25E - AGMT - PROFESSIONAL AUDITING

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SINGLE AUDIT APPROACH The single audit will be performed in accordance with all the requirements of the Single Audit Act, the Uniform Guidance and Government Auditing Standards Issued by the GAO (the "Yellow Book") for cities that expend greater than $750,000 in federal awards in fiscal year 2015-2016 and subsequent years, • We will identify the Major and Nonmajor Federal Programs of the City through the risk -based approach required by the Uniform Guidance. This approach includes consideration of current and prior audit experience, oversight by Federal agencies and pass -through entities, and the inherent risk of the federal program. • We will review all federal and industry -specific publications and guidance and inform the City of any recent changes, • We will perform tests of controls to evaluate the effectiveness of the design and operation of controls that we consider relevant to preventing or detecting material noncompliance with applicable compliance requirements. If weaknesses in the Internal controls are noted, we will modify our audit program as needed. • Our audit will Include tests of transactions related to major federal award programs for compliance with applicable compliance requirements and certain provisions of laws, regulations, contracts and grant agreements. • Our procedures will consist of the applicable procedures described in the Uniform Guidance 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 those procedures will be to express an opinion on the City's compliance with requirements applicable to major programs in our report on compliance issued pursuant to the Uniform Guidance. • We will assist the City in completing and filing the Data Collection Form, DETERMINING LAWS AND REGIFLATIONS S IRiECT TO AUDIT Under provisions of AICPA Auditing Standards, management of the City is responsible for identifying to its outside auditors any laws and regulations which would have a significant effect on the audit. This would include federal laws (such as federal grant regulations), State laws (such as permitted investments under the California Government Code) and local laws (such as restrictions on special revenues levied by the City). After our selection as auditors, we will consult with City officials regarding these matters, to determine what laws and regulations need to be evaluated in connection with our audit. If a City is not able to Identify specific laws and regulations that effect it, we have references (California Government Code and Health and Safety Code) to the more common laws, rules and regulations in our standard audit programs for the usual activities of a California City or Successor Agency to the Redevelopment Agency which will assist us in identifying laws and regulations to review in the audit. METHOD OE SAMPLING Our approach is to utilize random sampling based in our testing of the internal control systems related to cash receipts, cash disbursements, payroll and utility billings. Based on a statistical conclusion used by the firm our sample sizes can range from 25 to 60 transactions for each system. A random sample selection allows each item in the population of an equal chance of being selected. In addition, for disbursements, we may select a stratified sample of all transactions over a specified dollar amount for review. 25E-65 27