Purvis 2AThe City Commissioners
Atlantic Beach
800 Seminole Road
Atlantic Beach, Florida 32233
va O
,� City Commission,
i'y mana er
El City Attorney Pury
GLay
1010" ON,
,�n.p
itECEIVED
May 2, 2008 1 1 A A- y 0 6 faPA0
OFFICE OF THE CITY CLERIC
We are pleased to confirm our understanding of the services we are to provide the City of Atlantic Beach,
Florida (the City) for the years ended September 30, 2008, 2009. We will audit the financial statements
of the governmental activities, the business -type activities, the aggregate discretely presented component
units, each major fund, and the aggregate remaining fund information, which collectively comprise the
basic financial statements of the City as of and for the years ended September 30, 2008 and 2009.
Accounting standards generally accepted in the United States provide for certain required supplementary
information (RSI), such as management's discussion and analysis (MD&A), to accompany the City's
basic financial statements. As part of our engagement, we will apply certain limited procedures to the
City's RSI. These limited procedures will consist principally of inquiries of management regarding the
methods of measurement and presentation, which management is responsible for affirming to us in its
representation letter. Unless we encounter problems with the presentation of the RSI or with procedures
relating to it, we will disclaim an opinion on it. The following RSI is required by generally accepted
accounting principles and will be subjected to certain limited procedures but will not be audited:
■ Management's Discussion and Analysis
■ Certain Pension Information
■ Certain Budgetary Comparison Schedules
Supplementary information other than RSI, such as combining and individual fund financial statements,
also accompanies the City's basic financial statements. We will subject the following supplementary
information to the auditing procedures applied in our audit of the basic financial statements and will
provide an opinion on it in relation to the basic financial statements:
■ Combining Nonmajor Fund Statements
■ Schedule of Expenditures of Federal and State Awards
Audit Objectives
The objective of our audit is the expression of opinions as to whether your basic financial statements are
fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles
and to report on the fairness of the additional information referred to in the first paragraph when
considered in relation to the basic financial statements taken as a whole. The objective also includes
reporting on:
■ Internal control related to the financial statements and compliance with the provisions of applicable
laws, regulations, contracts, agreements, and grants, noncompliance with which could have a material
effect on the financial statements in accordance with GovernmentAuditing Standards.
Certified Public Accountants
P.O. Box 23999 • 222 N.E. 1st Street • Gainesville, Florida 32602 • (352) 378-2461 • FAX (352) 378-2505
MEMBERS OF AMERICAN AND FLORIDA INSTITUTES OF CERTIFIED PUBLIC ACCOUNTANTS
MEMBER OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS PRIVATE COMPANIES AND S.E.C. PRACTICE SECTIONS
The City Commissioners
Atlantic Beach
Atlantic Beach, Florida -2- May 2, 2008
Audit Objectives (Concluded)
■ Internal control related to major programs and an opinion (or disclaimer of opinion) on compliance
with laws, regulations, and the provisions of contracts or grant agreements that could have a direct
and material effect on each major program in accordance with the Single Audit Act Amendments of
1996, OMB Circular A-133, Audits of States, Local Governments, and Non -Profit Organizations, and
Chapter 10.550, Rules of the Auditor General of the State of Florida.
The reports on internal control and compliance will each include a statement that the report is intended for
the information and use of the City Commission, management, specific legislative or regulatory bodies,
federal awarding agencies, and if applicable, pass-through entities and is not intended to be and should
not be used by anyone other than these specified parties.
Our audit will be conducted in accordance with U.S. generally accepted auditing standards; the standards
for financial audits contained in Government Auditing Standards, issued by the Comptroller General of
the United States; the Single Audit Act Amendments of 1996; the provisions of OMB Circular A-133,
and the provisions of Chapter 10.550 and will include tests of accounting records, a determination of
major program(s) in accordance with Circular A-133 and the State Single Audit, and other procedures we
consider necessary to enable us to express such opinions and to render the required reports. If our
opinions on the financial statements or the Single Audit(s) compliance opinions are other than unqualified,
we will fully discuss the reasons with you in advance. If, for any reason, we are unable to complete the
audit or are unable to form or have not formed opinions, we may decline to express opinions or to issue a
report as a result of this engagement.
Management Responsibilities
Management is responsible for establishing and maintaining internal controls, including monitoring
ongoing activities; for the selection and application of accounting principles; for the fair presentation in
the financial statements of the respective financial position of the governmental activities, the business -
type activities, each major fund, and the aggregate remaining fund information of the City and the
respective changes in financial position and, where applicable, cash flows in conformity with U.S.
generally accepted accounting principles; and for federal and state award program compliance with
applicable laws and regulations and the provisions of contracts and grant agreements. Management is
responsible for the basic financial statements and all accompanying information as well as all
representations contained therein.
Management is responsible for making all financial records and related information available to us,
including identifying significant vendor relationships in which the vendor has the responsibility for
program compliance and for the accuracy and completeness of that information. Management's
responsibilities include adjusting the financial statements to correct material misstatements and for
confirming to us in the representation letter that the effects of any uncorrected misstatements aggregated
by us during the current engagement and pertaining to the latest period presented are immaterial, both
individually and in the aggregate, to the financial statements taken as a whole.
You are responsible for the design and implementation of programs and controls to prevent and detect
fraud, and for informing us about all known or suspected fraud or illegal acts affecting the government
involving (1) management, (2) employees who have significant roles in internal control, and (3) others
where the fraud or illegal acts could have a material effect on the financial statements. Your
responsibilities include informing us of your knowledge of any allegations of fraud or suspected fraud
The City Commissioners
Atlantic Beach
Atlantic Beach, Florida -3- May 2, 2008
Management Responsibilities (Concluded)
affecting the government received in communications from employees, former employees, grantors,
regulators, or others. In addition, you are responsible for identifying and ensuring that the entity complies
with applicable laws, regulations, contracts, agreements, and grants. Additionally, as required by OMB
Circular A-133, it is management's responsibility to follow up and take corrective action on reported
audit findings and to prepare a summary schedule of prior audit findings and a corrective action plan.
The summary schedule of prior audit findings should be available for our review on the commencement
of fieldwork.
Audit Procedures—General
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements; therefore, our audit will involve judgment about the number of transactions to be
examined and the areas to be tested. We will plan and perform the audit to obtain reasonable rather than
absolute assurance about whether the financial statements are free of material misstatement, whether from
(1) errors, (2) fraudulent financial reporting, (3) misappropriation of assets, or (4) violations of laws or
governmental regulations that are attributable to the entity or to acts by management or employees acting
on behalf of the entity. Because the determination of abuse is subjective, Government Auditing Standards
do not expect auditors to provide reasonable assurance of detecting abuse.
Because an audit is designed to provide reasonable, but not absolute assurance and because we will not
perform a detailed examination of all transactions, there is a risk that material misstatements or
noncompliance may exist and not be detected by us. In addition, an audit is not designed to detect
immaterial misstatements or violations of laws or governmental regulations that do not have a direct and
material effect on the financial statements or major programs. However, we will inform you of any
material errors and any fraudulent financial reporting or misappropriation of assets that come to our
attention. We will also inform you of any violations of laws or governmental regulations that come to our
attention, unless clearly inconsequential. We will include such matters in the reports required for a Single
Audit. Our responsibility as an auditor is limited to the period covered by our audit and does not extend
to any later periods for which we are not engaged as auditors.
Our procedures will include tests of documentary evidence supporting the transactions recorded in the
accounts, and may include tests of the physical existence of inventories, and direct confirmation of
receivables and certain other assets and liabilities by correspondence with selected individuals, creditors,
and financial institutions. We will request written representations from your attorneys as part of the
engagement, and they may bill you for responding to this inquiry. At the conclusion of our audit, we will
also require certain written representations from you about the financial statements and related matters.
Audit Procedures—Internal Controls
Our audit will include obtaining an understanding of the entity and its environment, including internal
control, sufficient to assess the risks of material misstatement of the financial statements and to design the
nature, timing, and extent of further audit procedures. Tests of controls may be performed to test the
effectiveness of certain controls that we consider relevant to preventing and detecting errors and fraud
that are material to the financial statements and to preventing and detecting misstatements resulting from
illegal acts and other noncompliance matters that have a direct and material effect on the financial
statements. Our tests, if performed, will be less in scope than would be necessary to render an opinion on
internal control and, accordingly, no opinion will be expressed in our report on internal control issued
pursuant to Government Auditing Standards.
The City Commissioners
Atlantic Beach
Atlantic Beach, Florida 4- May 2, 2008
Audit Procedures—Internal Controls (Concluded)
As required by OMB Circular A-133 and the State Single Audit, we will perform tests of controls over
compliance to evaluate the effectiveness of the design and operation of controls that we consider relevant
to preventing or detecting material noncompliance with compliance requirements applicable to each
major federal award program. However, our tests will be less in scope than would be necessary to render
an opinion on those controls and, accordingly, no opinion will be expressed in our report on internal
control issued pursuant to OMB Circular A-133 and the State Single Audit.
An audit is not designed to provide assurance on internal control or to identify significant deficiencies.
However, during the audit, we will communicate to management and those charged with governance
internal control related matters that are required to be communicated under professional standards,
Government Auditing Standards, OMB Circular A-133 and Chapter 10.550.
Audit Procedures—Compliance
As part of obtaining reasonable assurance about whether the financial statements are free of material
misstatement, we will perform tests of the City's compliance with applicable laws and regulations and the
provisions of contracts and agreements, including grant agreements. However, the objective of those
procedures will not be to provide an opinion on overall compliance and we will not express such an
opinion in our report on compliance issued pursuant to Government Auditing Standards.
OMB Circular A-133 and the State Single Audit require that we also plan and perform the audit to obtain
reasonable assurance about whether the auditee has complied with applicable laws and regulations and the
provisions of contracts and grant agreements applicable to major programs. Our procedures will consist
of test of transactions and other applicable procedures described in the OMB Circular A-133, Compliance
Supplement, and the State Single Audit 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 each of its major programs
in our report on compliance issued pursuant to OMB Circular A-133 and the State Single Audit.
Audit Administration, Fees, and Other
We understand that your employees will prepare all cash, accounts receivable, or other confirmations we
request and will locate any documents selected by us for testing.
At the conclusion of the engagement, we will complete the appropriate sections of and sign the Data
Collection Form that summarizes our audit findings. We will provide copies of our reports to the City;
however, it is management's responsibility to submit the reporting package (including financial
statements, schedule of expenditures of federal awards, summary schedule of prior audit findings,
auditors' reports, and a corrective action plan) along with the Data Collection Form to the designated
federal clearinghouse and, if appropriate, to pass-through entities. The Data Collection Form and the
reporting package must be submitted within the earlier of 30 days after receipt of the auditors' reports or
nine months after the end of the audit period, unless a longer period is agreed to in advance by the
cognizant or oversight agency for audits. At the conclusion of the engagement, we will provide
information to management as to where the reporting packages should be submitted and the number to
submit.
The audit documentation for this engagement is the property of Purvis Gray and Company, LLP and
constitutes confidential information. However, pursuant to authority given by law or regulation, we may
be requested to make certain audit documentation available to a federal or state agency providing direct or
indirect funding, or the U.S. Government Accountability Office for purposes of a quality review of the
The City Commissioners
Atlantic Beach
Atlantic Beach, Florida -5-
May 2, 2008
Audit Administration, Fees, and Other (Concluded)
audit, to resolve audit findings, or to carry out oversight responsibilities. We will notify you of any such
request. If requested, access to such audit documentation will be provided under the supervision of Purvis
Gray and Company, LLP personnel. Furthermore, upon request, we may provide copies of selected audit
documentation to the aforementioned parties. These parties may intend, or decide, to distribute the copies
or information contained therein to others, including other governmental agencies.
The audit documentation for this engagement will be retained for a minimum of five years after the date
the auditors' report is issued. If we are aware that a federal or state awarding agency, pass-through entity,
or auditee is contesting an audit finding, we will contact the party(ies) contesting the audit finding for
guidance prior to destroying the audit documentation.
We expect to begin our audits in December of each year and to issue our reports no later than March 31 of
each year. Our fee for these services will be as follows:
2008 $ 42,500
2009 $ 44,000
If a federal or state single audit is required in any audit year, the fee will be increased $3,000 per single
audit, per year.
Our invoices for these fees will be rendered each month as work progresses and are payable on
presentation. If we elect to terminate our services for nonpayment, our engagement will be deemed to
have been completed upon written notification of termination, even if we have not completed our report.
You will be obligated to compensate us for all time expended and to reimburse us for all out-of-pocket
costs through the date of termination. The above fee is based on anticipated cooperation from your
personnel and the assumption that unexpected circumstances will not be encountered during the audit. If
significant additional time is necessary, we will discuss it with you and arrive at a new fee estimate before
we incur the additional costs.
Government Auditing Standards require that we provide you with a copy of our most recent external peer
review report and any letter of comment, and any subsequent peer review reports and letters of comment
received during the period of the contract. Our 2007 peer review report accompanies this letter.
We appreciate the opportunity to be of service to the City of Atlantic Beach, Florida and believe this letter
accurately summarizes the significant terms of our engagement. If you have any questions, please let us
know. If you agree with the terms of our engagement as described in this letter, please sign the enclosed
copy and return it to us.
Very truly yours,
PURVIS GRAY AND COMPANY, LLP
Ronald D. Whitesides, C.P.A.
Audit Partner
RDW/asb
The City Commissioners
Atlantic Beach
Atlantic Beach, Florida -6-
RESPONSE:
This letter correctly sets forth the understanding of the City of Atlantic Beach, Florida.
Officer Signature:
Title: r4 ,
Date: S11-7 )hsz
May 2, 2008
Fowler, Holley, Rambo & Stalvey, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
BUSINESS CONSULTANTS
Curtis G. Fowler, CPA, PFS, CFP • Carlton W. Holley, CPA • C. Wayne Rambo, CPA, CVA • Richard A. Stalvey, CPA
3208 Wildwood Plantation Drive • Post Office Box 1887 • Valdosta, GA 31603-1887 - (229) 244-1559 • (800) 360-3123 • Fax (229) 245-7369
September 12, 2007
To the Partners of
Purvis, Gray and Company
and the Center for Public Company Audit Firms Peer Review Committee
We have reviewed the system of quality control for the accounting and auditing practice of Purvis, Gray
and Company (the firm) applicable to non -SEC issuers in effect for the year ended May 3l, 2007. The
firm has informed us that it did not audit SEC -issuers for the year ended May 31, 2007. A system of
quality control encompasses the firm's organizational structure and the policies adopted and procedures
established to provide it with reasonable assurance of complying with professional standards. The
elements of quality control are described in the Statements on Quality Control Standards issued by the
American Institute of Certified Public Accountants (the AICPA). The design of the system, and
compliance with it, are the responsibilities of the firm. Our responsibility is to express an opinion on the
design of the system, and the firm's compliance with that system based on our review.
Our review was conducted in accordance with standards established by the Peer Review Committee of the
Center for Public Company Audit Firms and included procedures to plan and perform the review that are
summarized in the attached description of the peer review process. Our review would not necessarily
disclose all weaknesses in the system of quality control or all instances of lack of compliance with it since
it was based on selective tests. Because there are inherent limitations in the effectiveness of any system
of quality control, departures from the system may occur and not be detected. Also, 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 that the degree of compliance with
the policies or procedures may deteriorate.
In our opinion, the system of quality control for the accounting and auditing practice applicable to the
non -SEC issuers of Purvis, Gray and Company in effect for the year ended May 3I, 2007, has been
designed to meet the requirements of the quality control standards for an accounting and auditing practice
established by the AICPA, and was complied with during the year then ended to provide the firm with
reasonable assurance of complying with applicable professional standards.
1[ I Y2 o T-- ��knf t , P C
Fowler, olley, Rambo & Stalvey, P.C.
SERVING VALDOSTA AND SOUTH GEORGIA SINCE 1956
James E. Folsom, CPA . Josie Miller, CPA . R. Arden DeLoach, Jr., CPA . G. Michael Walker, CPA
Robert D. Elliott, CPA . Tally M. Wisenbaker, III, CPA . Dustin C. Wilkes, CPA
www.vaidostacpa.com . MEMBER OF AGN INTERNATIONAL
Curtis G. Fowler, CPA, PFS, CFP - Carlton W. Holley, CPA - C. Wayne Rambo, CPA, CVA - Richard A. Stalvey, CPA
3208 Wildwood Plantation Drive ^ Post Office Box 1887 •Valdosta, GA 31603 -1 887 . (229) 244-1559 - (800) 360-3123 . Fax (229) 245-7369
Attachment to the Peer Review Report of Purvis, Gray and Company
Description of the Peer Review Process
Overview
Firms enrolled in the AICPA Center for Public Company Audit Firms (the Center) Peer Review Program
have their system of quality control periodically reviewed by independent peers. These reviews are
system and compliance oriented with the objectives of evaluating whether:
The reviewed firm's system of quality control for its accounting and auditing practice applicable
to non -SEC issuers has been designed to meet the requirements of the Quality Control Standards
established by the AICPA.
The reviewed firm's quality control policies and procedures applicable to non -SEC issuers were
being complied with to provide the firm with reasonable assurance of complying with
professional standards.
A peer review is based on selective tests and directed at assessing whether the design of and compliance
with the firm's system of quality control for its accounting and auditing practice applicable to non -SEC
issuers provides the firm with reasonable, not absolute, assurance of complying with professional
standards. Consequently a peer review on the firm's system of quality control is not intended to, and does
not, provide assurance with respect to any individual engagement conducted by the firm or that none of
the financial statements audited by the firm should be restated.
The Center's Peer Review Committee (PRC) establishes and maintains peer review standards. At regular
meetings and through report evaluation task forces, the PRC considers each peer review, evaluates the
reviewer's competence and performance, and examines every report, letter of comments, and
accompanying response from the reviewed firm that states its corrective action plan before the peer
review is finalized. The Center's staff plays a key role in overseeing the performance of peer reviews
working closely with the peer review teams and the PRC.
Once the PRC accepts the peer review reports, letters of comments, and reviewed firms' responses, these
documents are maintained in a file available to the public. In some situations, the public file also includes
a signed undertaking by the firm agreeing to specific follow-up action requested by the PRC.
Firms that perform audits or play a substantial role in the audit of one or more SEC issuers, as defined by
the Public Company Accounting Oversight Board (PCAOB), are required to be registered with and have
their accounting and auditing practice applicable to SEC issuers inspected by the PCAOB. The firm did
not audit SEC issuers for the year ended May 31, 2007.
SERVING VALDOSTA AND SOUTH GEORGIA SINCE 1956
James E. Folsom, CPA . Josie Miller, CPA . R. Arden DeLoach, Jr., CPA . G. Michael Walker, CPA
Robert D. Elliott, CPA . Tally M. Wisenbaker, III, CPA . Dustin C. Wilkes, CPA
www.valdostacpa.com . MEMBER OF AGN INTERNATIONAL
Fowler, Holley, Rambo & Stalvey, P.C.
Planning the Review for the Firm's Accounting and Auditing Practice Applicable to Non -SEC
Issuers
To plan the review of Purvis, Gray and Company we obtained an understanding of (1) the nature and
extent of the firm's accounting and auditing practice, and (2) the design of the firm's system of duality
control sufficient to assess the inherent and control risks implicit in its practice. Inherent risks were
assessed by obtaining an understanding of the firm's practice, such as the industries of its clients and
other factors of complexity in serving those clients, and the organization of the firm's personnel into
practice units. Control risks were assessed by obtaining an understanding of the design of the Firm's
system of quality control, including its audit methodology, and monitoring procedures. Assessing control
risk is the process of evaluating the effectiveness of the reviewed firm's system of quality control in
preventing the performance of engagements that do not comply with professional standards.
Performing the Review for the Firm's Accounting and Auditing Practice Applicable to Non -SEC
Issuers
Based on our assessment of the combined level of inherent and control risks, we identified practice units
and selected engagements within those units to test for compliance with the firm's system of quality
control. The engagements selected for review included engagements performed under the Government
Auditing Standards, audits performed under FDICIA and audits of Employee Benefit Plans. The
engagements selected for review represented a cross-section of the Firm's accounting and auditing
practice with emphasis on higher -risk engagements. The engagement reviews included examining
working paper files and reports and interviewing engagement personnel.
The scope of the peer review also included examining selected administrative and personnel files to
determine compliance with the firm's policies and procedures for the elements of quality control
pertaining to independence, integrity, and objectivity; personnel management; and acceptance and
continuance of clients and engagements. Prior to concluding the review, we reassessed the adequacy of
scope and conducted a meeting with firm management to discuss our findings and recommendations.