HomeMy WebLinkAboutLC18-018 McMahan and AssociatesMcMahan and Associates, l.l.c.
Certified Public Accountants and Consultants
Web Site: www.mcmahancpa.com
Chapel Square, Bldg C Main Office: (970) 845-8800
245 Chapel Place, Suite 300 Facsimile: (970) 845-8108
P.O. Box 5850, Avon, CO 81620 E-mail: mcmahan@mcmahancpa.com
Member: American Institute of Certified Public Accountants
Paul J. Backes, CPA, CGMA Avon: (970) 845-8800
Michael N. Jenkins, CA, CPA, CGMA Aspen: (970) 544-3996
Daniel R. Cudahy, CPA, CGMA Frisco: (970) 668-3481
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September 28, 2018
Board of Directors
Lake Creek Village LLC
c/o Eagle County
P.O. Box 850
Eagle, Colorado 81631-0850
Attention: Jill Klosterman, Finance Director
Dear Board members
We are pleased to confirm our understanding of the services we are to provide for Lake Creek Village
LLC (the “Corporation”) – a component unit of Eagle County, Colorado – for the period ending September
30, 2018.
We will audit the Corporation’s Form HUD-92230, Mortgagor’s Certificate of Actual Cost, through
September 30, 2018 pertaining to the development of Corporation’s Lake Creek Village Apartments
project (HUD Project No. 101-11153 and 101-10016) and the financial statements of the Corporation,
which comprise the balance sheet (HUD Basis) as of September 30, 2018 and the related statement of
operations for the period from August 28, 2017 through September 30, 2018 (HUD Basis), and the related
notes to the financial statements.
Audit Objectives
The objective of our audit is the expression of an opinion about whether Form HUD-92230 and the
financial statements referenced above are fairly presented, in all material respects, in conformity with the
basis of accounting and reporting practices prescribed by the U.S. Department of Housing and Urban
Development (“HUD”), which is a comprehensive basis of accounting other than accounting principles
generally accepted in the United States of America. The objective also includes reporting on internal
control related to Form HUD-92230 and the financial statements and compliance with laws, regulations,
and the provisions of contracts, or grant agreements, noncompliance with which could have a material
effect on Form HUD-92230 and the financial statements in accordance with Government Auditing
Standards and the Consolidated Audit Guide for Audits of HUD Programs.
The report on internal control will include a paragraph that states that the purpose of the report is solely to
describe (1) the scope of testing of internal control over financial reporting and compliance and the results
of that testing and not to provide an opinion on the effectiveness of internal control over financial reporting
or on compliance, and (2) that the report is an integral part of an audit performed in accordance with
Government Auditing Standards in considering internal control over financial reporting and compliance
and with the Consolidated Audit Guide for Audits of HUD Programs in considering internal control over
compliance. The paragraph will also state that the report is not suitable for any other purpose.
DocuSign Envelope ID: D37B3F9B-8ADE-4CC5-B816-99EACF4CC4DC
Board of Directors
Lake Creek Village LLC
September 28, 2018
Page 2
Audit Objectives (continued)
Our audit will be conducted in accordance with auditing standards generally accepted in the United States
of America; the standards for financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States; and the Consolidated Audit Guide for Audits of HUD Programs
(HUD Handbook 2000.04 dated 2016). Our audit will include tests of the accounting records and other
procedures we consider necessary to enable us to express such an opinion and render the required
reports. We cannot provide assurance that unmodified opinions will be expressed. Circumstances may
arise in which it is necessary for us to modify our opinions or add an emphasis-of-matter or other-matter
paragraph. If our opinions on Form HUD-92230 or the financial statements or the compliance opinion are
other than unmodified, we will 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 the Form HUD-92230 and the financial statements and all accompanying
information, as well as all representations contained therein. Management is also responsible for
understanding and complying with the compliance requirements. As part of the audit, we will assist with
preparation of Form HUD-92230, the financial statements, and related notes. You agree to assume all
management responsibilities relating to Form HUD-92230, the financial statements, and related notes,
and any other non-audit services we provide. You will be required to acknowledge in the representation
letter our assistance with preparation of Form HUD-92230, the financial statements, and related notes
and that you have evaluated the adequacy of our services and have reviewed and approved the results of
the services, Form HUD-92230, the financial statements, and related notes prior to their issuance and
have accepted responsibility for them. Further, you are required to designate an individual, preferably
from senior management, with suitable skill, knowledge, or experience to oversee any non-audit services
we provide and for evaluating the adequacy and results of those services and accepting responsibility for
them.
Management is responsible for establishing and maintaining effective internal controls, including internal
controls over compliance, and for evaluating and monitoring ongoing activities; to help ensure that
appropriate goals and objectives are met and that there is reasonable assurance that government
programs are administered in compliance with compliance requirements. You are also responsible for
the selection and application of accounting principles; for the preparation and fair presentation of Form
HUD-92230 and the financial statements in conformity with the basis of accounting and reporting
practices prescribed by HUD (which is a comprehensive basis of accounting other than accounting
principles generally accepted in the United States of America); and for compliance with applicable laws
and regulations and the provisions of contracts and grant agreements.
Management is responsible for making all financial records and related information available to us and for
ensuring that management is reliable, and that financial information is reliable and properly recorded.
You are also responsible providing us with (1) access to all information of which you are aware that is
relevant to the preparation and fair presentation of Form HUD-92230 and the financial statements, (2)
additional information that we may request for the purpose of the audit, and (3) unrestricted access to
persons within the Corporation from whom we determine it necessary to obtain audit evidence.
DocuSign Envelope ID: D37B3F9B-8ADE-4CC5-B816-99EACF4CC4DC
Board of Directors
Lake Creek Village LLC
September 28, 2018
Page 3
Management Responsibilities (continued)
Your responsibilities also include identifying significant vendor relationships in which the vendor has
responsibility for program compliance and for the accuracy and completeness of that information. Your
responsibilities include adjusting Form HUD-92230 and the financial statements to correct material
misstatements and confirming to us in the management 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 Form HUD-92230 and 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 Corporation
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 Form HUD-92230 and the financial
statements. Your responsibilities include informing us of your knowledge of any allegations of fraud or
suspected fraud affecting the Corporation received in communications from employees, former
employees, grantors, regulators, or others. In addition, you are responsible for identifying and ensuring
that the Corporation complies with applicable laws, regulations, contracts, agreements, and grants. It is
management’s responsibility to follow up and take corrective action on reported audit findings and to
prepare comments on audit resolution matters and a corrective action plan. The comments on audit
resolution should be available for our review during fieldwork.
Management is responsible for establishing and maintaining a process for tracking the status of audit
findings and recommendations. Management is also responsible for identifying for us previous financial
audits, attestation engagements, performance audits, or studies related to the objectives discussed in the
Audit Objectives section of this letter. This responsibility includes relaying to us corrective actions taken
to address significant findings and recommendations resulting from those audits, attestation
engagements, performance audits, or studies. You are also responsible for providing management’s
views on our current findings, conclusions, and recommendations, as well as your planned corrective
actions for the report, and for the timing and format for providing that information.
With regard to the electronic dissemination of Form HUD-92230 and audited financial statements,
including such documents published electronically on your website, you understand that electronic sites
are a means to distribute information and, therefore, we are not required to read the information
contained in these sites or to consider the consistency of other information in the electronic site with the
original document. With regard to using the auditor’s reports, you understand that you must obtain our
prior written consent to reproduce or use our reports in bond offering official statements or other
documents.
Audit Procedures – General
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in Form
HUD-92230 and the financial statements; therefore, our audit will involve judgment about the number of
transactions to be examined and the areas to be tested. An 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 Form HUD-92230 and the
financial statements. We will plan and perform the audit to obtain reasonable rather than absolute
assurance about whether Form HUD-92230 and the financial statements are free of material
misstatement, whether from (1) errors, (2) fraudulent financial reporting, (3) misappropriations of assets,
or (4) violations of laws or governmental regulations that are attributable to the Corporation or to acts by
management or employees acting on behalf of the Corporation. Because the determination of abuse is
subjective, Government Auditing Standards do not expect auditors to provide reasonable assurance of
detecting abuse.
DocuSign Envelope ID: D37B3F9B-8ADE-4CC5-B816-99EACF4CC4DC
Board of Directors
Lake Creek Village LLC
September 28, 2018
Page 4
Audit Procedures – General (continued)
Because of the inherent limitations of an audit, combined with the inherent limitations of internal control,
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, even though the audit is properly
planned and performed in accordance with auditing standards generally accepted in the United States of
America and Government Auditing Standards. 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 Form HUD-92230 or the financial statements. However, we will inform the appropriate level of
management of any illegal acts or fraud that has occurred or is likely to have occurred, and material
errors, any fraudulent financial reporting, or misappropriation of assets that come to our attention. We will
also inform the appropriate level of management of any violations of governmental regulations that come
to our attention, unless clearly inconsequential, and of any material abuse that comes to our attention.
We will include such matters in the reports required for a HUD audit. In conformity with the Consolidated
Audit Guide for Audits of HUD Programs, we will inform the HUD single audit coordinator by telephone if
we become aware of any instances of illegal acts or fraud that has occurred or is likely to have occurred.
We may be requested to prepare a written report on these matters. Your acceptance of this letter grants
us permission to contact the HUD single audit coordinator and discuss the known or likely illegal acts or
fraud. Our responsibility as auditors 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 direct confirmation of cash, receivables, loan balances, and certain other
assets and liabilities by correspondence with selected individuals, funding sources, creditors, and
financial institutions. We may 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
require certain written representations from you about Form HUD-92230 and the financial statements and
related matters.
Audit Procedures – Internal Control
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 Form HUD-92230 and 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 Form HUD-92230 and 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 Form HUD-92230 and 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.
An audit is not designed to provide assurance on internal control or to identify significant deficiencies or
material weaknesses. 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
AICPA professional standards, Government Auditing Standards, and the Consolidated Audit Guide for
Audits of HUD Programs.
Audit Procedures – Compliance
As part of obtaining reasonable assurance about whether Form HUD-92230 and the financial statements
are free of material misstatement, we will perform tests of the Corporation’s compliance with provisions of
applicable laws, regulations, 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
and the Consolidated Audit Guide for Audits of HUD Programs.
DocuSign Envelope ID: D37B3F9B-8ADE-4CC5-B816-99EACF4CC4DC
Board of Directors
Lake Creek Village LLC
September 28, 2018
Page 5
Engagement Administration, Fees, and Other
We understand that your employees will prepare all cash or other confirmations, reconciliations and work
papers we request and will locate any documents selected by us for testing.
The audit documentation for this engagement is the property of McMahan and Associates, LLC and
constitutes confidential information. However, pursuant to authority given by law or regulation, we may
be requested to make certain audit documentation available to the Secretary of Housing and Urban
Development, the HUD Inspector General, or the United States Government Accountability Office for
purposes of a quality review of the 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 McMahan and Associates, LLC personnel. Furthermore, upon
request, we may provide copies of selected audit documentation (hardcopy or electronic) 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 report
release or for any additional period requested by HUD. If we are aware that HUD is contesting an audit
finding, we will contact the party or parties contesting the audit finding for guidance prior to destroying the
audit documentation.
Michael Jenkins is the engagement partner and is responsible for supervising the engagement and
signing the report. Additional firm personnel will be assigned to the engagement as considered
necessary. We will schedule our audit fieldwork at a mutually convenient time.
Our fees for these services will be based on our standard hourly rates, plus out-of-pocket costs (such as
report production, word processing, postage, travel, copies, telephone, etc.). Our standard hourly rates
vary according to the degree of responsibility involved and the experience level of the personnel assigned
to your audit. We estimate that our gross fee for this audit engagement will not exceed $11,275. The fee
estimate 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
keep you informed of any problems we encounter and our fees will be adjusted accordingly.
Our invoices for these fees will be rendered each month as work progresses and are payable on
presentation. In accordance with our firm policies, work may be suspended if your account becomes
overdue and may not be resumed until your account is paid in full. 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.
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 unmodified 2015 peer review report; the latest available;
accompanies this letter.
We appreciate the opportunity to be of service to Lake Creek Village LLC 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,
McMAHAN and ASSOCIATES, L.L.C.
DocuSign Envelope ID: D37B3F9B-8ADE-4CC5-B816-99EACF4CC4DC
Board of Directors
Lake Creek Village LLC
September 28, 2018
Page 6
This letter correctly sets forth the understanding of Lake Creek Village LLC with respect to the services to
be performed by McMahan and Associates, L.L.C.
LAKE CREEK VILLAGE LLC
BY:
Signature: _________________________________
Title: _________________________________
Date: _________________________________
DocuSign Envelope ID: D37B3F9B-8ADE-4CC5-B816-99EACF4CC4DC
10/11/2018
Housing Director
Rick Mason, CPA
Joni Kumor, CPA
Larry D. Graham, CPA
John A. Smith, CPA
Jack E. Lenhart, CPA
Richard P. Reimann, CPA
Stephen A. Willadson, CPA
Scott Buckingham, CPA
Larry G. Bean, CPA – Of Counsel
SYSTEM REVIEW REPORT
January 27, 2016
To the Members of McMahan and Associates, LLC
and the Peer Review Committee of the Colorado Society of CPA’s
We have reviewed the system of quality control for the accounting and auditing practice of McMahan and
Associates, LLC (the firm) in effect for the year ended October 31, 2015. 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. As a part of our peer review,
we considered reviews by regulatory entities, if applicable, in determining the nature and extent of our
procedures. 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 conformity 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/prsummary.
As required by the standards, engagements selected for review included engagements performed under
Government Auditing Standards and audits of employee benefit plans.
In our opinion, the system of quality control for the accounting and auditing practice of McMahan and
Associates, LLC in effect for the year ended October 31, 2015, has been suitably designed and complied
with to provide the firm 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
deficiency(ies) or fail. McMahan and Associates, LLC has received a peer review rating of pass.
Lenhart, Mason & Associates, LLC
DocuSign Envelope ID: D37B3F9B-8ADE-4CC5-B816-99EACF4CC4DC
