PROPOSAL TO AUDIT

CITY OF SOUTH DAYI'ONA, FLORIDA

MOATS & ASSOCU TES, CPAs 21 00 South Ridgewood Avenue, Suite 7

South Daytonu, FL 321 19

Phone: (386) 760-3083

Contact Person: Ronald R. Moats, C.P.A.

Date: August 22,2012

TABLE OF CONTENTS

Transmittal Letter ................................................................................... i

Description and History of the Make-up and Composition of the Firm. .... .... ... ... . ................. . . . . . . . ......... ......... 1-2

Relevant Government Auditing fiperience of the Finn .. ... ... . . .. . . .. . .. . .. . .. ... .. ... .. .. . .. . . . . . . . . . . . . 3

References for Similar Work ........ . ........ .. ... ........... .. ....... . . . . . . . . . . . 4

StafAvailable for Audit .. ..... ...... . .... . ................. ....... . . . . ....... . . 5

Resumes of Personnel Assigned to the Audit ................... .................... 6-8

hipress Agreement to Meet or Exceed the Peformance Specifications .. ... .... . .. . ... . . . . . ... . .. . . ..... . ... .. . . . . . . . . . . . . . . . . .. . . . .. . 9 - 1 1

Audit Procedures to be Followed .................................................... 12-1 7

Tentative Schedule for Petfiorming Key Aspectr of the Audit ... ....... . ...... 1 7

Fee Schedule for the Audit ........................................... ......................... 18

CPA Licenses.. . . . . , . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

CPE Aflrmation . ...... . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Documentation #om the Board of Accountancy that the Licenses are Active and in Good Standing ............................. ....................... 20

Location of the Ofice from which the Audit will be Conducted ............. 20

l b o Most Recent External Quality Control Reviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Result of any Federal or State Desk Review Audits Dwing the Past Three Years . . . . . .. . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Disciplinary Actions, ifany .............................................................. 20

Use of City Stuff. .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Description of lnnvance Coverage.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Attachments:

................................................................................. Peer Review. M i b i t I

....,............................................ ............. Commercia I Insurance.. .'. Exhibit 2

.................................................. Professional Liability Insurance. Exhibit 3

.............................................................................. CPA Licenses.. b i t 4

-. <:i.R I I I ' I E L I JIU.lt: /Kl.:(-,)UN-l./\N-lS Members of:

American institute of CPAs Florida Institute of CPAs

kit: C/rristoplier. L;. Crmtpbell, Fititrttce Dit-ecror City qf Souttr Dcrytona P. 0. Box 241 960 S'olttlt Daj) t otin, Florilli? 32 1 2 1 -4960

We tlr crtr k yotr -for. cot isickrit~g ot a. pt.opostil to trtrllit the City of Soztth Daytutru, Flo~.itl(i .for the three ymt. period hegit;lning ~titlr the jlecrt. ettded September 30, 201 2 I vith exter?.~io~?s. 1/Ife (itme pleasecl to srrbnlit to j7(1rr tlre~followit~g it?fit-nti?tion tlrnt \rill pt-ovide the C i ~ y with pet-titretit .facts about Mout.s & Associntes. CPAs.

Moa1.s & Associates, CPAs is loctrted it? Soutlr Daytotrn, Flor-ih brrt orir cliet~ts are wtot-It/-wide. We lia\~e c1ie1tt.s itr OI W' t lrir~) cotrirtt.ies idr rick ittclztiie:

Uilitecl Kit~g~iorn, S'uin, Getnlaty, holy, Greece, Fr(rt?ce, Belgizini, it-eland, Detrt~rad-, Stvitzei-lutrd, Cypirrs, Ca~radn, Sutrth A /i-icn. htiin, Ati.strcrlicr, New Zeakrt~d, Colombia, Ecrcado~; Gltarenzali?, I)cltrtrt~rcr, BrtiziI, C'cryntntr Isliintl.~, t'tc.

Moats & .4ssociate.s, C13,4.s has beet? czzitlitittg loccrl goverttntetrts it1 the State o f Ffoticicr jht- the pastjout-tectr j~mrs crtiti Rot? Moats, it? ptrrtictrlar, 1rcr.s hcetl crztdititty 1-1 govertinicnts.fot- over thirty-niwe yeurs. Ron Mmts, CPA is ( I nten~hcr- of the GFUA Cer.tifictirc. c? f Ac/rievmlcn~ itr Financial Reporting pi-ogrcm~ us n techtricnl resielrw. M'e have ns.sistc.(i local govetarnetrtnl agertcies with the inzplementcrtion qf GilSB .Jfcc.atrntitrg Pt-inciples. n t~d assisted in agt4recl tcpotr procedures t-elated to utility otrcr(ysis, sj?.sreni co17tr.ol.s crttri CjOcr~t~lettt~tion. 0111' pt~~cticnl esyeriencr it1 ti zriiitit ig grunts i~ns etra bled t ts to rrssist govet-~r~zeti ta 1 aget1cie.s it i cornplying ~vith nt~d t-ecoveritrg gr.attt.s .funds. Oztt. extensive ptwced~rt-es a l l o ~ ~ t t s to detect pt-oblenis ~vitli grant programs while otJret..firnr.s n~ciy 0 otrh pmlittrin~iy ~~rocccltcre.~.

Out- Firm hcrs conrplcteti otri- peel. ~*e~)ie~t l at?(! ~ ' t ' htive attncireti tite r-epot-t to this pt-uposal. Tlie t-eqtrir.enzetrts to clrrrJit FeI-ln-ti/ grcrtrts have beconre rttot-e teclrtiicnl itr irtrttrt.e atid the AICPA peer t-evielvpr.ugr.cnn hns intplententcd lien) 1-eqrril-enzeirts~fo~~ their- review tetrn1.s. Otrl- .fir111 has conzplied ~vith the latest I-eqtlit-en1ent.s q/ the A/CI1A by havitrg cr peer- review thtrt q r~a l i f~s with those standat-cI.s. Ozrr- indepenclence it7 pt;ofis.siotral attitude ancl ottr qpr-oach to the arrdit has n~ade the process conipletel~~ irrtiepet uler it.

Kotl Moats, CP.4 /zas beeti urtrl tvi/l I-enlait1 t l~c feud arcllitot.. fbt. tlte City of' Sozitll Daytotta. In today's totigh ecvttontic environn~ent, we have tlre e.xperietzcc of ktro~?itrg yoto. .sy.stents anti can p~.ovi(le at7 itrtlepetrdetzt review hecrrtrse wc. wit .fictcs otu. q[fi)t-t.s on the tzretis that ct-eate the grecitest accolrtrtiizg risk.

Telephone (386) 760-3083 Fax (3661 760-61 34 www.MoatsandAssoc~atesCPAs.com 2100 South R~dgewood Avenue, Sirite 7 South Daytona, Florida 321 19

Moats & Associates. CPRr was founded on the principle of providing quality service. Our finn members have over seventy years of public accounting experience which includts non profit, sole proprietors, partnerships, governmental and individuals.

Our proposal is a finn and irrevocable offer for the three year period beginning with the year ended September 3 0,201 2, with extensions.

We appreciate the opportunity to present o w qualijications to serve ar the City's auditor.

Sincerely,

Ronald R. Moats, CPA

Descri~tion and History of the Make-up and Composition of the Audit Firm

The Firm of Moats & Associates, CPAs was founded 1998. Ron Moats has been in Volusia County for over thirty-nine years. Moats & Associates, CPAs practices in the areas of accounting, auditing, tmt ion and consulting.

The Firm has established a client base in a variety of industries. me. governmental accounting and non profit section hm been an industry that the Firm has continually served in for over thirty-nine years. KheBrm belongs to the AICPA, FICPA, GFOA, and is a member in the Government Audit Quality Center with the AICPA.

Moats & Associates CPAs has clients in over thirty countries. %y include United Kingdom, Spain, Germany, Italy, Greece, France, Belgium, Irelmrd. Denmark Switzerland, Cyprus, Canada, South Africa, India, Australia, New Zealand, Colombia, Ecuador, Guatemala, Panama, Brazil, Cayman Islunds, etc. These clients are corporations and individuals that have real estate investments in the United States. Our continued service to these clients indicates that our Firm is designed to handle a variety of clients in the global economy.

Moats & Associates, CPAs war foundedfor the primmy purpose to provide independent accounting services to clients in a direct manner, thus giving our clients the access to someone with years of accounting and auditing experience and industry knowledge. Uur client base is divided in such a way that our governmental practice and not for profir practice is evenly spaced throughout the year. Ola client acceptance procedures allows for us to maintain a group in each industry segment. Our foreign national client base indicates that we have the ability to serve clients throughout the world.

Other members of the Firm consist of Pamela Moats, David Kendall, and Dennis Carlson, CPA. Each member of our team has a specialty that enables the Firm to provide quality sewice to our clients in a variety offields. Our audit group consists of Ron Moats, CPA, Dennis Carlson, CPA and David Kendall. Our administrative support group consists of Sean Kendall and Kathryn Kendall.

David is a Senior Accountant with the Firm and has practiced in the area of government and non-pro$t accounting, small business accounting and taxation with an emphasis in foreign investors in real estate. David has received his degree from the University of Central Florida.

Dennis Carlson, CPA is a Senior Accountant in our audit department. Dennis has worked on several governmental and non-profir engagements. He has assisted clients in the preparation of governmental financial statements, corporate tux returns1 etc.

Pamela Moats is a Tax Manoger in our t m department. Pamela has over twenty years of public accounting experience sewing a variety of clients in tax and accounting. Pamela is our director of foreign tmation which serves clients that own US. real estate.

M W & Associates, CPAs has strived to maintain a quality practice through client service that has not impaired our independence. The governmental practice has been the

Page 1

cornerstone of o w practice with preparing audits of annual financial statements, preparing single audits in accordonce with OMB Circular A-133, water and sewer rate studies, preparation of policy and procedure manuals and a variety of other client services. Ron has taught governmental accounting courses for the AICPA and GFOA.

Page 2

Relevant Government Auditing Experience of the Firm

Moats di Associates, CPRF is a certified public accountingfinn located at 2100 South Ridgewood Ave, Suite 7, South Daytona, Florida.

The Finn audits the City of Pomona Park, the City of Crescent City and the City of South Daytona. Our nonproft engagements consist of Mid Florida Housing Partnership, Coral Cay Homeowners Association, Inc., 8303 Resort, A Condominium Association, Inc., Caribe Cove Condominium Association. Inc., Bahama Bay Condominium Association, Inc., Lake Buena Vista Resort Condominium Association, Inc., Hawthorn Suites Orlando, A Condominium Association, Inc. etc. Ron's past experience has consisted of auditing several governmental clients in the Volusia County area.

The Finn has per$ormed a variety of services in the past which include rate studies, comfort letters for bond issues and testlfiing as a witness in bond validation hearings. Ron has been a reviewer for the GlOOA in its certificate of achievement in excellence in financial reporting program. Ron has assisted cities in preparing accounting policy and procedure manuals for their finance departments.

Page 3

References for Similar Work

Mr. Joseph Yarbrough, City Manager South Daytona, FL Phone: (386) 322-3001

The CAFR that we are submitting is the City of South Daytona 's report. See Finance Department for copies.

Mr. Patrick Kennedy, City Manager City of Crescent City 3 North Street Crescent City, Florida Phone: (386) 698-2525

Ms. Frun Gordon, Executive Director Mid Florida Housing Partnership Phone: (386) 2 74-4441

Cindy Hair, Town Clerk Post W c e Box 5 I S 1 775 Highway 1 7 South Pomona Park, FL 321 81 Phone: (386) 649-4902

Mr. John Gordon, President Shy Resort Munagenlent 701 1 Grand National Drive, Stlitel 04 OrZartdo, Florida 3281 9 Phone: (407)492- 7020

Page 4

Staff Available For Audit

The Audit team will consist of the following:

Ron Moats, CPA - Auditor In-charge

Ron will direct the engagement including the risk assessments standardr and quality control review.

Dennis Carlson, CPA - Senior Accountant

Dennis will direct thejield work ofthe engagement and will be responsible for carrying out the engagement plan andprocedures. Dennis will be in-charge of the single audit procedures and practices.

David Kendall-Senior Accountant

David will be perfming tests of controls and other selected tests throughout the engagement.

Page 5

Resumes of Personnel assigned to this Audit

The auditor-in-charge meets the education requirements in accordance with the Board of Accountancy.

The resumes of the audit team are as follows:

RONALD R MOATS. CPA Auditor In-Charge

CERTIFICATION: Cerrified Public Accountant - licensed by the State of Florida. Member of the American Imtitute of CPA 's and the Florida Iwtitute of CPA 's, Associate member of the Governmental Finance Oficers Association.

EDUCATION: Bachelor of Science Fom The Pennsylvania State University

EXPERIENCE: May Zima & Co., Audit Partner Arthur Young & Co., Audit Principal Yordon. Lipkin & Moats, Audit Partner Moats & Associates, CPAs, Shareholder, President

Ron has had extensive experience in auditing local govemntents in the State of Florida. Ron has been in the Volwia County area for over thirty-nine years. During that time. he has been an audit partner with a large regionalfinn and an audit principal for a national public accounting firm.

Ron has audited several of the citiex in the Volusia County area. Ron's primary industry practice has been state and local government. Ron has taught education courses in accounting, auditing and taxation. Ron is the director of the j h ' s quality control systems. Ron has attended the FICPA accounting courses and the FICPA State and local government continuing professional education courses during the part year and has met the education requirements for the reestablishmnt period.

Ron has taught continuing education courses in accounting and auditing and has presented tar courses for foreign nationals that have invesiment properties in the United States.

Ron is a member in the South DaytondPort Orange Chamber of Commerce and pmt president of the Daytona Beach Kiwanis Club.

Page 6

DENNIS P. CARLSON. CPA Senior Accountant

CERTIFICATION: Certrped Public Accountant - licensed by the State of Florida. Member of the American Institute of CPA 's and the Florida Institute of CPA 's

EDUCATION: Bachelor of Science from the University of Central Florida

EXPERIENCE: Moats & Associates, CPAs, South Daytonu, Florida

Dennis has had extensive experience in auditing local governments and nonprofit organizations in the State of Florida. Dennis joined the Firm more than three years ago and has spent that time almost exclwively in the accounting and audit areas. Dennis has

. perfnned audits for several governmental and nonprofit clients and has worked with the risk assessments stundardr and developed audit programs for clients. Dennis has assisted clients in the preparation of governmental financial statements which includes governmental and proprietary fund and has performed computations of OPEB benefits under the alternative method. Dennis has also peflormed single audit engagements for both Federal and State grants.

Dennis has over 80 hours in governmental related continuing professional education courses. He has attended the FICPA Accounting Conference, the UCF Accounting Conference and the FICPA Governmental Accounting Conference.

Dennis is a member of the Elks Club.

Page 7

DAVID KENDAL,L Senior Accountant

EDUCATION: Bachelor of Science from the University of Central Flodda

EXPERIENCE: Moats & Associates, CPAs, South Daytonu, Florida

Responsibilities: David has had extensive experience in auditing Iocal governments and nonprofit organizations in the State of Florida. David joined the Finn over eight years ago and has spent that time almost exclusively in the accounting and audit areas. David has perfoned audits for several governmental and nonprofit clients and has worked with our s m d business practice section as well as our foreign tax practice section.

David has performed tests of detailed transactions, audit confirmation and control, inventory observation and testing, prepomtion of wor@apers for preliminary analytical review and trial balance analysis.

David is currently enrolled at the University of Central Florida where he is taking classes in governmental accounting and related courses.

Page 8

Express Agreement to Meet or Exceed the Performance S~ecifications

TRe finn of Moats & Associates, CPAs wiN meet or m e e d the p e f o m n c e specifiations as listed in the Request for Proposal-Audit Services which includes, but not limited to, the following:

1. Audit will be pefonned in compliance with the requirements 08 a. Section 21 8.39, Florida Statutes, and any other applicable Florida Statutes b. Rules of the Florida Department of Finuncial Services c. Rules of the Auditor General, State of Florida, Chapter 10.550 d. Audits of State and Local Government Units, issued by the American

Institutes of Certzjied Public Accountants e. CircuZor A- 133, Audits of States, Local Governments, and Non-Profi

Organizations, OBce of Management and Budget f: Federal Single Audit Act of 1984 g. Federal S i d e Audit Act Amendments of 1996 h. Florida Single Audit Act (Section 215.97, Florida Statutes) i. Statement on Auditing Standardr (GAAS) j. Government Auditing Standards, issued by the Comptroller General of the

United States k. Any other applicable Federal, State, Local regulations or professional

guidance not specifically Zisted above as well us any additona2 requirements which may be adopted by these organizations in the fiture

2. We anticipate expressing an opinion on the fair presentation of the City 's general purpose jnancial statement in conformity with applicable generally accepted accounting principles. We will also provide an opinion on the combining and individual fund statements. We are not required to audit the s u p p l e ~ r y informtion or the statisticd sections contained in the CAFR.

3. l%e audit will be an annual financial audit as defined in Section 218.31 (1 7), Florida Statutes, and shall be conducted in accordance with generally accepted auditing standbrds as well as the standards listed above. The audit shall cover a three-year period beginning with year ended 9/30/12 and ending with year 9/30/14, with the expectation that additional contrace will be awarded for two one-year periods subject to the mutual consent of the City and the Finn.

4. A Single Audit will be conducted in accordance with the Federal and Stare Single Audit Acts and related profdonal guidance shall be conducted as required. m e Finn will provide the City with any required letters and schedules related to the audit. A "single audit" wm performed for the fscal year ended 9/30/10 and o w fee will contemplate the perfrming of the single audit and will be listed separately. gnone is required, no reports or required procedures will be prepared.

5. The Firm will prepare and submit to the City of South Daytoria, not later than March 31 following the end of the fiscal year under audit, a report on the financial condition of the City of South Daytona, or deterioration thereoj: in accordance with the rules of the Auditor General.

Page 9

Emress Aereement to Meet or Exceed the Performance S~ecifications (continued)

6. The audit will aho include a review of the finuncial report provided to the Department of Financial Services to assure consistency with the CAFR

7. Ajinal and complete opinion letter on the financial statement will be delivered to the City of South Daytona by March 31 following the end of the fiscal year under audit.

8. The Finn will submit not later than March 31 following the end of the fucal year under auditt afirN and complete management letter which shall identrfi any management weaknesses observed, assess their effect on financial management and propose steps to correct or eliminate those weaknesses. The Finn anticipates the fieldwork related to the audit shall be completed on or about January 31 of each year.

9. m e Finn shall provide the City with suflcient letterhead to print 2 original copies of all required letters for the Comprehensive Annual Financial Report.

10. Ron Moats, CPA and Dennis Curlson. CPA s M attend at least three public meetings for discussion of the audit report as deemed necessary by the City.

11. The Finn shall assist the City in preparing the Comprehensive Annual Financial Report in accordance with the standards. The Finn will proofed the entire document, provide technical assistance in the implementation of recommended improvements fiom prior year submission to GFOA under the Certificate of Achievement program and provide technical ussistance in the overall layout, design and suggested improvements.

12. m e Finn shall perform interim audit procedures to comply with the Januuy 31 date for completing the audit. The Finn understands that the City will make the yearend records available to the auditor on or b&re December 1 each year.

13. The Finn shall coordinate with the City 'sfinane director to promote Hciency in conducting the audit.

14. The Finn shall report to the City at leost weekly the status of any potential audit a+stments so the City may have adequate opportunity to investigate, gather infonnntion and respond ifnecessary. Final audit adjustments shall be submitted to the City no later than January 31 following the end of the fucal year under audit.

15. The F'irrn can issue "comfort letters" and other documents necessary to issue &on&. Underwriters sometime present financial information and need assistance in gathering data that is outside the scope of the engagement for the audit requirement of the comprehensive annual financial report. A basic estimate will be anticipated, but it can be subject to change i f the underwriters require signifcant changes.

Page 10

Eg~ress Agreement to Meet or Exceed the Performance Specifications (continued)

16. Tle Firm workpapers are the property of the Finn and will be held locally for a period of five years. m e workpapers will be available for examination'or duplication without charge to authorized City personnel, representatives of Federal or State Agencies upon request of that Agency or the City of South Daytona in accordance with Federal Low, State Law and other regulations. Working papers will also be made available for examination. at no charge, or duplication. at a reasonable charge, to subsequent auditors engaged by the City in accorhnce with the rules of the Board of Accountancy.

17. The Firm agrees to notz5 the City immediately if any regulatory or other government agencies request a review of the audit workpapers concerning the City of South Daytona or any other goverment client audited by the audit Finn. The records of the City are confidential and the Firm will comply with Federal and State Law as it relates to access to contdential infomation.

18. The Finn will notijj the City immediately should any disciplinary action be taken or complaints filed with any regulatory bodies against any of the Finn's staff or the Firm itserf as it relates to standards of professional conduct.

19. The Firm will designate two member of the audit team. The City shall reserve the right to approve any substitutions or changes in those staffdesignated as "kq':

20. The Firm will provide the City of South Daytona with a copy of each external quality control review conducted during the time period engaged by the City of South Daytona.

Audit Procedures to be Followed

The following is an outline of our technical approach to completing the audit engagement.

Phase I: Understandinn the Entity and ldentlfiinnl Risks The primary objectives of this phase are (1) to gain an understanding of your organization and comprehend how the financial data we will audit rejects the reality ofyour operations; and (2) to arrive at a tentative evaluation of your control environment for significant systems, application and accounts in order to develop a detailed plan for the successfil and timely completion of the audit. Because we are familiar wifh your organization and accounting structure, we have already documented your system.

Conduct Survq of Owrations: As explained above, we have a thorough understanding of your system and wiN only need to update our understanding of the systems for any changes that may have occurred during the past year.

The general planning in the governmental engagement usually begins with obtaining knowledge and understanding of the governmental unit's environment and operating characteristics which can be divided into the following:

Under-nding the En* and Iis Environment Structure and Governance Risk Industry and Regulatory or Other External Factors Governmental Industry Conditions Risk Nature of Entity Governmental Unit 's Operations Financial Reporting Objectives and Strategies and Related Risk Measurement and Review of the Entity 's Financial PerJormnce

Risk Inquiries Those that Govem Management Employees

Understanding the Control Environment Those that Govern and how signifcant influence Management's philosophy and operating style Human resources policies and procedures

Risk Assessment Entity andfinancial reporting objectives Management established practices for idenwing risk Monitoring process Management mitigates ri&k

Informution and Communication ~nfonnation is captured and distributed Infonnation that enables personnel to carry out intern1 control responsibilities Communication between Management and those that Govern

* Communication from the top to carry outfinancial reporting objectives

Moniioring Ongoing Monitoring

0 Independent Evaluations Correction of defciencies

Develo~ Audit Stratew: The primary purpare for developing a detailed audit strategy is to coordinate and control the overall aspects of the audit. As such, it is considered a blueprint of your organization 's unique audit nee&. The plan will be a flexible, active tool, designed to communicate certain basic information relating to the audit, such as the scope of the effort, the accounting, auditing and reporting matters requiring attention and resolution, the involvement of your organization 's personnel and other planning considerations.

Signtpcant steps contributing to the development of the audit strategy include:

Understandinn the Entitv and Its Environment As a basis for planning more detailed audit tests, we will update our understanding of your organization S structure and governance, perform risk inquiries and develop an understanding of the control environment.

Identifiin~ the avvlications to be reviewed. T%e standards explain that the auditor should perfnn risk assessment procedures to provide a basis for the identijication and assessment of rish of material misstatement at both the financial statement and relevant assertion levels. Obtaining an understanding of the enti9 and environment, including its internal control, is an essential aspect of consideration of risk. Applications such as receipts, disbursements, grants, contracts, faed assets, inventory, payroll and encumbrances will be examined in order to assess their relationship to the Cityk Statement of Net Assea and the individual find financial statements, and to assist us in planning our overall audit procedures.

Survevina the-fLnd structure. A similar view of the structure of the governmental find types and the account groups will also facilitate our audit planning. For the City, this will include the individual finds - the general, special revenue, and capital projects. Additionally, the accounting and controls for the general long-term debt and general ftced asset account groups will also be surveyed. During this phase of the audit, we are concerned with the overall trends, changes, variances between account balances and the budget and the logical relationship of the account balances to each other.

Afrr we have completed these surveying and data gathering efforts, we will prepare the detailed audit plan, which will include information such as:

Page 13

Historical, statistical andfinancially-related infomtion about the City. Scope of the audit engagement, consistent with the prevailing controls and the tests and reviews mandated by generally accepted auditing standards, the Single Audit Act (if applicable), OMB Circular A-133 (fapplicable), the AICPA Audit Guide, and the GAO Standardr - for Audit.

Responsibilities for completion of specijic tasks assigned to the auditors and the level of assistance to be provided by the City's personnel.

Detailed budgets for all work to be perfrmed in connection with the audit engagement.

Schedules of tasks to be completed, including specij?~ timing and stafing assignments, progress reports, meetings, etc., to provide for timely completion of the engagement.

Owrview of the major accounting systems, accounting policies, applicable legal provisions and reporting considerations.

Specij?~ observations regarding certain key accounts and transactions, such as cash and investments and the related investment risk information, inter- organization and find accounts, procurement, land, buildings, f i r e s and equipment, trust and agency fun&, contracts, payables and encumbrances, billings, receivables and collections, and contingencies and commitments.

Internal Controls: A preliminary evaluation of the efectiveness of the internal accounting controls is an integral part of our auditing techniques. This evaluation enables us to decide tentatively upon the degree of reliance we wiN place on the City's various controls; the amount of testing for effectiveness required of the controls that we plan to rely upon; the nature, timing and extent of the auditingprocedures needed to make detailed tests of related account balances.

In this task we will peform an analysis of the various aspects of internal controls by interviewing the appropriate City personnel, obtaining responses to pertinent questions, completing checklists to target accounting personnel and confirm responsibilities and observing spec$c controls. Nkxt, we will document our understanding of significant applications, connfm the authorization and approval process by a "walk-through" of selected transactions, prepare flow charts of control processes and drafl a narrative summary of the processes.

In this phase, we will also make a risk assessment of each account or account group andfindr and find-wpes to identijj specifc conditions we are likely to encounter. mthin this fiamavonk, we will examine the City's commitments made in connection with any debt issued. The results of this preliminary evaluation of internal controls and this initial risk asst~~sment will help us formulate our detailed audit approach and determine the extent of specific tests required for validation and compliance. We will develop tailored audit programs to meet your nee&.

These programs specifcaIly address the governmental accounting environment. We will consult with your cognizant agency (ifnecessary) to obtain assurance that the audit approach satisjZes their audit requiremen ts if applicable.

Page 14

Phase II: Risk Assessment phase The t& to be per$ormed during this phase of the audit will reflect the tentative conclusions on internal accounting controls reached as a result of the surveys, reviews and evaluations we conducted earlier. n e s e conclusions will either confinn or cause us to modii our initial assessments, as well as provide additional f ~ o t e information on the City's financial statements. We will discuss any conditions observed with the City's management, prior to their inclusion in our reports on internal control.

Understanding of simificant transaction classes. This task is concerned with testing to confimr our initial assessment of the effectiveness of intemal controls and the likelihood or actual presence of errors in the accounting data produced by your system. Again, the extent of testing will be influenced by our initial assessment.

In emphasizing our commitment to eficient audits, we do not test controls f w e can expect to rely on other audit procedures, such as testing account balances. However, where tests of controls can serve a dual purpose by also validating account balances, we will adopt this approach. At the end of this phase, we will reach a conclusion of the effectiveness of your intemal accounting control procedures. men, based on our risk assessments, we will outline the detailed audit procedures we will use on the City 's account balances.

Conduct Final Risk Assessment Review. Risk assessment requires evaluating the likelihood of errors important enough to materially affect the accuracy offinancial statementr being audited. Consequently, risk assessment must be a continuing effort throughout the audit. However, it is particularly important in our planning process because the conclusions reached contribute greatly to how we design our detailed auditingprocedures.

In conducting our fino1 risk assessment, our review will include considerations and conditions related to all funds and account groups and the single audit requirements 07 necessary) and mandated tests for all federal grant and contract programs. We will also weigh data acquired @om earlier tests. m e following factors, ifpresent, could reduce the risk of material errors existing in the account and account groupings.

Certain data are subject to signifcant management control features. For example, frxed asset accounting is subject to the requiremen& of the commitment accounting approach, such as a sound procurement process, timely and accurate recordation, periodic inventory, etc.

As noted in the discussion related to Phase I, the conclusions reached in our risk assessment will be based on many evaluations of internal controls, systems, accounts, and transaction flows throughout the audit. The preliminary assessments we muke early in the audit will continually be evaluated as we encounter the results of additional audit procedures.

Our next step is to construct substantive audit procedures which can identi@ the extent of material error, if any, in each account balance, find and account group in the City's financial statements. Upon completion of the risk assessment and a f t r developing our detailed substantive audit procedures, we will meet with the City's F i ~ n c e Director to discuss our observations and to outline our closing phase of the audit.

Perform Substantive Tests o f Account Balances. We do not consider the various segments ofthe audit as discrete activities. Rather, we focus on the impact that each audit procedure will have on other procedures we perjiorm during the course of the audit. This technique helps us select

Page 15

audit procedures that complement one another, as compared to procedures that overlap or are redundant, and thus in@cient.

The objective of the substantive tests is to veri! that the balances in the City's financial statements are fairly presented and that the City 's reporting is consistent with earlier years, and in accordance with generally accepted governmental accounting principles.

Substantive tests involve examining the details of numerous specific transactions and balances and selected analytical review procedures applied to this finoncia1 information. While some of these tests may be conducted concurrent with our tests of effectiveness of internal controls. the focus of the substantive tests is to complement our reliance on internal controls and to validate all of our earlier observations. The substantive tesh emphasize obtaining evidence as to the validity and propriety of the accounting treatment of transactions and balances, and are directed at checking the timing, purpose, amount, compliance, allowability, and appropriateness of recorded transactions.

In this task, we will perfrm tests of account balances. We will perfrm analytical reviews to identi3 additional accounting and reporting issues and will record these issues for later discussions with the City Finance Director.

Based on the above efforts and previous audit procedures, we will compile, submit and discuss any proposed adjutments with the Ci@ Finance Director prior to beginning the closing and financial reporting phase.

Phase LII= Closing Phase In this phase of the audit,' we will focus on those tasks relating to closing andfinancial reporting. Upon completion, we will begin our year-end reports and management letter.

Review Dralfi Financial Statements. At year-end. we will again pegom limited reviews of the systems of internal accounting controls to determine whether there have been any signifcant changes in them since the completion of our interim work. Signifcant changes in either the systems of intemal control or intemal accounting policies will be evaluated to determine their potential impact on planned audit test procedures.

After we complete this review, we will perJorm our detailed audit test procedures and work to resolve any remaining accounting and reporting issues which could affect the financial statement disclosures.

At this time, we will formally document potential financial statement adjlctments identfted during the course of the audit and discuss with the City Finance Director the effects of these a#ustments. Additionally, we will document how these accounting issues were resolved.

Our sta8 will then review the draft of the City's financial statements and make appropriate comments. Next, we will review the draftjinancial statements with the City Finance Director and other appropriate oflcials to determine that the data conform to generally accepted accounting principles and to mutually agree that all the data included are fairly stated. The financial statements to be included in this review will be the financial statements of the governmental activities, the business-type activities, each major find and the aggregate remaining find information and the footnote disclosures.

Page 16

Obtain Legal and Management Representation. Throughout the course of the audit, we will inquire of the City S management concerning various fhcets of your operations, commitments, contingencies, pending or actual lawsuits and judgments, and obligations. Responses to our inquiries may be provided both orally and in writing. During this task, we will request and obtain written legal and management representations from the City's management and representatives in response to various inquiries. We will also request separate munagement representation for purposes of the Single Audit Act (rapplicable). Our intention is to confrm the continuing appropriateness of these representations and to assure a mutual understanding of the subject matters relating to these representations.

Finalize Audit Re~orts~ Throughout the course of the audit, we plan to meet with the City Finance Director to discuss developments in the audit and to resolve issues as they arise. In addition, the City Finance Director will have an opportunity to make a final review of the proposed changes, gany, in the financial statements that will accompany our audit report. Also, the remaining deliverables will be reviewed with the City Finance Director and appropriate ogfcials andfirualized in this phase.

Tentative Schedule for Performing Kev As~ects of the Audit

We will begin interim work upon being selected as the auditors for the City. We wiil update our understanding of the general control environment and the conditions of the accounting recorak and develop a detailed work plan as mentioned in the following section.

Our schedule will be as follows (subject to the City's availability)

I . Auditors Contract Signed: Acceptance by the City. 2. Firld work for the interim audit: July (one week during the audit period) which will consist of review of minutes and disctcssions with management concerning the previous management letter and internal control documentation. 3. Field work for the interim audit: September (hvo weeh) which will include Fixed Asset observations, tests of controls and walk through of systems, develop conjrmation requests, update discussions with management concerning controls andfiaud risk assessment. 4. Fkid work for the interim audit: October (one week) which wiN include finalizing any sampling tests through September 30. 5. Inventory Observation: On or about September 30 of each year. 6. Year end will begin: The City has agreed to close the books for examination on or before December 1 of each year. 7. Finalize the report: Complete substantial procedures by January 31 and render opinions by March 31 of each year.

Page 17

CPA License

The Finn holds an active liceme. Ronald R Moats, CPA and Dennis P. Carlson, CPA, both hold active licenses in the State of Florida. A cow of each license is attached as &hibit 4.

CPE Affirmation

Ronald R MWS CPA and Dennis P. Carlson, CPA have met the requirements for continuing professional education.

Documentation from the Board of Accountancy that the Licenses are Active and in Good Standing

Licenses can be reviewed on line at www.rnvfloridalicense.com/db~r under "veriB a license":

Ronald R Moats, CPA License no. AC0006400 Dennis P. Carlson, CPA License no. AC41613

Moats & Associates, Certified Public Accountants License no. AW017261

Page 19

CPA License

27he Finn holds an active license. Romld R Moats, CPA and Dennis P. Carlson, CPA, both hold active licenses in the State of Florida. A copy of each license is attached as Erhibit 4.

CPE Affirmation

Ronald R Moats CPA and Dennis P. Carlson, CPA have met the requirements for continuing professional education.

Documentation from the Board of Accountancy that the Licenses are Active and in Good Standing

Licenses can be reviewed on line at www.rnvfloridalicense.com/db~r under "verz~ a license":

Ronald R Moats, CPA License no. AC0006400 Dennis P. Carlson. CPA License no. AC41613

Moats & Associates, Certified Public Accountants License no. A W O I 7261

Page 19

Location of the O@ce from which the Audit will be Conducted

me Firm's accounting ofice is located at 2100 South Ridgewood Avenue, Suite 7, South Daytona, Florida 321 19.

TWO Mosi Recent External Qual;ty Control Reviews

The Firm has attached the two most recent external quality control reviews.

Results of any Federal or State Desk Review Audits During the Past Three Years

The Finn did not have any Federal or State desk reviews other than the annual review of the Auditor General for the State of Florida.

No Discjrlinary Actions

The F im has not been involved in any disciplinary actions.

Use of Ci@ staff

The Finn will use the staff of the Ciw of South Daytona within the meaning of the auditing standards and hm anticipated stafassistance in quoting the fee estimate.

Descdption of Insurance Coverage

m e Finn is self ficnded for Workers Compensation and has General Commercial Liability coverage and professional liability coverage is with the AICPA Prof&onal Liability Insurance Program.

Page 20

is proud to present this

Certificate of Recognition

For having a system of quality controlfor its accounting and auditing practice in effect for the year ended

August 31,2011 which has been designed to meet the requirements ofthe quality control standads

for an accounting and auditing practice established by the AlCPA, and which was complied with duting the year then ended to provide the fimr with recisonable assurance of conforming with profesJonal standards.

@acey Golden, Chair AlCPA Peer Review Board

20l2

Baggett, Reutimann, & Associates, CPAs PA Certified Public Accountants

Judson B. Baggett, MBA, CPA, CVA, Partner/Sbareholder Marei Rcutimann, CPA, Partner/Sharcholder Brian \V. Williams, CPA, PartnerlSbartholder

6815 Dairy Road Zephyrhills, FL 33542 Phone: (813) 788-2155 Fax: (813) 782-8606

System Review Report

To the Shareholder of January 5,2012 Moats & Associates, Certified Public Accountants and the Peer Review Committee of the Florida Institute of Certified Public Accountants

We have reviewed the system of quality control for the accounting and auditing practice of Moats & Associates, Certified Public Accountants(the firm), in effect for the year ended August 31, 201 1. Our peer review was conducted in accordance with the Standards for Performing and Reporting on Peer Reviews established by the Peer Review Board of the American .Institute of Certified Public Accountants. The firm is responsible for designing a system of quality control and complying with it to provide the firm with reasonable assurance of performing and reporting in codormity with applicable professional standards in all material respects. Our responsibility is to express an opinion on the design of the system of quality control, and the firm's compliance therewith based on our review. The nature, objectives, scope, limitations of, and the procedures performed in a System Review are described in the standards at www.aicpa.org/prs~ary.

As required by the standards, engagements selected for review included engagements performed under the Government Auditing Standards.

In our opinion, the system of quality control for the accounting and auditing practice of Moats Bt Associates, Certified Public Accountants in effect for the year ended August 3 1, 201 1, has been suitably designed and complied with to provide the fm with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects. Firms can receive a rating of pass, pass with defciency(ies), or fail. Moats & Associates, Certified Public Accountants has received a peer review rating of pass.

* \ 2r-

Baggett, Reutimann & Associates, CPAs PA

M e m k American Institute of Ctrtified Public Accountants (AICPA); Florida Institute of Certified Public Accountants (FJCPA); National Association of Certified Valuation Analysts (NACVA)

Lashley, Seland & Rotroff, P.A. Certified Public Accountants

919 West State Road 436 Suite 300 Altamonte Springs, FL 32714

Phone: 407-774-2044 Fax: 407-774-6199

~1 December 15,2008

To the Owners R.R. Moats, CPA, P.A. Port Orange, Florida

We have reviewed the system of quality control for the accounting and auditing practice of R.R. Moat., CPA, P.A. (the finn) in effect for the year ended August 3 1,2008. A system of quality control encompasses the firm's organizational structure, the policies adopted and procedures established to provide it with reasonable assurance of conforming with professional standards. The elements of quality conbol are described in the Statements on Quality Control Standards issued by the American Institute of CPAs (AICPA). The firm is responsible for designing a system of quality cone01 and complying with it to provide the firm reasonable assurance of conforming with professional standards in all material respects. Our responsibility is to express an opinion on the design of the system of quality control and the firm's compliance with its system of quality control based on our review.

Our review was conducted in accordance with standards established by the Peer Review Board of the AICPA. During our review, we read required representations from the firm, interviewed firm persomel and obtained an understanding o f the nature of the firm's accounting and auditing practice, and the design of the firm's system of quality control sufficient to assess the risks implicit in its practice. Based on our assessments, we selected engagements and administrative files to test for conformity with professional standards and compliance with the firm's system of quality control. The engagements selected represented a reasonable cross-section of the firm's accounting and auditing practice with emphasis on higher-risk engagements. The engagements selected included among others engagements performed under Government Auditing Standards. Prior to concluding the review, we reassessed the adequacy of the scope of the peer review procedures and met with firm management to discuss the results of our peer review. We believe that the procedures we performed provide a reasonable basis for our opinion.

In performing our review, we obtained an understanding of the system of quality control for the firm's accounting and auditing practice. In addition, we tested compliance with the firm's quality control policies and procedures to the extent we consider appropriate. These tests covered the application of the firm's policies and procedures on selected engagements. Our review was based on selected tests therefore it would not necessarily detect all weaknesses in the system of quality control or all instances of noncompliance with it. There are inherent limitations in the effectiveness of any system of quality control and therefore noncompliance with the system of quality control may occur and not be detected. Projection of any evaluation of a system of quality control to future periods is subject to the risk that the system of quality control may become inadequate because of changes in conditions, or because the degree of compliance with the policies or procedures may deteriorate.

R.R. Moats, CPA, P.A. December 15,2008

In our opinion, the system of quality control for the accounting and auditing practice of R.R. Moats, CPA, P.A. in effect for the year ended August 3 1,2008, has been designed to meet the requirements of the quality control standards for an accounting and auditing practice established by the AKPA and was complied with during the year then ended to provide the firm with reasonable assurance of conforming with professional standards.

Lashley, Seland & Rotroff, P.A.

INSURED

PdicyNumber: BP61749C Account Number: CAC61749C

SPECIAL C - - - IAL PACKI-I E POLICY

I

flUAT8 & ASSOCIATES CPAS; ,

bw-ard a-1

:,j IantamkttR. . tRarkrsumensas

r) 1~0ar0,oOo S 3,0B;Q*OOO

FL RECOUPHEMT* t 12.35 FL EMPAT FUND: 8 4 . 0 0 FL FIRE WARSHALL: 8 .54

TBTW. FIWMIU11 M(D CWARQES. S bfPS*$9

R 64LS2SS (1104) 09/20/11 RENEWAL JC

~ R H CERTIFICATE OF LIABILITY INSURANCE M=O w 1 m 1 2

THIS CERTIFICATE IS ISSUED AS A MATfER OF INFORWTKm ONLY AND CONFERS NO IUGtKS UPON M E CERWKA" WlER, THlS CERTfFUlE DOES NOT AFFIRMATNUY OR NEGATIVELY AMEND, E%lEMD OR ALTER 'THE COVERAGE AFFORDED BY THE POUCIES BELOW. THIS CERWICATE OF INSURANCE DOES NOT CONSmUTE A COWRACT -EN THE ISSUING IWSURER@), AWHoRED IZFpQFWATNE OR PRODUCER, AND THE CERTIFICATE HOU)UZ.

Affinii Insurance Services, Inc. 159 East County Line Rd Hatboro, PA 19040-1218

I Mr.WR Mosb RR CPA PA

Prior Acts Date: 0710 1 12004

CERTIFICATE HOLDER CANCELLATlON I

I I I

Q 19863M0 ACORD CORPORA'110N. A# dghb M. I

m ACORD 25 (201ato5) flre ACORD name and logo are regbtersd marks of ACORD

e LICENSES

J* "Q; ; & $ v . 1

DEPARTWESIT OF BWBINB88 AND PROFSSSIONAfi REGIVLATION

BOARD OF ACCOUNTANCY ( 8 5 0 ) 487-1395 240 NW 76TH DRIVE, SUITE A (ULINESVILLE FL 32607

MOATS, RONAIsD R 2100 SOUTH RIDGEWOOD A m SUITE 7 SOUTH DAYTONA FL 32119

Congratula~onsl With this licewe you become one of the nearly one million Floridians l~censed by the Department of Business and Professional Regulation. Our professionals and businesses range from architects to yacht brokers, from boxers to barbeque restaurants, and they keep Florida's economy strong.

Every day we work to improve the way we do business in order to serve you better. For information about our services, please log onto www.myfloridalicense.com. There you can find more information abwt ow divisions and the regulatims that imoad vou. subscribe to department newsletters and learn more about the DCiaaltriren-i's initiatives.

Our mission at the Department is: License Efficiently, Regulate FaMy. We constantly strive to serve you better so that you can serve your customers. Thank you for doing business in Florida, and congratulations on your new license!

DETACH HERE

CAR&EJON DBRWIS P A n 4031 BLm WXW3UR BY THB SEA 1PL 32127

DATE BATCH NUMBER

c STATE OF FLORIDA

DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION

1 BOARD OF ACCOUNTANCY (850) 487-1395 240 NW 76TH DRIVE, SUITE A GAINESVILLE FL 32607

R. R. MOATS* CIP.A., P.A. MOATS & ASSOCIATES, CERTIFIED PUBLIC ACCOUNTANTS

B 2100 SOUTH RIDGEWOOD AVENUE SUITE 7 DAYTONA BEACH FL 32119

I I STAJE OF-FLORIDA AC# 5 - ? ? 8 6 1

Congratulations! With this license you become one of the nearly one million Floridians licensed by the Department of Business and Professional Regulation. D E P A ~ ~ ~ E N T OF BUSINESS AND Our professionals and businesses range from architects to yacht brokers, from boxers to barbeque restaurants, and they keep Florida's economy strong.

118055528 Every day we work to improve the way we do business in order to serve you better. For information about our services, please log onto www.myfloridalicense.com. ONE OWNE , There you can find more information about our divisions and the regulations that R. R. MOA impact you, subscribe to department newsletters and learn more about the MOATS & A ERTZFIED PU Department's initiatives.

Our mission at the Department is: License Efficiently, Regulate Fairly. We constantly strive to serve you better so that you can serve your customers. IS LICENSED under the provieione of Ch.473 PS. Thank you for doing business in Florida, and congratulations on your new license!

dare: DEC 31, 2013 L1109 2100744

J

DETACHHERE

DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION BOARD OF ACCOUNTANCY

SEQ#~i1092700744

DAYTONA BEACH FL 32119

I RICK SCOTT KEN LAWSON GOVERNOR SECRETARY

------- DISPLAY AS REQUIRED BY LAW pp ------ -- -.---------