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Mr. Francisco Gutierrez <br /> Executive Director of Finance and Management <br /> City of Santa Ana <br /> January 26, 2010 <br /> Page 3 <br /> Management is responsible for establishing and maintaining effective internal controls, including internal <br /> controls over compliance, and for monitoring ongoing activities, to help ensure that appropriate goals and <br /> objectives are met. You are also responsible for the selection and application of accounting principles; for the <br /> fair presentation in the financial statements of the respective financial position of the governmental activities, <br /> the business-type activities, each major fund, and the aggregate remaining fund information of the City and <br /> Agency and the respective changes in financial position and, where applicable, cash flows in conformity with <br /> U.S. generally accepted accounting principles; and for compliance with applicable laws and regulations and <br /> the provisions of contracts and grant agreements. <br /> Management is also responsible for making all financial records and related information available to us and <br /> for ensuring that management and financial information is reliable and properly recorded. Your <br /> responsibilities also include identifying significant vendor relationships in which the vendor has <br /> responsibility for program compliance and for the accuracy and completeness of that information. Your <br /> responsibilities include adjusting the financial statements to correct material misstatements and confirming to <br /> us in the representation letter that the effects of any uncorrected misstatements aggregated by us during the <br /> current engagement and pertaining to the latest period presented are immaterial, both individually and in the <br /> aggregate, to the financial statements taken as a whole. <br /> You are responsible for the design and implementation of programs and controls to prevent and detect fraud, <br /> and for informing us about all known or suspected fraud or illegal acts affecting the government involving (1) <br /> management, (2) employees who have significant roles in internal control, and (3) others where the fraud or <br /> illegal acts could have a material effect on the financial statements. Your responsibilities include informing <br /> us of your knowledge of any allegations of fraud or suspected fraud affecting the government received in <br /> communications from employees, former employees, grantors, regulators, or others. In addition, you are <br /> responsible for identifying and ensuring that the entity complies with applicable laws, regulations, contracts, <br /> agreements, and grants. Additionally, as required by OMB Circular A-133, it is management's responsibility <br /> to follow up and take corrective action on reported audit findings. Management is responsible for <br /> establishing and maintaining a process for tracking the status of audit findings and recommendations. <br /> Management is also responsible for identifying for us previous financial audits, attestation engagements, <br /> performance audits, or other studies related to the objectives discussed in the Audit Objectives section of this <br /> letter. This responsibility includes relaying to us corrective actions taken to address significant findings and <br /> recommendations resulting from those audits, attestation engagements, performance audits, or studies. You <br /> are also responsible for providing management's views on our current findings, conclusions, and <br /> recommendations, as well as your planned corrective actions, for the report, and for the timing and format for <br /> providing that information. <br /> Audit Procedures-General <br /> An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the <br /> financial statements; therefore, our audit will involve judgment about the number of transactions to be <br /> examined and the areas to be tested. We will plan and perform the audit to obtain reasonable rather than <br /> absolute assurance about whether the financial statements are free of material misstatement, whether from (1) <br /> errors, (2) fraudulent financial reporting, (3) misappropriation of assets, or (4) violations of laws or <br /> governmental regulations that are attributable to the entity or to acts by management or employees acting on <br /> behalf of the entity. Because the determination of abuse is subjective, GovernmentAuditing Standards do not <br /> <br /> expect auditors to provide reasonable assurance of detecting abuse. <br /> 251-8 <br /> <br />