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Phase III: Evaluation of Audit Results This phase includes a review of all audit documentation by the partners to ensure that testing and documentation support the conclusions reached. This phase also includes preliminary discussions with management of the audit findings. Phase W: Reporting In this phase of the audit, the engagement team will complete the tasks related to the closing of year-end balances and financial reporting. This -will include final testing in areas including compliance, balance sheet accounts, revenues and expenditures. All required reports will be delivered to the City in accordance with the dates specified in the request for proposal. The audit partner will be available to attend the City Council meeting to present the audit report. MANAGEMENT LETTER The Firm will prepare a management letter for the City to identify systemic deficiencies observed. The letter also may offer recommendations for changes in accounting and other procedures in order to improve operations of the City. As each potential management letter point is identified in the audit process, the engagement team will document the condition, our recommendation, and the benefits of the recommended action. All potential comments will be reviewed with key staff members before issuance. The Firm's policy is to prepare this report as a vehicle for suggesting improvements to enhance efficiency, management effectiveness, and the degree of internal control. Appendix G includes three recent management letters issued by MarcumRachlin in connection with government audits. QUALITY CONTROL The Firm has an extensive quality control system. All engagements are reviewed by the Audit partner and the Ouality Control partner prior to the issuance of the financial statements. On an annual basis the -~ - --~ ~..,~ firm performs an inspection of the system of quality control to ensure compliance with Firm and professional standards. The Firm also participates in an external quality review program requiring an on-site independent examination of our accounting and auditing practices. The Firm has consistently received an unqualified opinion on the quality of the Firm's audit practice. The latest peer review reports are included in Appendix B. The Firm's governmental engagements were included in the latest review. 9. IDENTIFICATION OF ANTICIPATED POTENTIAL AUDIT PROBLEMS The Firm does not anticipate any potential audit problems. Our service team understands the industry issues relevant to the City. The combination of our Firm's resources, level of partner involvement and experienced team members provides an excellent service team of professionals capable of servicing the City's needs. Regular communication will be ongoing with the City's personnel, allowing for timely knowledge of the City's matters as they arise. When we learn of matters the City may not be aware of, we will be active in conveying relevant information. We are very much aware of audit requirements and accounting requirements affecting the City's audits. As with other issues that may arise, we will work with the City throughout the year to achieve appropriate resolution. GASB Standards required to be implemented during the life of the contract are No. 51, Accounting and Financial Reporting for Intangible Assets; No. 53, Accounting and Financial Reporting for Derivative Instruments; and No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. These standards mayor may not have an impact on the City's financial statements. MARCUM MarcumRachlin C Proposal for Professional Audit Services RA H LI N ACCOUNTANTS..... ADVISORS A Division of Marcum LLP Page -13