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CM-2019-0038 - 2/1/2019February 6, 2019 Whitley Penn, LLP 3600 N. Capital of Texas Hwy. Bldg. B, Suite 250 Austin, Texas 78746 This representation letter is provided in connection with your audit of the financial statements, which comprise the respective financial position of the governmental activities, business -type activities, each major fiord, and the aggregate remaining fund information of City of Round Rock (the "City") as of September 30, 2018 and for the year then ended, and the related notes to the financial statements, for the purpose of expressing opinions on whether the basic financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows, where applicable, of the various opinion units of the City in accordance with accounting principles generally accepted for governments in the United States of America (U.S. GAAP). Certain representations in this letter are described as being limited to matters that are material. Items are considered material, regardless of size, if they involve an omission or misstatement of accounting information that, in the light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would be changed or influenced by the omission or misstatement. We confirm that, to the best of our knowledge and belief, having made such inquiries as we considered necessary for the purpose of appropriately informing ourselves as of February 6, 2019. Financial Statements • We have fulfilled our responsibilities, as set out in the terms of the audit engagement letter dated July I3, 2018, for the preparation and fair presentation of the financial statements of the various opinion units referred to above in accordance with U.S. GAAP. • We acknowledge our responsibility for the design, implementation, and maintenance of internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. • We acknowledge our responsibility for the design, implementation, and maintenance of internal controls to prevent and detect fraud. • We acknowledge our responsibility for compliance with the laws, regulations, and provisions of contracts and grant agreements. • We have reviewed, approved, and taken responsibility for the financial statements and related notes. • We have a process to track the status of audit findings and recommendations. • We have identified and communicated to you all previous audits, attestation engagements, and other studies related to the audit objectives and whether related recommendations have been implemented. GSI-Zola>_�03�' CITY OF ROUND ROCK 221 East Main Street, Round Rack, Texas 78664 [P] 512.218.5400 • ]F] 512.671.2808 • roundrocktexas.gav Mayor Craig Morgan Councilmembers Tammy Young City Manager Laurie Hadley Rene Flores ROUND ROCK TEXAS FINANCE DEPARTMENT MayorProTern Writ Baese Matthew Baiter Will Peckham Hilda Montgomery City Attorney Stephan L. Sheets February 6, 2019 Whitley Penn, LLP 3600 N. Capital of Texas Hwy. Bldg. B, Suite 250 Austin, Texas 78746 This representation letter is provided in connection with your audit of the financial statements, which comprise the respective financial position of the governmental activities, business -type activities, each major fiord, and the aggregate remaining fund information of City of Round Rock (the "City") as of September 30, 2018 and for the year then ended, and the related notes to the financial statements, for the purpose of expressing opinions on whether the basic financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows, where applicable, of the various opinion units of the City in accordance with accounting principles generally accepted for governments in the United States of America (U.S. GAAP). Certain representations in this letter are described as being limited to matters that are material. Items are considered material, regardless of size, if they involve an omission or misstatement of accounting information that, in the light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would be changed or influenced by the omission or misstatement. We confirm that, to the best of our knowledge and belief, having made such inquiries as we considered necessary for the purpose of appropriately informing ourselves as of February 6, 2019. Financial Statements • We have fulfilled our responsibilities, as set out in the terms of the audit engagement letter dated July I3, 2018, for the preparation and fair presentation of the financial statements of the various opinion units referred to above in accordance with U.S. GAAP. • We acknowledge our responsibility for the design, implementation, and maintenance of internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. • We acknowledge our responsibility for the design, implementation, and maintenance of internal controls to prevent and detect fraud. • We acknowledge our responsibility for compliance with the laws, regulations, and provisions of contracts and grant agreements. • We have reviewed, approved, and taken responsibility for the financial statements and related notes. • We have a process to track the status of audit findings and recommendations. • We have identified and communicated to you all previous audits, attestation engagements, and other studies related to the audit objectives and whether related recommendations have been implemented. GSI-Zola>_�03�' CITY OF ROUND ROCK 221 East Main Street, Round Rack, Texas 78664 [P] 512.218.5400 • ]F] 512.671.2808 • roundrocktexas.gav February 6, 2019 Whitley Penn, LLP Page 2 • Significant assumptions used by us in making accounting estimates, including those measured at fair value, are reasonable. • There have been no related party relationships or transactions that require disclosure in accordance with the requirements of U.S. GAAP. • All events subsequent to the date of the financial statements and for which U.S. GAAP requires adjustment or disclosure have been adjusted or disclosed. • We have consulted a lawyer concerning various litigation, claims, or assessments and we are not aware of any pending or threatened litigation, claims, or assessments, or unasserted claims or assessments that are required to be accrued or disclosed in the financial statements in accordance with GASB Statement No. 62 (GASB -62), Codification of Accounting and Financial Reporting Guidance Contained in Pre -November 30, 1989 FASB and AICPA Pronouncements (FASB Accounting Standards Codification (ASC) 450, Contingencies). • All component units, as well as joint ventures with an equity interest, are included and other joint ventures and related organizations are properly disclosed. • All funds and activities are properly classified. • All funds that meet the quantitative criteria in GASB Statement No. 34, Basic Financial Statements- and Management's Discussion and Analysis for State and Local Governments, GASB Statement No. 37, Basic Financial Statements and Management's Discussion and Analysis—for State and Local Governments: Omnibus as amended, and GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, for presentation as major are identified and presented as such and all other funds that are presented as major are considered important to financial statement users. • All components of net position, nonspendable fund balance, and restricted, committed, assigned, and unassigned fund balance are properly classified and, if applicable, approved. • Our policy regarding whether to first apply restricted or unrestricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position/fund balance are available is appropriately disclosed and net position/fund balance is properly recognized under the policy. • All revenues within the statement of activities have been properly classified as program revenues or general revenues. • All expenses have been properly classified in or allocated to functions and programs in the statement of activities, and allocations, if any, have been made on a reasonable basis. • All interfund and intra -entity transactions and balances have been properly classified and reported. • Deposit and investment risks have been properly and fully disclosed. • CapitaI assets, including infrastructure assets, are properly capitalized, reported, and if applicable, depreciated. • All required supplementary information is measured and presented within the prescribed guidelines. • With regard to investments and other instruments reported at fair value: The underlying assumptions are reasonable and they appropriately reflect management's intent and ability to carry out its stated courses of action. The measurement methods and related assumptions used in determining fair value are appropriate in the circumstances and have been consistently applied. The disclosures related to fair values are complete, adequate, and in accordance with U.S. GAAP. There are no subsequent events that require adjustments to the fair value measurements and disclosures included in the financial statements. • Provisions for uncollectible receivables have been properly identified and recorded. February 6, 2019 Whitley Penn, LLP Page 3 • Tax-exempt bonds issued have retained their tax-exempt status. • We believe that the actuarial assumptions and methods used to measure pension and other post - employment benefit liabilities and costs for financial accounting purposes are appropriate in the circumstances. Information Provided • We have provided you with: - Access to all information, of which we are aware that is relevant to the preparation and fair presentation of the financial statements of the various opinion units referred to above, such as records, documentation, meeting minutes, and other matters; Additional information that you have requested from us for the purpose of the audit; and - Unrestricted access to persons within the City from whom you determined it necessary to obtain audit evidence. • All transactions have been recorded in the accounting records and are reflected in the financial statements. • We have disclosed to you the results of our assessment of the risk that the financial statements may be materially misstated as a result of fraud, and there is none to report. • We have no knowledge of any fraud or suspected fraud that affects the City and involves: Management; Employees who have significant roles in internal control; or - Others where the fraud could have a material effect on the financial statements. • We have no knowledge of any allegations of fraud, or suspected fraud, affecting the City's financial statements communicated by employees, former employees, vendors, regulators, or others. • We are not aware of any pending or threatened litigation, claims, and assessments whose effects should be considered when preparing the financial statements. • We have disclosed to you the identity of the City's related parties and all the related party relationships and transactions of which we are aware. • There have been no communications from regulatory agencies concerning noncompliance with or deficiencies in accounting, internal control, or financial reporting practices. • The City has no plans or intentions that may materially affect the carrying value or classification of assets and liabilities. • We have disclosed to you all guarantees, whether written or oral, under which the City is contingently liable. • We have disclosed to you all significant estimates and material concentrations known to management that are required to be disclosed in accordance with GASB Statement No. 62 (GASB - 62), Codification of Accounting and Financial Reporting Guidance Contained in Pre -November 30, 1989 FASB and AICPA Pronouncements. Significant estimates are estimates at the balance sheet date that could change materially within the next year. Concentrations refer to volumes of business, revenues, available sources of supply, or markets or geographic areas for which events could occur that would significantly disrupt normal finances within the next year. • We have identified and disclosed to you the laws, regulations, and provisions of contracts and grant agreements that could have a direct and material effect on financial statement amounts, including legal and contractual provisions for reporting specific activities in separate funds. • There are no: Violations or possible violations of laws or regulations, or provisions of contracts or grant agreements whose effects should be considered for disclosure in the financial statements or as a basis for recording a loss contingency, including applicable budget laws and regulations. February 6, 2019 Whitley Penn, LLP Page 4 - Unasserted claims or assessments that our lawyer has advised are probable of assertion and must be disclosed in accordance with GASB -62. - Other liabilities or gain or loss contingencies that are required to be accrued or disclosed by GASB -62. Continuing disclosure consent decree agreements or filings with the Securities and Exchange Commission and we have filed updates on a timely basis in accordance with the agreements (Rule 240, 15c2-12). The City has satisfactory title to all owned assets, and there are no liens or encumbrances on such assets nor has any asset or future revenue been pledged as collateral, except as disclosed to you. We have complied with all aspects of grant agreements and other contractual agreements that would have a material effect on the financial statements in the event of noncompliance. We have made all payments in a timely manner to the Texas Municipal Retirement System (TMRS), Texas Workforce Commission (TWC), Internal Revenue Service (IRS), and other government agencies. Federal Award Programs • We are responsible for understanding and complying with and have complied with the requirements of Title 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements of Federal Awards (the Uniform Guidance), including requirements relating to preparation of the schedule of expenditures of federal awards. • We acknowledge our responsibility for presenting the schedule of expenditures of federal awards (SEFA) in accordance with the requirements of the Uniform Guidance, and we believe the SEFA, including its form and content, is fairly presented in accordance with the Uniform Guidance. The methods of measurement or presentation of the SEFA have not changed from those used in the prior period and we have disclosed to you any significant assumptions and interpretations underlying the measurement or presentation of the SEFA. • If the SEFA is not presented with the audited financial statements, we will make the audited financial statements readily available to the intended users of the SEFA no later than the date we issue the SEFA and the auditor's report thereon. • We have identified and disclosed to you all of our government programs and related activities subject to the Uniform Guidance, and included in the SEFA made during the audit period for all awards provided by federal agencies in the form of grants, federal cost -reimbursement contracts, loans, loan guarantees, property (including donated surplus property), cooperative agreements, interest subsidies, insurance, food commodities, direct appropriations, and other direct assistance. • We are responsible for understanding and complying with, and have complied with, the requirements of laws, regulations, and the provisions of contracts and grant agreements related to each of our federal programs and have identified and disclosed to you the requirements of laws, regulations, and the provisions of contracts and grant agreements that are considered to have a direct and material effect on each major program. • We are responsible for establishing and maintaining, and have established and maintained, effective internal control over compliance requirements applicable to federal programs that provides reasonable assurance that we are managing our federal awards in compliance with laws, regulations, and the provisions of contracts and grant agreements that could have a material effect on our federal programs. We believe the internal control system is adequate and is functioning as intended. • We have made available to you all contracts and grant agreements (including amendments, if any) and any other correspondence with federal agencies or pass-through entities relevant to federal programs and related activities. February 6, 2019 Whitley Penn, LLP Page 5 • We have received no requests from a federal agency to audit one or more specific programs as a major program. • We have complied with the direct and material compliance requirements, including when applicable, those set forth in the OMB Compliance Supplement, relating to federal awards. • Amounts claimed or used for matching were determined in accordance with relevant guidelines in OMB Circular A-87, Cost Principles for State, Local, and Tribal Governments, and OMB's Uniform Administrative Requirements far Grants and Cooperative Agreentents to State and Local Governments, or the Uniform Guidance, as applicable. • We have disclosed to you our interpretation of compliance requirements that may have varying interpretations. • We have made available to you all documentation related to compliance with the direct material compliance requirements, including information related to federal program financial reports and claims for advances and reimbursements. • We have disclosed to you the nature of any subsequent events that provide additional evidence about conditions that existed at the end of the reporting period affecting noncompliance during the reporting period. • There are no such known instances of noncompliance with direct and material compliance requirements that occurred subsequent to the period covered by the auditor's report. • No changes have been made in internal control over compliance or other factors that might significantly affect internal control subsequent to the date as of which compliance was audited. • Federal program financial reports and claims for advances and reimbursements are supported by the books and records from which the financial statements have been prepared. • The copies of federal program financial reports provided you are true copies of the reports submitted, or electronically transmitted, to the respective federal agency or pass-through entity, as applicable. • We have monitored subrecipients to determine that they have expended pass-through assistance in accordance with applicable laws and regulations and have met the requirements of the Uniform Guidance. • We have taken appropriate action, including issuing management decisions, on a timely basis after receipt of subrecipients' auditor's reports that identified noncompliance with laws, regulations, or the provisions of contracts or grant agreements and have ensured that subrecipients have taken the appropriate and timely corrective action on findings. • We have considered the results of subrecipient audits and have made any necessary adjustments to our books and records. • We have charged costs to federal awards in accordance with applicable cost principles. • We are responsible for and have accurately prepared the auditee section of the Data Collection Form as required by the Uniform Guidance. Supplementary Information in Relation to the Financial Statements as a Whole With respect to the combining and individual fund financial statements and schedules accompanying the financial statements: • We acknowledge our responsibility for the presentation of the supplementary information in accordance with accounting principles generally accepted in the United States of America (GAAP). • We believe the supplementary information, including its form and content, is fairly presented in accordance with GAAP. • The methods of measurement or presentation have not changed from those used in the prior period. February 6, 2019 Whitley Penn, LLP Page 6 • When the supplementary information is not presented with the audited financial statements, management will make the audited financial statements readily available to the intended users of the supplementary information no later than the date of issuance by the City of the supplementary information and the auditor's report thereon. • We acknowledge our responsibility to include the auditor's report on the supplementary information in any document containing the supplementary information and that indicates the auditor reported on such supplementary information. • We acknowledge our responsibility to present the supplementary information with the audited financial statements or, if the supplementary information will not be presented with the 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 by the City of the supplementary information and the auditor's report thereon. Required Supplementary Information With respect to the management's discussion and analysis, pension information, and other post - employment benefit information (the "required supplementary information") accompanying the financial statements: • We acknowledge our responsibility for the presentation of the required supplementary information in accordance with U.S. GAAP. • We believe the required supplementary information, including its form and content, is measured and fairly presented in accordance with U.S. GAAP. • The methods of measurement or presentation have not changed from those used in the prior period. Laurie Hadley City Manager n r - Lorie Lankford Deputy Chief Financial O City of Round Rock - ROUND ROCK Agenda Item Summary Agenda Number: Title: Consider executing a management representation letter for the City's FY 2018 financial and compliance audit performed by Whitley Penn, LLP. Type: City Manager Item Governing Body: City Manager Approval Agenda Date: 2/1/2019 Dept Director: Cost: Indexes: Attachments: Management Representation Letter Signed Department: Fire Department Text of Legislative File CM -2019-0038 Each year the City engages an independent auditing firm to perform the required annual audit of the City's financial records. The objective of the audit includes: expressing an opinion as to whether the City's financial statements are fairly presented in accordance with generally accepted accounting principles; evaluating and reporting on the City's internal controls related to the financial statements and providing an opinion on the City's compliance with laws and regulations associated with Uniform Guidance which is related to federal grants the City receives. The audit provides an independent examination of financial records, activities and operations to assess internal control practices, compliance with regulations, grant terms, bond covenants, contractual requirements and fairness of the presentation of the financial information. The purpose of the management representation letter is for the City to attest that the financial statements submitted to Whitley Penn, LLP for their external audit are accurate and all material information has been disclosed to them. City of Round flock .. Page 1 Printed on 1/.7oP1oig