2021 Audit Engagement Letter NI Certified
AND ASSOCIATES, L. L. C .
Certified Public Accountants and Consultants
WEB SITE WWW.MCMAHANCPA COM
CHAPEL SQUARE. BLDG C MAIN OFFI:E: (9701 845-8800
245 CHAPEL PLACE, SUITE 300 FACSIMIL!: (970) 845-8 1 08
AP 0 Box 5850, AvoN, CO 8 1620 E-MAIL MCMAHAN@ML:MAHANCPA COM
February 10, 2022
Town of Avon
P.O. Box 975
Avon, CO 81620
You have requested that we audit the governmental activities, the business-type activities, the aggregate
discretely presented component units, each major fund, and the aggregate remaining fund information of
the Town, as of December 31, 2021, and for the year then ended and the related notes,which collectively
comprise the Town's basic financial statements as listed in the table of contents.
The objectives of our audit are to obtain reasonable assurance about whether the financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's
report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute
assurance and therefore is not a guarantee that an audit conducted in accordance with auditing
standards generally accepted in the United States of America ("U.S, GAAS")will always detect a material
misstatement when it exists. Misstatements, including omissions, can arise from fraud or error and are
considered material if there is a substantial likelihood that, individually or in the aggregate, they would
influence the judgment made by a reasonable user based on the financial statements.
Accounting principles generally accepted in the United States of America ("U.S. GAAP") as promulgated
by the Governmental Accounting Standards Board (-GASB') require that management's discussion and
analysis ("MD&A ) and schedules relating to the Town's net pension liability (asset) and pension
contributions be presented to supplement the basic financial statements. Such information, although not
a part of the basic financial statements, is required by the GASB, who considers it to be an essential part
of financial reporting for placing the basic financial statements in an appropriate operational, economic, or
historical context. As part of our engagement we will apply certain limited procedures to the required
supplementary information ("RSI") in accordance with U.S. GAAS. These limited procedures will consist
primarily of inquiries of management regarding their methods of measurement and presentation, and
comparing the information for consistency with management's responses to our inquiries. We will not
express an opinion or provide any form of assurance on the RSI. The following RSI is required by GAAP.
This RSI will be subjected to certain limited procedures but will not be audited:
• Management's Discussion and Analysis
• Schedule of the Town's Proportionate Share of the Net Pension Liability (Asset)— Police and
General Government Employees
• Schedule of Town Pension Contributions—Police and General Government Employees
The following RSI is required by U.S. GAAP and will be subjected to the auditing procedures applied in
our audit of the basic financial statements and we will provide an opinion on it in relation to the Town's
basic financial statements:
• Budgetary schedules for the General Fund and major special revenue funds(as applicable)
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
MATTHEW D. MILLER, CPA FRISCO (970) 668-348 I
February 10, 2022
Town of Avon, Colorado
Page 2
Supplementary information other than RSI will accompany the Town'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 perform certain additional procedures, including comparing and reconciling
the supplementary information to the underlying accounting and other records used to prepare the basic
financial statements or to the basic financial statements themselves, and additional procedures in
accordance with U.S. GAAS. We intend to provide an opinion on the following supplementary information
in relation to the basic financial statements as a whole:
• Combining statements for non-major governmental funds
• Budgetary comparison schedules for non-major governmental funds and proprietary funds
• Local Highway Finance Report
• Debt Schedule
Auditor Responsibilities
We will conduct our audit in accordance with U.S. GAAS. As part of an audit in accordance with U.S.
GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit.
We will also
• Identify and assess the risks of material misstatement of the financial statements,whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override
of internal control.
• Obtain an understanding of internal control relevant to the audit 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 the entity's internal control. However, we will communicate to you
in writing concerning any significant deficiencies or material weaknesses in internal control
relevant to the audit of the financial statements that we have identified during the audit.
• Evaluate the appropriateness of accounting policies used and the reasonableness of significant
accounting estimates made by management, as well as evaluate the overall presentation of the
financial statements, including the disclosures, and whether the financial statements represent
the underlying transactions and events in a manner that achieves fair presentation.
• Conclude, based on the audit evidence obtained,whether there are conditions or events,
considered in the aggregate, that raise substantial doubt about the Town's ability to continue as a
going concern for a reasonable period of time.
Because of the inherent limitations of an audit, together with the inherent limitations of internal control, an
unavoidable risk that some material misstatements may not be detected exists, even though the audit is
properly planned and performed in accordance with U.S. GAAS.
Our responsibility as auditors is limited to the period covered by our audit and does not extend to any
other periods.
Audit Procedures—Compliance
As previously discussed, as part of obtaining reasonable assurance about whether the basic financial
statements are free of material misstatement, we will perform tests of Town of Avon's compliance with the
provisions of applicable laws, regulations, contracts, and agreements. However, the objective of our audit
will not be to provide an opinion on overall compliance and we will not express such an opinion.
February 10, 2022
Town of Avon, Colorado
Page 3
Management Responsibilities
Our audit will be conducted on the basis that management and, when appropriate, those charged with
governance, acknowledge and understand that they have responsibility:
1. For the preparation and fair presentation of the basic financial statements in accordance with
GAAP;
2. For the design, implementation, and maintenance of internal control relevant to the preparation
and fair presentation of basic financial statements that are free from material misstatement,
whether due to error,fraudulent financial reporting, misappropriation of assets, or violations of
laws, governmental regulations, grant agreements, or contractual agreements; and
3. To provide us with:
a. Access to all information of which management is aware that is relevant to the preparation
and fair presentation of the basic financial statements such as records, documentation, and
other matters;
b. Additional information that we may request from management for the purpose of the audit;
c. Unrestricted access to persons within the entity from whom we determine it necessary to
obtain audit evidence.
4. For including the auditor's report in any document containing basic financial statements that
indicates that such basic financial statements have been audited by us;
5. For identifying and ensuring that the entity complies with the laws and regulations applicable to its
activities;
6. For adjusting the basic 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 current period under audit
are immaterial, both individually and in the aggregate, to the basic financial statements as a
whole; and
7. For acceptance of non-attest services, including identifying the proper party to oversee non-attest
work;
8. For maintaining adequate records, selecting and applying accounting principles, and
safeguarding assets;
9. For informing us of any known or suspected fraud affecting the entity involving management,
employees with significant role in internal control and others where fraud could have a material
effect on the financials; and
10. For the accuracy and completeness of all information provided.
With regard to the supplementary information referred to above, you acknowledge and understand your
responsibility: (a) for the preparation of the supplementary information in accordance with the applicable
criteria; (b) to provide us with the appropriate written representations regarding supplementary
information; (c) to include our report on the supplementary information in any document that contains the
supplementary information and that indicates that we have reported on such supplementary information;
and (d)to present the supplementary information with the audited basic financial statements, or if the
supplementary information will not be presented with the audited basic financial statements, to make the
audited basic financial statements readily available to the intended users of the supplementary
information no later than the date of issuance by you of the supplementary information and our report
thereon.
As part of our audit process,we will request from management and, when appropriate, those charged
with governance,written confirmation concerning representations made to us in connection with the audit.
February 10, 2022
Town of Avon, Colorado
Page 4
Non-attest Services
With respect to any non-attest services we perform, at the end of the year, we agree to perform the
following:
• Preparation of the Town's financial statements and related notes
• Propose adjusting or correcting journal entries to be reviewed and approved by the Town's
management.
We will not assume management responsibilities on behalf of about the Town. However, we will provide
advice and recommendations to assist management of about the Town in performing its responsibilities.
The Town's management is responsible for(a) making all management decisions and performing all
management functions; (b)assigning a competent individual to oversee the services; (c) evaluating the
adequacy of the services performed; (d) evaluating and accepting responsibility for the results of the
services performed; and (e) establishing and maintaining internal controls, including monitoring ongoing
activities.
Our responsibilities and limitations of the non-attest services are as follows:
• We will perform the services in accordance with applicable professional standards.
• The non-attest services are limited to the services as previously outlined. Our firm, in its sole
professional judgment, reserves the right to refuse to do any procedure or take any action that
could be construed as making management decisions or assuming management responsibilities,
including determining account coding and approving journal entries.
Reporting
We will issue a written report upon completion of our audit of the Town's basic financial statements.
Circumstances may arise in which our report may differ from its expected form and content based on the
results of our audit. Depending on the nature of these circumstances, it may be necessary for us to
modify our opinions, add an emphasis-of-matter or other-matter paragraph(s) to our auditor's report, or if
necessary, withdraw from the engagement. If our opinions on the basic financial statements 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.
Engagement Administration
We understand that your employees will prepare all cash or other confirmations, reconciliations, or work
papers we request and will locate any documents selected by us for testing.
If you intend to publish or otherwise reproduce the basic financial statements and make reference to our
firm, you agree to provide us with printers' proofs or masters for our review and approval before printing.
You also agree to provide us with a copy of the final reproduced material for our approval before it is
distributed.
Regarding the electronic dissemination of audited financial statements, including financial statements
published electronically on your Internet 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.
February 10, 2022
Town of Avon, Colorado
Page 5
Engagement Administration (continued)
Professional standards prohibit us from being the sole host and/or the sole storage for your financial and
non-financial data. As such, it is your responsibility to maintain your original data and records and we
cannot be responsible to maintain such original information. By signing this engagement letter, you affirm
that you have all the data and records required to make your books and records complete.
The audit documentation for this engagement is the property of McMahan and Associates, L.L.C. 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 Town's cognizant or oversight agency
or its designee, a federal agency providing direct or indirect funding, or the U.S. Government
Accountability Office, or peer reviewers for purposes of a quality review of the audit, to resolve audit
findings, or to carry out oversight responsibilities. If requested, access to such audit documentation will
be provided under the supervision of McMahan and Associates, L.L.C. 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.
Paul J. Backes, C.P.A. is the engagement partner and is responsible for supervising the engagement and
signing the report or authorizing another individual to sign it. Additional firm personnel will be assigned to
the engagement as considered necessary. We will begin our audit and issue our reports on a mutually
agreed-upon timeframe.
During the course of the audit, we may observe opportunities for economy in, or improved controls over,
your operations. We will bring such matters to the attention of the appropriate level of management,
either orally or in writing. At the conclusion of our audit engagement, we will communicate to
management and those charged with governance the following significant findings from the audit:
• Our view about the qualitative aspects of the entity's significant accounting practices;
• Significant difficulties, if any, encountered during the audit;
• Uncorrected misstatements, other than those we believe are trivial, if any;
• Disagreements with management, if any;
• Other findings or issues, if any, arising from the audit that are, in our professional judgment,
significant and relevant to those charged with governance regarding their oversight of the
financial reporting process;
• Material, corrected misstatements that were brought to the attention of management as a result of
our audit procedures;
• Representations we requested from management;
• Management's consultations with other accountants, if any; and
• Significant issues, if any, arising from the audit that were discussed, or the subject of
correspondence,with management.
During the course of the engagement,we may communicate with you or your personnel via fax or e-mail,
and you should be aware that communication in those mediums contains a risk of misdirected or
intercepted communications.
You agree to inform us of facts that may affect the financial statements of which you may become aware
during the period from the date of the auditor's report to the date the financial statements are issued.
We agree to retain our audit documentation or work papers for a period of at least five years from the
date of our report.
February 10, 2022
Town of Avon Colorado
Page 6
Our fee for these services will be based on our standard hourly rates, plus out-of-pocket costs (such as
report reproduction, word processing, postage, travel, copies, telephone, etc.). Our standard hourly rates
vary according to degree of responsibility involved and experience level of the personnel assigned to the
engagement. However we estimate that our fee for the 2021 financial statement audit will agree with
our latest proposal. This fee estimate is based on anticipated cooperation from your personnel and the
assumption that unexpected circumstances will not be encountered during the audit, including significant
changes in the size and nature of the Town's operations or the state of its accounting records and
controls. 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, and 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.
We appreciate the opportunity to be of service to Town of Avon, Colorado , and look forward to working
with you and your staff on this engagement. Please sign where indicated below to indicate your
acknowledgment of, and agreement with, the arrangements for this engagement, including our respective
responsibilities.
Very truly yours,
McMAHAN and ASSOCIATES, L.L.C.
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RESPONSE:
This letter correctly sets forth the understanding of Town of Avon, Colorado with respect to services to be
provided by McMahan and Associates, L L.C.
TO OF AVON..COLORADO
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M MCMAHAN AND ASSOCIATES, L. L.C .
Certified Public Accountants and Consultants
& WEB SITE WNW MCMAHANCPA.COM
CHAPEL SQUARE, BLDO C MAIN OFFICE. (970) 845-8800
245 CHAPEL PLACE. SUITE 300 FACSIMILE (970) 845-8 108
AP 0 Box 5850. AVON, CO 8 620 E HAIL MCMAHAN@MCMAHANCPA COM
Transmittal Letter
January 12, 2022
Town of Avon, Colorado
100 Mikaela Way
P.O.Box 975
Avon,CO 81230
Attention: Audit Committee
Dear Committee Members
In response to the Request for Proposal issued by the Town of Avon, Colorado(the"Town")with respect
to the financial audit of the Town for the fiscal year ending December 31, 2021 and thereafter,we are
pleased to submit the following proposal for the provision of audit and consulting services.
Although our proposal addresses the major areas of concern identified by the Town in the Request for
Proposal, I would like to take the opportunity to summarize the reasons why we feel it is in the Town's
best interest to utilize McMahan and Associates as your auditors and consultants. Our qualifications
include:
• Resort Municipality Expertise: We currently serve as auditors and consultants to the majority of
resort municipalities within Colorado's Rocky Mountains. In fact,the majority of the members of the
Colorado Association of Ski Towns (CAST) have chosen McMahan and Associates as their financial
statement auditors. Our experience with resort municipalities and their challenges will ensure that
Avon receives the most efficient and effective financial statement auditing and consulting services.
The Colorado Society of CPAs lists our firm as governmental accounting and auditing experts in their
technical advisory manual.
• Strategic Redevelopment Knowledge: We have assisted our clients with public improvement districts,
tax increment financing, urban renewal authorities, and strategic redevelopment financing options.
We would be available to assist the Town with any plans regarding financing for redevelopments.
�•,Ic nlber; American Institute of Certified Public Accountants
PAUL J. BACKES, CPA, CGMA AvoN; (0701 845-6800
MICHAEL N. JENKINS, CA. CPA, COMA ASPEN: (970) 544-3996
DANIEL R. CUDAHY, CPA. COMA FRISCO (970) 668-3481
• Affordable Housing experience. We have assisted our clients in financing and managing projects
containing over 3,500 affordable housing units. Our experience includes low income tax credit rental
properties, public-private partnerships, and deed restrictions. We have also assisted with software
development(using Salesforce)for lottery awards and unit management. Whether your need is help
determining financing options or operations, we can assist you with affordable housing plans.
• Recreation Departments Experience: We have worked with our clients to provide recommendations
for the construction and operation of government-owned recreation centers. We have audited
construction expenditures and operations for the Aspen Recreation Center, Glenwood Springs
Recreation Center, North Jeffco APEX Center and many others. We will plan our audit to ensure the
Town's recreation center practices the best policies for financial reporting and cash handling.
• Software Assistance: We have assisted many of our clients with the implementation of Enterprise
Resource Planning (ERP)software to assist with all aspects of municipal operations. We have
experience with conversions to Oracle, Salesforce, Caselle,Tyler(in-code)and many others.
We understand the nature of the work to be done, have a commitment to perform the work within the time
period, and believe we are the best qua'ified for your financial assurance needs. Please consider this a
firm and irrevocable offer for 30 days to engage our firm. As a long-time Colorado mountain residents we
pride ourselves on our commitment to client service. Our firm is proud of the assistance we have
provided to our clients throughout the years. We have developed long-term working relationships and
have helped make our clients financially stronger and operationally more efficient. We look forward to
working with you in the coming years to help the Town of Avon achieve its financial goals.
Please do not hesitate to contact me at your convenience if you have any questions.
Sincerely,
McMAHAN and ASSOCIATES, L.L.C.
G,44,s,atkif Ff Sao; 4. ,
Paul J. Backes, C.P.A.
Managing Member
Town of Avon, Colorado
Avon, Colorado
Proposal for Professional Audit Services
January 12, 2022
Nt MCMAHAN AND ASSOCIATES , L. L.C.
& P.O. Box 5850
A AVON, CO 8 1620
970-845-8800
www MGMAHANCPA.CQM
Specially prepared for:
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Our Mission Statement
We are committed to achieving professional excellence
and will continually provide
ethical, progressive, and responsive service
to all our clients.
AICPA PCPSMI NM LAMRPt Vi%two
Members
GGM A"' Governmental
Audit Duality Center
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Town of Avon, Colorado
Avon, Colorado
Proposal for Professional Audit Services
Table of Contents
Page(s)
Proposal re: Professional Audit Services 1 —8
Appendices:
Appendix A—Firm License—Colorado State Board of Accountancy Al
Appendix B—Peer Review Acceptance Report B1
Appendix C—Proposer Guarantees Cl
Appendix D—Proposer Warranties Cl
MCMAHAN AND ASSOCIATES, L.L.C.
)�l Certified Public Accountants and Consultants
`,!? WEB SITE WWW MCMAHANCPA.COM
CHAPEL SQUARE- BLDO C MAIN OFFICE (970) 845-8800
245 CHAPEL PLACE. SUITE 300 FACSIMILE (9701 845.8 08
AP 0 Box 5850. Avon. CO 8 1620 E MAIL MCMAHAN@MCMAHANCPA COM
January 12, 2022
Town of Avon,Colorado
100 Mikaela Way
P.O.Box 975
Avon,CO 81230
Attention: Audit Committee
Dear Committee Members:
As requested, it is my pleasure to provide you this proposal detailing our firm's ability to provide
independent, professional audit and advisory services to Town of Avon("The Town").
Firm Qualifications and Experience
From our offices in Avon, McMahan and
Associates, L.L.C. has provided professional
•
services to clients throughout Colorado and
the Rocky Mountain region for over 50 years - • • ;
:p „ et it• f
Unlike many"audit"firms,our practice •s . �„ I
specialization is not a sideline. McMahan and - ` ,
Associates focuses on providing assurance - - - .• `I -
1
(financial statement audits, reviews,and
compilations),business consulting, and tax advisory services to a diverse range of clientele—from
governments to non-profits. As auditors and trusted advisors for almost all of Colorado's finest mountain
towns, our industry-specific experience allows us to assist you with a variety of municipal operations. Our
auditors are specifically experienced with utilities auditing, recreation programs,affordable housing, sales
tax monitoring, building and planning departments. accounting advice, municipal software concerns,
investment policies,and statutory compliance guidance Our resort location prov des efficiencies to
mountain communities, along with a greater familiarity with entities in resort areas.
Member:American Institute of Certified Publc Accountants
PAUL J. BACKES. CPA, CGMA Avow (970)845-8800
MICHAEL N. JENKINS, CA, CPA. CGMA ASPEN (970) 544.3995
DANIEL R. CUDAHY, CPA, CGMA FRIsCO (970)668.348
January 12, 2022
Town of Avon, Colorado
Attention: Audit Committee
Our Team-Partner, Supervisory and Staff Qualifications and Experience
F Paul J. Backes, CPA, CGMA,will be the principal contact person for the Town's
audit,compliance,and consulting services. A partner in McMahan and
Associates, Paul has over thirty years of accounting,auditing, and consulting
'� ` ' experience, including more than twenty years with McMahan and Associates. He
I-. has been actively involved in the Colorado accounting community,working with
the AICPA;the COCPA; Colorado Government Finance Officers Association
("CGFOA");and other professional organizations. He has served on the
rt. .
COCPA's Governmental Accounting and Issues Committee and Continuing
Professional Education Committee. He has lectured at continuing education
courses for CPAs and taught college level accounting classes as an adjunct professor. All of his recent
continuing education is related to database analytics and auditing governments and non-profits.
Yadira Miller, CPA, CFA grew up in the Vail Valley and graduated Summa Cum
Laude with a Bachelor in Accounting degree from the University of New Mexico in
2012. She joined McMahan and Associates in 2013 and became a Certified Public
Accountant in 2015 as well as a Certified Fraud Examiner in 2017. Yadira is a
4 member of the Colorado Society of Certified Public Accountants,the American
Institute of Certified Public Accountants and the Association of Certified Fraud
Examiners. Yadira works with a variety of non-profit, homeowner organizations
governmental, and for-profit clients. She lives in Gypsum, Colorado and enjoys
snowboarding, reading and traveling.
Additional firm personnel will be assigned as necessary to staff the Town's financial statement audit and
tax preparation,with all such team members having prior experience in municipal auditing. We will
however,rotate staff to ensure that at least one new accountant is on the engagement every other year
Independence
F1 McMahan and Associates, L.L.C. and its staff are independent,as defined
by U.S. generally accepted auditing standards and Government Auditing
'-• f_mi.p.4.4 Standards issued by the Comptroller General of the United States, of the
rale
Town and its component units identified in the RFP. During the term of our
engagement with the Town,we will provide prompt written notice of any
NMI , personal or professional relationships which would pose a conflict of interest
as defined by the applicable professional standards established by the American Institute of Certified
Public Accountants and the U.S. Government Accountability Office.
2
January 12,2022
Town of Avon,Colorado
Attention; Audit Committee
Licensing
Our firm and all our CPAs are licensed to practice in the State of Colorado.
McMahan and Associates' license to practice public accountancy in Colorado is
License compliance attached as Appendix B. Neither our firm nor any staff member has been subject to
any disciplinary action by state regulatory bodies or professional organizations.
Our licensing and spotless record for both partners and the firm can be verified at
https://apps colorado qov/dora/licensinq/Lcokup/LicenseLookup aspx(Colorado)
and http//www.aicpa orq/FORTHEPUBLIC/DlSCIPLINARYACTIONS/Pages/default.aspx(AICPA).
We also voluntarily participate in the AICPA's peer review process,which entails an independent review
of our audit engagements. Our firm's 2019 system review report,the most recent such review completed,
awarded us a"Pass"rating, representing the highest level of assurance in the AICPA peer review
process and is attached as Appendix C.
The professional staff at McMahan and Associates shares our commitment to excellence in providing the
highest quality assurance,tax,and consulting services for our clients,through professional development
and continuing education,and our shared efforts to anticipate client needs. To this end, all staff meets or
exceed the annual continuing professional education requirements imposed by the Colorado State Board
of Accountancy,the AICPA,and the U.S. Government Accountability Office's Governmental Auditing
Standards, with the majority of such course work concentrated on auditing and consulting matters.
McMahan and Associates will not subcontract any part of Town of Avon's engagement.
Prior Engagements with the Town of Avon
We have provided audit services to the Town for the last several years. As the Town is likely aware,
several studies indicate there can be significant disadvantages towards auditor rotation that is not based
upon auditor quality. These disadvantages include higher cost and risk in the initial years of a new
engagement and potential decreased audit quality. Studies indicate the highest percentage of audit
failures occur in the first two years of an engagement with a new client. Although independent,we have
rotated staff members on a periodic basis to ensure a"fresh"perspective towards the Town's audit. We
will commit to staffing the Town's audit with a new staff member and a staff member with prior experience
on the Town's engagement.
4
January 12,2022
Town of Avon,Colorado
Attention: Audit Committee
Engagements with Similar Entities
We are proud of our long-term relationships with our clients,and have listed below selected governmental
clients for which our firm provides services similar to those required by Town of Avon or are close to the
Town's geographic area.
Scope of Engagement
Client Name Work Dates Partner Contact
Eagle County, Audit and tax 1998 to present Michael Jill Klosterrnan
Colorado services Jenkins Chief Financial Officer
970-328-3511
City of Aspen Audit and tax 1992 to present Paul Backes Peter Strecker,CFO
services (970) 920-5007
Town of Vail Audit and tax 1968 to present Paul Backes Kathleen Halloran
services Finance Director
(970)479-2116
City of Glenwood Audit and tax 1990 to present Paul Backes Yvette Gusted
Springs services Finance Director
(970) 384-6421
Our client base includes almost all of the members of the Colorado Association of Ski Towns. Additional
references can be provided upon request.
Quality Control=Quality Service
At McMahan and Associates,we are committed to the highest level
of service and technical competence. Unlike many"audit"firms, our ® Governmental
practice specialization is not a sideline. Our firm is a proud member MI=Audit Quality Center
of the Governmental Audit Quality Center of the American Institute of 41.11)
CPAs ("AICPA"),which is dedicated to promoting the importance of
quality audits and their value to financial statement users. We also PCF'S
maintain membership in the AICPA's Private Companies Practice , , uwu..sr ro+04„ry
Section, which advocates for leadership and quality among local and
regional accounting firms across the United States. We have several Certificate
firm members that participate in the Government Finance Officers ACjJtBtlf'lI18;•1t
Association ("GFOA")Annual Comprehensive Financial Report ([) ,; cf
("ACFR")review program. FtrrtttialRepo.tras
3
January 12,2022
Town of Avon,Colorado
Attention: Audit Committee
Audit Approach
At McMahan and Associates,we believe that the goal of every financial statement audit should be the
identification of practical opportunities to improve business operations, not just the delivery of a bound
audit report and financial statements To achieve that result requires the auditor to work closely with the
client to plan an efficient process that identifies and assesses the client's major risk areas. and then
provides realistic suggestions for building on existing systems for financial reporting and control. Our
initial contacts with you and Town of Avon's staff,therefore,will be focused on learning about your
systems and controls over financial reporting, and other critical business processes. We will plan our
audit in accordance with professional standards, but will ensure that we address areas of concern
identified by Town of Avon's management and Board of Directors(the"Board").
To minimize any disruption on your ongoing operations and maximize the efficiency of our work, we will
provide you with a detailed listing of documents. reconciliations, and work papers needed in advance of
the scheduled fieldwork date.
At the conclusion of our fieldwork,we will provide you with a complete set of adjustments, if any, for
posting to Town of Avon's books All audit work papers will be subject to a detailed review by the
designated in-charge for Town of Avon's audit Pr or to issuance of the audit and other reports, all work
papers and draft reports will also undergo a final review by the engagement partner. Draft reports
(including the Management Letter, if any)will be reviewed with appropriate management personnel
before issuance or presentation to the Board.
5
January 12,2022
Town of Avon, Colorado
Attention: Audit Committee
Audit Approach (continued)
Analytical Procedures, Data Analytics and Sampling
In order to increase the effectiveness and efficiency of our client
Ai
engagements,we have implemented software that automates many of
our key processes and links them to the procedures we perform. In
addition, our assurance work and electronic documents(including the
financial statements)are linked,thereby integrating all elements of our
electronic client binders. Our green"paperless"initiative, allows us to quickly access financial and other
information to deliver documents and timely responses to client inquiries, while minimizing paper.
Current audit technics have replaced random statistical sampling and
ti some analytical procedures in auditing with data analysis. Reviewing the
,......., entire population is generally more efficient and accurate when
4 - . ` conducting audits. We utilize our data analysis software to review entire
�A populations and risk weight transactions,thereby reducing sampling
1 ' Q = error. Implementation of this software is a 2020 firm initiative.
-a ilia Examples of analysis that we regularly perform on client databases
include:
• Purchasing card and other databases for weekend transactions or higher risk vendors.
• Reviewing vendor address databases for comparison to employee address databases.
• Reviewing bank numbers on wire transfers for comparison to employee bank account
numbers(through direct deposit payroll).
• Utility billings
• Comparison of gross vs. net payroll across the employee database.
• Benford's law analysis for violating purchasing policies.
• Reviewing revenue databases for improper credits.
• Reviewing journal entries database for high dollar,weekend,or unusual entries.
• Sales tax database analytics
• Recreation database analytics
Gaining an Understanding of Internal Control Structure
r A key factor in an effective(and efficient)audit is to first gain an appropriate
understanding of the client's systems and processes, so as to identify not only how
K .. transactions are recorded but how those business processes contribute to the entity's
overall objectives. Consequently, we invest considerable time during preliminary
fieldwork in interviewing department heads and other staff to ensure that we have a complete
understanding of how the Town really works. This process also helps us recognize opportunities for
improving business processes and tightening up internal controls.
6
January 12,2022
Town of Avon, Colorado
Attention: Audit Committee
Audit Approach (continued)
Laws and Regulations
McMahan and Associates personnel are thoroughly familiar with State of Colorado budget laws,other
State statutes,and the Single Audit law. The Town's compliance with these and other laws and
regulations will be assessed as part of our audit procedures.
Report Format and Communications to the Board
At the conclusion of audit fieldwork,we will provide Town staff with a complete set of audit adjustments,
together with appropriate documentation,for review and approval by the Town's Finance Director. As
well, any findings and recommendations noted in the course of the audit will be discussed with the
Finance Director, and other appropriate Town personnel. We will communicate to the Board and
management, in writing,any material weaknesses or significant deficiencies noted in the course of our
audit, along with our suggestions for improvement in business practices and procedures As requested,
we would also be pleased to present the results of our audit to the Board.
Anticipated Potential Audit Problems
We don't believe in audit surprises should ever happen. We currently
f anticipate no potential audit problems. However, should matters
arise in the course of our audit we will promptly discuss the potential
OP- , problems with the Finance Director and other appropriate Town
personnel to determine the most cost-effective resolution, and in accordance with professional auditing
standards.
Cost Proposal
We estimate our fee for the Town's audits will not exceed the following:
Component 2021 2022 2023
Audit of Financial Statement 24,700 25,935 27,232
Single Audit 4,250 4,465 4,689
Total 28,950 30,400 31,920
Please note that all of our fee quotations are inclusive of relevant telephone conferences or other such
meetings as may be required to complete the audit and deliver the required reports within the agreed-
upon period. In addition,our pricing includes ongoing basic support and consultation throughout the year.
Telephone conferences and meetings during the year that do not require significant research time by our
staff are provided at no additional cost, and we encourage this regular communication to stay abreast of
current circumstances. Finally, as a mountain-area employer, McMahan and Associates has not in the
past and will not charge the Town for any travel or other incidental costs incurred in the engagements.
Thus,our estimated fees are inclusive of all out-of-pocket costs, so that the Town knows, in advance, the
full cost of our audit services.
7
January 12,2022
Town of Avon,Colorado
Attention: Audit Committee
Ongoing Support
As with all clients, telephone conferences and meetings required to complete the engagement and
present the required reports within the agreed-upon time frame are included in our base fees. In addition,
telephone consultation during the year that does not require significant research time by our staff is
provided to our clients at no additional cost, and we encourage this regular communication to stay
abreast of current circumstances.
As long-term residents of the Avon,our staff prides themselves on community involvement and
commitment to client service. We are proud of the assistance we have provided to our clients over the
years. We have developed long-term working relationships and have helped our clients become
financially stronger and operate more efficiently. We look forward to working with you in the coming years
to help Town of Avon meet its financial goals.
Please do not hesitate to contact me if you have any questions.
Sincerely,
McMAHAN and ASSOCIATES, L.L.C.
ac,J l tr.o;&L.L L.
Paul J. Backes, CPA,CGMA
Managing Member
8
TOWN OF AVON,COLORADO
Proposal for Professional Audit Services
Appendix A—Firm License—Colorado State Board of Accountancy
* OOkA' COLORADO
co111,
Department of
Regulatory Agencies
Velty a Colorado Professional or Business License
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I t.ICmanan a00Assocaies LLC I PO BOX 5850
AVON CO 81620
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Al
TOWN OF AVON,COLORADO
Proposal for Professional Audit Services
Appendix B—Peer Review Acceptance Report
COCPA AICPA
Colorado Sock ty of[citified Publ,c MCP".I,nn
AICPA Peer Re.tew Program admim,icred in Colorado
'
December 20,2019
Michael Jenkins
McMahan and Associates,L.L.C.
P.O.BOX 5850
Avon,CO 81620-5850
Dear Michael Jenkins:
It is my pleasure to notify you that on December 19, 2019, the Colorado Peer Review Committee accepted
the report on the most recent System Reviewof your firm. The due date for your next review Is April 30,
2022.This is the date by which all review documents should be completed and submitted to the administering
entity.Since your due date falls between January and April, you can arrange to have your review a few
months earlier to avoid having a review during tax season.
As you know, the report had a peer review rating of pass. The Committee asked me to convey its
congratulations to the firm.
Thank you for your cooperation.
Sincerely,
Timothy Raub
Chair
traub@mracpas.com
303-421-4775
Colorado Society of CPAs
cc:Joanne Kumor,Daniel Cudahy
Firm Number: 900010090471 Review Number: 563729
B1
TOWN OF AVON,COLORADO
Proposal for Professional Audit Services
APPENDIX C - PROPOSER GUARANTEES
The proposer certifies it can and will provide and make available, as a minimum, all services set forth in
Section II, Nature of Services Required.
Signature of Official I"-AJ i (-a
Name (typed): Paul J. Backes,CPA
Title Managing Member
Firm: McMahan and Associates, LLC
Date: August 19,2021
APPENDIX D -PROPOSER WARRANTIES
A Proposer warrants that it is willing and able to comply with State of Colorado laws with respect to
foreign (non-state of Colorado)corporations and employees.
B Proposer warrants that has insurance coverage of$2,000,000 in compliance with the proposal.
C Proposer warrants that it will not delegate or subcontract its responsibilities under an agreement
without the prior written permission of the Town of Avon.
D. Proposer warrants that all information provided by it in connection with this proposal is true and
accurate.
Signature of Official A «e
Name(typed): Paul J. Backes,CPA
Title: Managing Member
Firm: McMahan and Associates,LLC
Date: August 19,2021
Cl