiently to oversee them.
Accordingly, the management of City of Scandia agrees to the following:
• The City of Scandia has designated Colleen Firkus, Treasurer, as a senior member of management who
possesses suitable skill, knowledge and experience to oversee the services;
• Colleen Firkus, Treasurer will assume all management responsibilities for subject matter and scope of the
non-audit services described above;
• The City of Scandia will evaluate the adequacy and results of the services performed; and
• The City of Scandia accepts responsibility for the results and ultimate use of the services.
GAS further requires that we establish an understanding with the City of Scandia’s management and those
charged with governance of the objectives of the non-audit services, the services to be performed, the City’s
acceptance of its responsibilities, the auditor’s responsibilities and any limitations of the non -audit services. We
believe this letter documents that understanding.
Other Relevant Information
Schlenner Wenner & Co. may mention the City’s name and provide a general description of the engagement in
Schlenner Wenner & Co.’s client lists and marketing materials.
From time to time and depending upon the circumstances, we may utilize financial information you have provided
to us in connection with this engagement for purposes of creating benchmarking data to be used by Schlenner
Wenner & Co. professionals and other clients. This benchmarking data is aggregated with data from a minimum
of five other entities so that users of the data are unable to associate the data with any single entity in the database.
In accordance with GAS, a copy of our most recent peer review report is enclosed for your informat ion.
If any term or provision of this arrangement letter is determined to be invalid or unenforceable, such term or
provision will be deemed stricken and all other terms and provisions will remain in full force and effect.
Fees, Costs, and Access to Workpapers
Our fees for the services described above are based upon the value of the services performed and the time
required by the individuals assigned to the engagement, plus direct expenses. Our fee estimate and completion of
our work are based upon the following criteria:
a. Anticipated cooperation from City personnel
b. Timely responses to our inquiries
c. Timely completion and delivery of client assistance requests
d. Timely communication of all significant accounting and financial reporting matters
e. The assumption that unexpected circumstances will not be encountered during the engagement
If any of the aforementioned criteria are not met, then fees may increase. Interim billings will be submitted as
work progresses and as expenses are incurred. Billings are due upon submission Our estimated fees for the
services described in the letter for the year ended December 31, 2020 will be $20,200. If the City has federal
expenditures in excess of $750,000 and requires an audit under Uniform Guidance, there will be an additional
charge of $3,000 per major program.
Our professional standards require that we perform certain additional procedures, on current and previous years’
engagements, whenever a partner or professional employee leaves the firm and is subsequently employed by or
associated with a client in a key position. Accordingly, the City agrees it will compensate Schlenner Wenner &
Co. for any additional costs incurred as a result of the City’s employment of a partner or professional employee of
Schlenner Wenner & Co.
The audit documentation for this engagement is the property of Schlenner Wenner & Co. and constitutes
confidential information.
Review of audit documentation by a successor auditor or as part of due diligence will be agreed to, accounted for
and billed separately.
In the event we are requested or authorized by the City of Scandia or are required by government regulation,
subpoena or other legal process to produce our documents or our personnel as witnesses with respect to our
engagements for the City of Scandia, the City of Scandia will, so long as we are not a party to the proceeding in
which the information is sought, reimburse us for our professional time and expenses, as well as the fees and
expenses of our counsel, incurred in responding to such requests.
The documentation for this engagement is the property of Schlenner Wenner & Co. However, you acknowledge
and grant your assent that representatives of the cognizant or oversight agency or their designee, other
government audit staffs, and the U.S. Government Accountability Office shall have access to the audit
documentation upon their request and that we shall maintain the audit documentation for a period of at least three
years after the date of the report, or for a longer period if we are requested to do so by the cognizant or oversight
agency. Access to requested documentation will be provided under the supervision of Schlenner Wenner & Co.
audit personnel and at a location designated by our Firm.
Termination
Your failure to make full payment of any and all undisputed amounts invoiced in a timely manner constitutes a
material breach for which we may refuse to provide deliverables and/or, upon written notice, suspend or terminate
our services under this Arrangement Letter. We will not be liable to you for any resulting loss, damage or
expense connected with the suspension or termination of our services due to your failure to make full payment of
undisputed amounts invoiced in a timely manner.
In the event you terminate this engagement, you will pay us for all services rendered (including deliverables and
products delivered), expenses incurred, and noncancelable commitments made by us on your behalf through the
effective date of termination.
We will not be responsible for any delay or failure in our performance resulting from acts beyond our reasonable
control or unforeseen or unexpected circumstances, such as, but not limited to, acts of God, government or war,
riots or strikes, disasters, fires, floods, epidemics, pandemics or outbreaks of communicable disease, cyberattacks,
and internet or other system or network outages. At your option, you may terminate this Arrangement Letter
where our services are delayed more than 120 days; however, you are not excused from paying us for all amounts
owed for services rendered and deliverables provided prior to the termination of this Arrangement Letter.
When an engagement has been suspended at the request of management or those charged with governance and
work on that engagement has not recommenced within 120 days of the request to suspend our work, we may, at
our sole discretion, terminate this Arrangement Letter without further obligation to you. Resumption of our work
following termination may be subject to our client acceptance procedures and, if resumed, will require additional
procedures not contemplated in this Arrangement Letter. Accordingly, the scope, timing and fee arrangement
discussed in this Arrangement Letter will no longer apply. In order for us to recommence work, the execution of
a new Arrangement Letter will be required.
We may terminate this Arrangement Letter upon written notice if: (i) we determine that our continued
performance would result in a violation of law, regulatory requirements, applicable professional or ethical
standards, or our client acceptance or retention standards.
Indemnification and Claim Resolution
Because Schlenner Wenner & Co. will rely on the City of Scandia and its management and Governing Board to
discharge the foregoing responsibilities, the City of Scandia holds harmless and releases Schlenner Wenner & Co.
and its partners and employees from all claims, liabilities, losses and costs arising in circumstances where there
has been a knowing misrepresentation by a member of the City of Scandia’s management that has caused, in any
respect, Schlenner Wenner & Co.’s breach of contract or negligence.
The City of Scandia and Schlenner Wenner & Co. agree that no claim arising out of services rendered pursuant to
this arrangement letter shall be filed more than the earlier of two years after the date of the audit report issued by
Schlenner Wenner & Co. or the date of this arrangement letter if no report has been issued. In no event shall
either party be liable to the other for claims of punitive, consequential, special, or indirect damages. Schlenner
Wenner & Co.’s liability for all claims, damages and costs of the City of Scandia arising from this engagement is
limited to the amount of fees paid by the City of Scandia to Schlenner Wenner & Co. for the services rendered
under this arrangement letter.
These provisions shall survive the termination of this arrangement for services.
Reporting
We will issue a written report upon completion of our audit of the City of Scandia’s financial statements. Our
report will be addressed to the Governing Board of the City of Scandia. We cannot provide assurance that an
unmodified opinion will be expressed. Circumstances may arise in which it is necessary for us to modify our
opinion, add an emphasis-of-matter or other-matter paragraph(s), or withdraw from the engagement.
In addition to our report on the City of Scandia’s financial statements, we will also issue the following types of
reports:
1. Reports on internal control related to the financial statements. This report will describe the scope of
testing of internal control and the results of our tests of internal controls;
2. Reports on compliance with laws, regulations, and the provisions of contracts or grant agreements.
We will report on any noncompliance that could have a material effect on the financial statements;
and
3. A report on the City’s compliance with Minnesota Statutes.
This letter constitutes the complete and exclusive statement of agreement between Schlenner Wenner & Co. and
the City of Scandia, superseding all proposals, oral or written, and all other communications with respect to the
terms of the engagement between the parties.
Electronic Signatures and Counterparts
Each party hereto agrees that any electronic signature of a party to this agreement or any electronic signature to a
document contemplated hereby (including any representation letter) is intended to authenticate such writing and
shall be as valid, and have the same force and effect, as a m anual signature. Any such electronically signed
document shall be deemed (i) to be "written" or "in writing," (ii) to have been signed and (iii) to constitute a
record established and maintained in the ordinary course of business and an original written r ecord when printed
from electronic files. Each party hereto also agrees that electronic delivery of a signature to any such document
(via email or otherwise) shall be as effective as manual delivery of a manual signature. For purposes hereof,
“electronic signature” includes, but is not limited to, (i) a scanned copy (as a "pdf" (portable document format) or
other replicating image) of a manual ink signature, (ii) an electronic copy of a traditional signature affixed to a
document, (iii) a signature incorporated into a document utilizing touchscreen capabilities or (iv) a digital
signature. This agreement may be executed in one or more counterparts, each of which shall be considered an
original instrument, but all of which shall be considered one and the same agreement. Paper copies or "printouts,”
of such documents if introduced as evidence in any judicial, arbitral, mediation or administrative proceeding, will
be admissible as between the parties to the same extent and under the same conditions as other original business
records created and maintained in documentary form. Neither party shall contest the admissibility of true and
accurate copies of electronically signed documents on the basis of the best evidence rule or as not satisfying the
business records exception to the hearsay rule.
Please sign and return a copy of this letter to indicate your acknowledgment of, and agreement with, the
arrangements for our audit of the financial statements, including our respective responsibilities.
Jonathan S. Archer, CPA
Partner
SCHLENNER WENNER & CO.
St. Cloud, Minnesota
Confirmed on behalf of the City of Scandia:
____________________________________
Ken Cammilleri, City Administrator
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