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05-09-2017 McMahan & Associates, LLC 2016 Audit FindingsTown of Avon, Colorado, CO McMahan & Associates, LLC P.O. Box 5850 Avon, Colorado 81620 This representation letter is provided in connection with your audit of the financial statements of Town of Avon, Colorado, Colorado (the "Town"), which comprise the respective financial position of the governmental activities, the business -type activities, each major fund, and the aggregate remaining fund information as of December 31, 2016, and the respective changes in financial position and, where applicable, cash flows for the year then ended, and the related notes to the financial statements, for the purpose of expressing opinions as to whether the financial statements are presented fairly, in all material respects, in accordance with accounting principles generally accepted in the United States of America. Certain representations in this letter are described as being limited to matters that are material. Matters noted below in respect of the Town's supplementary information about federal awards programs are considered material based on the materiality criteria specified in Title 2 of the U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements of Federal Awards (the "Uniform Guidance"). Items are considered material, regardless of size, if they involve an omission or misstatement of accounting information that, in light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would be changed or influenced by the omission or misstatement. An omission or misstatement that is monetarily small in amount could be considered material as a result of qualitative factors. We confirm, to the best of our knowledge and belief, as of the date of this letter, the following representations made to you during your audit. Financial Statements: We have fulfilled our responsibilities, as set out in the terms of the audit agreement dated November 2, 2016. The financial statements referred to above are fairly presented in conformity with accounting principles generally accepted in the United States of America and include all properly classified funds and other financial information of the primary government and all component units required by accounting principles generally accepted in the United States of America to be included in the financial reporting entity. We acknowledge our responsibility for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. We acknowledge our responsibility for the design, implementation, and maintenance of internal control to prevent and detect fraud. Significant assumptions we used in making accounting estimates are reasonable. Related party relationships and transactions, including revenues, expenditures/expenses, loans, transfers, leasing arrangements, guarantees, and amounts receivable from or payable to related parties have been appropriately accounted for and disclosed in accordance with the requirements of accounting principles generally accepted in the United States of America. All events subsequent to the date of the financial statements and for which accounting principles generally accepted in the United States of America requires adjustment or disclosure have been adjusted or disclosed. No events, including instances of noncompliance, have occurred subsequent to the balance sheet date and through the date of this letter that would require adjustment to or disclosure in the aforementioned financial statements or in the schedule of findings and questioned costs. McMahan & Associates, LLC RE: Town of Avon, Colorado Page 2 of 6 Financial Statements (continued): The effects of all known actual or possible litigation, claims, and assessments have been accounted for and disclosed in accordance with accounting principles generally accepted in the United States of America The effects of any uncorrected misstatements are immaterial, both individually and in the aggregate, to the financial statements for each opinion unit. Guarantees, whether written or oral, under which the Town is contingently liable, if any, have been properly recorded or disclosed. As part of your engagement, you assisted with preparation of the financial statements and related notes and the schedule of expenditures of federal awards ("SEFA"). We have designated an individual with suitable skill, knowledge, or experience to oversee your services and have made all management decisions and performed all management functions. We have reviewed, approved, and accepted responsibility for those financial statements and related notes and the SEFA. Information Provided: We have provided you with: o Access to all information, of which we are aware, that is relevant to the preparation and fair presentation of the financial statements, such as records, documentation, and other matters and all audit or relevant monitoring reports, if any, received from funding sources. o Additional information that you have requested from us for the purpose of the audit. o Unrestricted access to persons within the entity from whom you determined it necessary to obtain audit evidence. o Minutes of the meetings of the Town Council or summaries of actions of recent meetings for which minutes have not yet been prepared. All material transactions have been recorded in the accounting records and are reflected in the financial statements and the SEFA. We have disclosed to you the results of our assessment of the risk that the financial statements may be materially misstated as a result of fraud. We have no knowledge of any material fraud or suspected material fraud that affects the entity and involves: o Management, o Employees who have significant roles in internal control, or o Others where the fraud could have a material effect on the financial statements. We have no knowledge of any allegations of material fraud or suspected material fraud affecting the entity's financial statements communicated by employees, former employees, regulators, or others. We have disclosed to you all known instances of noncompliance or suspected noncompliance with provisions of laws, regulations, contracts, or grant agreements, or abuse, whose effects should be considered when preparing financial statements. McMahan & Associates, LLC RE: Town of Avon, Colorado Page 3 of 6 Information Provided (continued): We have disclosed to you all known actual or possible litigation, claims, and assessments whose effects should be considered when preparing the financial statements. We have disclosed to you the identity of the entity's related parties and all the related party relationships and transactions of which we are aware. Government — Specific: We have made available to you all financial records and related data and all audit or relevant monitoring reports, if any, received from funding sources. There have been no communications from regulatory agencies concerning noncompliance with, or deficiencies in, financial reporting practices. We have a process to track the status of audit findings and recommendations. We have taken timely and appropriate steps to remedy fraud, violations of laws, regulations, contracts, or grant agreements, or abuse reported to us. We have identified to you any previous audits, attestation engagements, and other studies related to the audit objectives and whether related recommendations have been implemented. We have provided our views on reported findings, conclusions, and recommendations, as well as our planned corrective actions, for the report. The Town has no plans or intentions that may materially affect the carrying value or classification of assets, liabilities, or equity. We are responsible for compliance with the laws, regulations, and provisions of contracts and grant agreements applicable to us, including tax or debt limits and debt contracts; and we have identified and disclosed to you all laws, regulations and provisions of contracts and grant agreements that we believe have a direct and material effect on the determination of financial statement amounts or other financial data significant to the audit objectives, including legal and contractual provisions for reporting specific activities in separate funds. We are aware of the fiscal requirements imposed by section 20 of Article X of the Constitution of the State of Colorado, commonly known as the "TABOR Amendment", and have complied with these requirements appropriately. Except as made known to you and disclosed in the financial statements, There are no violations or possible violations of budget ordinances, laws and regulations (including those pertaining to adopting, approving, and amending budgets), provisions of contracts and grant agreements, tax or debt limits, and any related debt covenants whose effects should be considered for disclosure in the financial statements, or as a basis for recording a loss contingency, or for reporting on noncompliance. Except as made known to you and disclosed in the financial statements, The Town has satisfactory title to all owned assets, and there are no liens or encumbrances on such assets nor has any asset been pledged as collateral. The Town has complied with all aspects of contractual agreements that would have a material effect on the financial statements in the event of noncompliance. We have followed all applicable laws and regulations in adopting, approving, and amending budgets. The financial statements include all component units as well as joint ventures with an equity interest, and properly disclose all other joint ventures and other related organizations. The financial statements properly classify all funds and activities. All funds that meet the quantitative criteria in GASB Statements No. 34 and No. 37 for presentation as major are identified and presented as such and all other funds that are presented as major are particularly important to financial statement users. Components of net position (net investment in capital assets; restricted; and unrestricted) and equity amounts are properly classified and, if applicable, approved. McMahan & Associates, LLC RE: Town ofAvon, Colorado Page 4 of 6 Government — Specific (continued): Deposits and investment securities are properly classified as to risk, and investments and derivative instruments, if any, are properly valued. Provisions for uncollectible receivables have been properly identified and recorded. Expenses have been appropriately classified in or allocated to functions and programs in the statement of activities, and allocations have been made on a reasonable basis. Revenues are appropriately classified in the statement of activities within program revenues, general revenues, contributions to term or permanent endowments, or contributions to permanent fund principal. Interfund, internal, and intra -entity activity and balances have been appropriately classified and reported. Special and extraordinary items are appropriately classified and reported. Capital assets, including infrastructure and intangible assets, are properly capitalized, reported, and, if applicable, depreciated. We have appropriately disclosed the Town's policy regarding whether to first apply restricted or unrestricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position are available and have determined that net position was properly recognized under the policy. We acknowledge our responsibility for the required supplementary information. The required supplementary information is measured and presented within prescribed guidelines and the methods of measurement and presentation have not changed from those used in the prior period. We have disclosed to you any significant assumptions and interpretations underlying the measurement and presentation of the required supplementary information. With respect to the supplementary information on which an "in -relation -to" opinion is issued: o We acknowledge our responsibility for presenting the supplementary information in accordance with accounting principles generally accepted in the United States of America, and we believe the supplementary information, including its form and content, is fairly presented in accordance with accounting principles generally accepted in the United States of America. The methods of measurement and presentation of the supplementary information have not changed from those used in the prior period, and we have disclosed to you any significant assumptions or interpretations underlying the measurement and presentation of the supplementary information. o If the supplementary information is not presented with the audited financial statements, we will make the audited financial statements readily available to the intended users of the supplementary information no later than the date we issue the supplementary information and the auditor's report thereon. With respect to the supplementary information about federal awards programs on which an "in - relation -to" opinion is issued: o We are responsible for understanding and complying with, and have complied with, the requirements of the Uniform Guidance, including requirements relating to preparation of the SEFA. o We have prepared the SEFA in accordance with the Uniform Guidance, and have identified and disclosed in the SEFA expenditures made during the audit period for all awards provided by federal agencies in the form of grants, federal cost -reimbursement contracts, loans, loan guarantees, property (including donated surplus property), cooperative agreements, interest subsidies, insurance, food commodities, direct appropriations, and other direct assistance. o We acknowledge our responsibility for presenting the SEFA in accordance with the requirements of the Uniform Guidance, and we believe the SEFA, including its form and content, is fairly presented in accordance with the Uniform Guidance. The methods of measurement and presentation of the SEFA have not changed from those used in the prior period and we have disclosed to you any significant assumptions and interpretations underlying the measurement and presentation of the SEFA. McMahan & Associates, LLC RE: Town ofAvon, Colorado Page 5 of 6 Government — Specific (continued): o If the SEFA is not presented with the audited financial statements, we will make the audited financial statements readily available to the intended users of the SEFA no later than the date we issue the SEFA and the auditor's report thereon. o We have identified and disclosed to you all of our government programs and related activities subject to the Uniform Guidance. o We are responsible for understanding and complying with, and have complied with, the requirements of laws, regulations, and the provisions of contracts and grant agreements related to each of our federal programs and have identified and disclosed to you the requirements of laws, regulations, and the provisions of contracts and grant agreements that are considered to have a direct and material effect on each major program. o We are responsible for establishing and maintaining, and have established and maintained, effective internal control over compliance requirements applicable to federal programs that provides reasonable assurance that we are managing our federal awards in compliance with laws, regulations, and the provisions of contracts and grant agreements that could have a material effect on our federal programs. We believe the internal control system is adequate and is functioning as intended. o We have made available to you all contracts and grant agreements (including amendments, if any) and any other correspondence with federal agencies or pass-through entities relevant to federal programs and related activities. o We have received no requests from a federal agency to audit one or more specific programs as a major program. o We have complied with the direct and material compliance requirements (except for noncompliance disclosed to you), including when applicable, those set forth in the U.S. Office of Management and Budget OMB Compliance Supplement, relating to federal awards and have identified and disclosed to you all amounts questioned and all known noncompliance with the requirements of federal awards. o We have disclosed any communications from grantors and pass-through entities concerning possible noncompliance with the direct and material compliance requirements, including communications received from the end of the period covered by the compliance audit to the date of the auditor's report. o We have disclosed to you the findings received and related corrective actions taken for previous audits, attestation engagements, and internal or external monitoring that directly relate to the objectives of the compliance audit, including findings received and corrective actions taken from the end of the period covered by the compliance audit to the date of the auditor's report. o Amounts claimed or used for matching were determined in accordance with relevant guidelines in the Uniform Guidance. o We have disclosed to you our interpretation of compliance requirements that may have varying interpretations. o We have made available to you all documentation related to compliance with the direct material compliance requirements, including information related to federal program financial reports and claims for advances and reimbursements. o We have disclosed to you the nature of any subsequent events that provide additional evidence about conditions that existed at the end of the reporting period affecting noncompliance during the reporting period. o There are no such known instances of noncompliance with direct and material compliance requirements that occurred subsequent to the period covered by the auditor's report. o No changes have been made in internal control over compliance or other factors that might significantly affect internal control — including any corrective action we have taken regarding significant deficiencies in internal control over compliance (including material weaknesses in internal control over compliance) — have occurred subsequent to the date as of which compliance was audited. McMahan & Associates, LLC RE: Town ofAvon, Colorado Page 6 of 6 Government — Specific (continued): o Federal program financial reports and claims for advances and reimbursements are supported by the books and records from which the financial statements have been prepared. o The copies of federal program financial reports provided you are true copies of the reports submitted, or electronically transmitted, to the respective federal agency or pass-through entity, as applicable. o We have monitored subrecipients to determine that they have expended pass-through assistance in accordance with applicable laws and regulations and have met the requirements of the Uniform Guidance. o We have taken appropriate action, including issuing management decisions, on a timely basis after receipt of subrecipients' auditor's reports that identified noncompliance with laws, regulations, or the provisions of contracts or grant agreements and have ensured that subrecipients have taken the appropriate and timely corrective action on findings. o We have considered the results of subrecipient audits and have made any necessary adjustments to our books and records. o We have charged costs to federal awards in accordance with applicable cost principles. o We are responsible for and have accurately prepared the summary schedule of prior audit findings to include all findings required to be included by the Uniform Guidance and we have provided you with all information on the status of the follow-up on prior audit findings by federal awarding agencies and pass-through entities, including all management decisions. o We are responsible for and have accurately prepared the auditee section of the Data Collection Form as required by the Uniform Guidance. o We are responsible for preparing and implementing a corrective action plan for each audit finding. o As applicable, we have disclosed to you all contracts or other agreements with service organizations, and we have disclosed to you all communications from the service organizations relating to noncompliance at the service organizations. Town of Avon, Colorado BY: Q)6(b_t l Scott Wright Finance Director — Town of A o Jenrile Fancher Town of Avon Mayor May 4, 2017 May 4, 2017 Date Date