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HomeMy WebLinkAboutContractJune 25, 2026 Mayor and City Council City of Renton 1055 South Grady Way Renton, WA 98057 We are pleased to confirm the audits to be performed by the Office of the Washington State Auditor (we, us, our), in accordance with the provisions of Chapter 43.09 RCW, for the City of Renton (you, your). This letter confirms the nature and limitations of the audits, as well as responsibilities of the parties and other engagement terms. Office of the Washington State Auditor Responsibilities Financial Statement Audit We will perform an audit of the comprehensive financial report and basic financial statements of the City of Renton as of and for the fiscal year ended December 31, 2025, prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The objective of our audit will be to express our opinion on these financial statements. We will perform our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable, rather than absolute, assurance about whether the financial statements are free from material misstatement. Since we do not review every transaction, our audit cannot be relied upon to identify every potential misstatement. Because of the inherent limitations of an audit, together with the inherent limitations of internal control, an unavoidable risk exists that some material misstatements may not be detected, even though the audit is properly planned and performed in accordance with the standards identified above. Afinancial statement audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers relevant internal controls in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of internal control. Accordingly, we will express no such opinion. Although our audit is not designed to provide an opinion on the effectiveness of internal control over financial reporting, we are required to report any identified significant deficiencies and material weaknesses in controls. We are also required to report instances of fraud and noncompliance with Office of the Washington State Auditor Pat McCarthy Insurance Building, P.O. Box 40021 {Olympia, Washington 98504-0021 {(564) 999-0950 {Pat.McCarthy@sao.wa.gov CAG-26-233 provisions of laws, regulations, contracts, and grant agreements that could have a direct and material effect on the accuracy of financial statements. A financial statement audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. All misstatements identified by the audit will be discussed with management. Material misstatements corrected by management and all uncorrected misstatements will be communicated at the exit conference, as required by professional auditing standards. Our responsibility is to issue a written report in which we express an opinion on the financial statements based on the results of our audit. We cannot guarantee an unmodified opinion. We may modify or disclaim an opinion on the financial statements if we are unable to complete the audit or obtain sufficient and appropriate audit evidence supporting the financial statements. If our opinion is other than unmodified, we will discuss the reason with you prior to issuing our report. Further, in accordance with professional standards, we may add emphasis-of-matter or other-matter paragraphs to our report to describe information that, in our judgment, is relevant to understanding the financial statements or our audit. We will also issue a written report (that does not include an opinion) on issues identified during the audit related to internal control over financial reporting and on compliance with the provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a material effect on the financial statements as required by Government Auditing Standards. The City prepares supplementary information that accompanies the financial statements, which is required by Generally Accepted Accounting Principles. We agree to perform auditing procedures on this information, with the objective of expressing an opinion as to whether it is fairly stated, in all material respects, in relation to the financial statements taken as a whole. The City also prepares other information to accompany the financial statements, which is required by accounting standards or is done at its discretion. We will perform limited procedures on this information for the purpose of identifying inconsistencies with the financial statements. However, we will not express an opinion on its fair presentation. Federal Single Audit We will also perform a federal single audit on compliance with, and report on internal control over compliance for, each major program for the fiscal year ended December 31, 2025. The objective of our audit will be to express our opinion on this compliance. We will perform our audit in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. Because of the inherent limitations of an audit, together with the inherent limitations of internal control, an unavoidable risk exists that some material noncompliance may not be detected, even though the audit is properly planned and performed in accordance with these standards and the Uniform Guidance. In planning and performing the compliance audit, we will consider internal control over compliance in order to determine the appropriate auditing procedures necessary for opining on compliance with each major program, and for testing and reporting on internal control over compliance in accordance with Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we will express no such opinion. Although our audit is not designed to provide an opinion on the effectiveness of internal control over compliance, we are required to report any identified significant deficiencies and material weaknesses in controls. We will express an opinion as to whether the Schedule of Expenditures of Federal Awards is fairly stated, in all material respects, in relation to the financial statements taken as a whole for the fiscal year ended December 31, 2025. Our responsibility is to issue a written report in which we express an opinion on compliance for each major program based on the results of our audit. We cannot guarantee an unmodified opinion. We may modify or disclaim an opinion on compliance if we are unable to complete the audit or obtain sufficient and appropriate audit evidence supporting compliance. If our opinion is other than unmodified, we will discuss the reason with you prior to issuing our report. Further, in accordance with professional standards, we may add emphasis-of-matter or other-matter paragraphs to our report to describe information that, in our judgment, is relevant to understanding our audit. We estimate the federal single audit will cover two federal grant programs, which will be identified at the audit entrance conference. If additional grant programs are audited to satisfy the requirements of the Uniform Guidance, the audit budget discussed below will increase by approximately $9,000 per additional major program. Data Security Our Office is committed to appropriately safeguarding the information we obtain during the course of the audit. We have entered into a data sharing agreement with the City to ensure compliance with legal requirements and Executive Directives (Executive Order 16-01, RCW 42.56 and WaTech policies and standards) in the handling of information considered confidential. Responsibilities specific to this engagement Additionally, we will: • Provide management with advanced notification if we identify issues that require further audit work and increase audit costs. • Participate in weekly progress meetings to discuss the status of the audit plans for future weeks. At those meetings, we will provide information on the departments we will work in and the audit objectives we will be addressing. • Conduct a formal entrance conference on the financial and single audits. • Conduct a formal exit conference to discuss results of the financial audit and single audits. • Provide our financial statement opinion (ACFR letter) by July 31, 2026 provided the financial statements we receive for audit are free of significant or numerous errors and the City fulfills its requirements listed in the succeeding Client’s Responsibilities section. • Interact with staff professionally and respectfully and communicate needs and issues in a timely manner. • Provide written correspondence during the course of the audit through email to the audit liaison, Arial Llorach, Senior Finance Analyst. • Provide advance notice when a scheduled meeting is to be cancelled. • Allow the City seven days to provide a written response to any findings. Reporting levels for audit issues Issues identified through the auditing process will be communicated as follows. Failure to appropriately address audit issues may result in escalated reporting levels. • Findings formally address issues in an audit report. Findings report significant results of the audit, such as significant deficiencies and material weaknesses in internal controls; misappropriation; and material abuse or non-compliance with laws, regulations, contracts or grant agreements. You will be given the opportunity to respond to a finding, and this response, or a synopsis of it, will be published in the audit report. Professional auditing standards define the issues we must report as findings with regard to non-compliance with a financial statement effect and internal controls over financial reporting. The Uniform Guidance defines the issues we must report as findings with regard to non-compliance and internal controls over compliance with federal grants. • Management letters communicate control deficiencies, non-compliance, misappropriation, abuse, or errors with a less-than-material effect on audit objectives. Management letters are referenced, but not included, in the audit report. • Exit items address control deficiencies, non-compliance, abuse, or errors that have an insignificant effect on audit objectives. These issues are informally communicated to management and are not referenced in the audit report. Client’s Responsibilities Management is responsible for the accuracy and completeness of information provided to the auditor and will provide the Office of the Washington State Auditor with: • Unrestricted access to people with whom the auditor wishes to speak. • All information that is requested or relevant to auditor requests. • Notification when any documents, records, files, or data contain information that is covered by confidentiality or privacy laws. • Adequate workspace and conditions, including interacting with auditors professionally and respectfully and promptly communicating about any issues and concerns. Moreover, our audit does not relieve management or the governing body of their responsibilities. Management’s responsibilities, with oversight from the governing body, include: • Selecting and applying appropriate administrative and accounting policies. • Establishing and maintaining effective internal controls over financial reporting, compliance, and safeguarding of public resources. • Designing and following effective controls to prevent and detect fraud, theft, and loss. • Promptly reporting to us knowledge of any fraud, allegations of fraud or suspected fraud involving management, employees or others, in accordance with RCW 43.09.185. • Ensuring compliance with laws, regulations and provisions of contracts and grant agreements. • Preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP). • Preparing the following supplementary information: o Schedule of Expenditures of Federal Awards (including notes and noncash assistance received) that includes all expenditures from federal agencies and pass-through agencies in the form of grants, contracts, loans, loan guarantees, property, cooperative agreements, interest subsidies, insurance, food commodities, direct appropriations, and other assistance in accordance with Uniform Guidance 2 CFR § 200.510 requirements o Combining Statements in accordance with Generally Accepted Accounting Principles • Preparing the following other information: o Introductory section of the Annual Comprehensive Financial Report in accordance with Generally Accepted Accounting Principles o Statistical section of the Annual Comprehensive Financial Report in accordance with Generally Accepted Accounting Principles Federal Single Audits – Additional Responsibilities: • Identifying all federal awards received. • Understanding and complying with the provisions of laws, regulations, contracts, and grant agreements, including applicable program compliance requirements. • Establishing and maintaining internal control over compliance, including establishing and maintaining effective controls that provide reasonable assurance that the City administers government programs in compliance with the compliance requirements. • Evaluating and monitoring compliance with federal award requirements. • Informing us of the City’s relationships with significant vendors who are responsible for program compliance • Submitting the reporting package and data collection form through the Federal Audit Clearinghouse. Responsibilities at the conclusion of the audit At the conclusion of our audit, the City will provide us with a letter to confirm in writing certain express and implied representations made during the course of the audit. This letter includes representations regarding legal matters. A separate letter may be needed from the City’s legal counsel. Office of the Washington State Auditor will publish the audit report. The City may not publish any document containing the audit report that has any change or modification to its contents without our express written consent, including the financial statements, supplementary and other information referenced in the auditor’s report. You should contact us if any changes are needed to the audit report or its content. Likewise, we will contact you if we subsequently discover any need to change our report. Management and the governing body are also responsible for following up and taking corrective action on all audit findings, including, when applicable, preparing a summary schedule of prior audit findings and a corrective action plan on the City’s own letterhead. Responsibilities specific to this engagement Additionally, the City will: • Provide our Office with documentation of the financial statement review and approval before they were submitted for audit. • Obtain a clear understanding of accounting standards applied in your financial statements and fully understand any adjusting journal entries recommended by the Office of the Washington State Auditor before approving the entries. • Revise financial statements and schedules only if agreed to in writing by our Office. Estimated Audit Costs and Timeline We estimate the cost of the audit work to be $122,000, plus travel costs, and other expenses, if any. Invoices for these services will be prepared and presented each month as our audit work progresses. We anticipate our reports will be published on our website at www.sao.wa.gov and be available to you and the public as outlined below. These estimates are based on timely access to financial information and no significant audit reporting issues. The estimated cost and completion date may change if unforeseen issues arise or if significant audit issues are identified necessitating additional audit work. We will promptly notify you if this is the case. Report Date* Independent Auditor’s Report on Financial Statements July 2026 Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards July 2026 Independent Auditor’s Report on Compliance for Each Major Program and on Internal Control over Compliance in Accordance with Uniform Guidance August 2026 *Report Issuance Dates Are Estimates Only The audit documentation for this engagement, which may contain confidential or sensitive information, is the property of SAO and constitutes a public record under Chapter 42.56 RCW. Subject to applicable laws and regulations, appropriate individuals, as well as audit documentation, will be made available upon request and in a timely manner to appropriate auditors and reviewers, City’s management and governing body, and federal agencies, for purposes of a public records request, a quality review of the audit, to resolve audit findings, or to carry out oversight responsibilities. The audit documentation for this engagement will be retained for a minimum of five years after the report release (publish) date in accordance with the public records retention schedule established by the Washington Secretary of State. Expected Communications During the course of the audit, we will communicate with the City’s selected audit liaison, Ariel Llorach, Senior Financial Analyst, on the audit status, any significant changes in our planned audit scope or schedule and preliminary results or recommendations as they are developed. The audit liaison is responsible for regularly updating management and the governing body on these matters. We may also provide direct communication of these matters to management and the governing body as needed or upon request. Please contact us if any events or concerns come to your attention of which we should be aware. We will expect the audit liaison to keep us informed of any such matters. Audit Dispute Process Please contact the Audit Manager or Assistant Director to discuss any unresolved disagreements or concerns you have during the performance of our audit. At the conclusion of the audit, we will summarize the results at the exit conference. We will also discuss any significant difficulties or disagreements encountered during the audit and their resolution. By signing and returning this letter, you acknowledge that the foregoing is in accordance with your understanding. Please contact us with any questions. We appreciate the opportunity to be of service to you and look forward to working with you and your staff. Sincerely, 6/25/2026 Paul Griswold, Audit Manager Date Office of the Washington State Auditor City Response: This letter correctly sets forth our understanding. Jason Seth, City Clerk Armondo Pavone, Mayor Date Paul Griiiiiiiiiiiiiiiiswswswsssssswold, Audit Manager r $WWHVW 7/16/2026