12-27-2017 McMahan and Associates, LLC 2017 Audit Engagement LetterMCMAHAN AND ASSOCIATES, L.L.C.
Certified Public Accountants and Consultants
CHAPEL SQUARE, BLDG C
245 CHAPEL PLACE, SUITE 300
P.O. Box 5850, AVON, CO 8 1620
December 27, 2017
Town of Avon, Colorado
P.O. Box 975
Avon, CO 81620
WEB SITE: V1WW.MCMAHANCPA.COM
MAIN OFFICE: (970) 845-8800
FACSIMILE: (970) 845-8 108
E-MAIL: MCMAHAN@MCMAHANCPA.COM
We are pleased to confirm our understanding of the services we are to provide Town of Avon, Colorado
for the year ended December 31, 2016. We will audit the financial statements of the governmental
activities, the business -type activities, each major fund, and the aggregate remaining fund information,
including the related notes to the financial statements, which collectively comprise the basic financial
statements of Town of Avon, Colorado as of and for the year ended December 31, 2016.
In addition, we will audit the entity's compliance over major federal award programs for the year ended
December 31, 2016. We are pleased to confirm our acceptance and our understanding of this audit
engagement by means of this letter. Our audits will be conducted with the objectives of our expressing an
opinion on each opinion unit and an opinion on compliance regarding the entity's major federal award
programs.
Accounting principles generally accepted in the United States of America provide for certain required
supplementary information ("RSI"), such as management's discussion and analysis ("MD&A"), to
supplement Town of Avon, Colorado's basic financial statements. Such information, although not a part
of the basic financial statements, is required by the Governmental Accounting Standards Board, 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 Town of Avon, Colorado's RSI in accordance with auditing standards generally
accepted in the United States of America. These limited procedures will consist of inquiries of
management regarding the methods of preparing the information and comparing the information for
consistency with management's responses to our inquiries, the basic financial statements, and other
knowledge we obtained during our audit of the basic financial statements. We will not express an opinion
or provide any assurance on the information because the limited procedures do not provide us with
sufficient evidence to express an opinion or provide any assurance. The following RSI is required by
generally accepted accounting principles and will be subjected to certain limited procedures, but will not
be audited:
1) Management's Discussion and Analysis.
We have also been engaged to report on RSI other than MD&A and supplementary information other
than RSI that accompanies Town of Avon, Colorado's financial statements. We will subject the following
RSI and supplementary information to the auditing procedures applied in our audit of the basic financial
statements and certain additional procedures, including comparing and reconciling such information
directly to the underlying accounting and other records used to prepare the financial statements or to the
financial statements themselves, and other additional procedures in accordance with auditing standards
generally accepted in the United States of America.
Member., Americas: 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) 66a-3481
December 27, 2017
Town of Avon, Colorado
Page 2
We intend to provide an opinion on the following RSI and supplementary information in relation to the
financial statements as a whole:
1) Budgetary schedules for the General Fund and major special revenue funds
2) Budget schedules for all other funds
3) Combining statements
4) Local Highway Finance Report
5) Debt Schedule
The following other information accompanying the financial statements will not be subjected to the
auditing procedures applied in our audit of the financial statements, and our auditor's report will not
provide an opinion or any assurance on that other information:
1) Introductory information
2) Statistical information
Schedule of Expenditures of Federal Awards
We will subject the schedule of expenditures of federal awards to the auditing procedures applied in our
audit of the basic financial statements and certain additional procedures, including comparing and
reconciling the schedule to the underlying accounting and other records used to prepare the financial
statements or to the financial statements themselves, and additional procedures in accordance with
auditing standards generally accepted in the United States of America. We intend to provide an opinion
on whether the schedule of expenditures of federal awards is presented fairly in all material respects in
relation to the financial statements as a whole.
Data Collection Form
Prior to the completion of our engagement, we will complete the sections of the Data Collection Form that
are our responsibility. The form will summarize our audit findings, amounts and conclusions. It is
management's responsibility to submit a reporting package including financial statements, schedule of
expenditure of federal awards, summary schedule of prior audit findings and corrective action plan along
with the Data Collection Form to the federal audit clearinghouse. The financial reporting package must be
text searchable, unencrypted, and unlocked. Otherwise, the reporting package will not be accepted by the
federal audit clearinghouse. We will assist you in the electronic submission and certification. You may
request from us copies of our report for you to include with the reporting package submitted to pass-
through entities.
The Data Collection Form is required to be submitted within the earlier of 30 days after receipt of our
auditors' reports or nine months after the end of the audit period, unless specifically waived by a federal
cognizant or oversight agency for audits. Data Collection Forms submitted untimely are one of the factors
in assessing programs at a higher risk.
December 27, 2097
Town of Avon, Colorado
Page 3
Audit of the Financial Statements
We will conduct our audit in accordance with auditing standards generally accepted in the United States
of America (U.S. GAAS), the standards applicable to financial audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States of America; and the audit
requirements of Title 2 U.S. Code of Federal Regulations (CFR) 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 the basic financial statements are free from material misstatement. An 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 error,
fraudulent financial reporting, misappropriation of assets, or violations of laws, governmental regulations,
grant agreements, or contractual agreements. 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 the financial statements.
Because of the inherent limitations of an audit, together with the inherent limitations of internal control, an
unavoidable risk that some material misstatements or noncompliance may not be detected exists, even
though the audit is properly planned and performed in accordance with U.S. GAAS and Government
Auditing Standards of the Comptroller General of the United States of America.
In making our risk assessments, we consider internal control relevant to the entity's preparation and fair
presentation of the financial statements 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.
We will issue a written report upon completion of our audit of Town of Avon, Colorado's basic financial
statements. Our report will be addressed to the governing body of Town of Avon, Colorado. We cannot
provide assurance that unmodified opinions will be expressed. Circumstances may arise in which it is
necessary for us to modify our opinions, add an emphasis -of -matter or other -matter paragraph(s), or
withdraw from the engagement.
In accordance with the requirements of Government Auditing Standards, we will also issue a written
report describing the scope of our testing over internal control over financial reporting and over
compliance with laws, regulations, and provisions of grants and contracts, including the results of that
testing. However, providing an opinion on internal control and compliance over financial reporting will not
be an objective of the audit and, therefore, no such opinion will be expressed.
Audit of Major Program Compliance
Our audit of Town of Avon, Colorado's major federal award program compliance will be conducted in
accordance with the requirements of the Single Audit Act, as amended; and the Uniform Guidance, and
will include tests of accounting records, a determination of major programs in accordance with the
Uniform Guidance and other procedures we consider necessary to enable us to express such an opinion
on major federal award program compliance and to render the required reports. We cannot provide
assurance that an unmodified opinion on compliance will be expressed. Circumstances may arise in
which it is necessary for us to modify our opinion or withdraw from the engagement.
December 27, 2017
Town of Avon, Colorado
Page 4
Audit of Major Program Compliance (continued)
The Uniform Guidance requires that we also plan and perform the audit to obtain reasonable assurance
about whether the entity has complied with applicable laws and regulations and the provisions of
contracts and grant agreements applicable to major federal award programs. Our procedures will consist
of determining major federal programs and performing the applicable procedures described in the U.S.
Office of Management and Budget OMB Compliance Supplement for the types of compliance
requirements that could have a direct and material effect on each of the entity's major programs. The
purpose of those procedures will be to express an opinion on the entity's compliance with requirements
applicable to each of its major programs in our report on compliance issued pursuant to the Uniform
Guidance.
Also, as required by the Uniform Guidance, we will perform tests of controls to evaluate the effectiveness
of the design and operation of controls that we consider relevant to preventing or detecting material
noncompliance with compliance requirements applicable to each of the entity's major federal award
programs. However, our tests will be less in scope than would be necessary to render an opinion on
these controls and, accordingly, no opinion will be expressed in our report.
We will issue a report on compliance that will include an opinion or disclaimer of opinion regarding the
entity's major federal award programs, and a report on internal controls over compliance that will report
any significant deficiencies and material weaknesses identified; however, such report will not express an
opinion on internal control.
Management Responsibilities
Management is responsible for:
1. For the preparation and fair presentation of the financial statements in accordance with accounting
principles generally accepted in the United States of America;
2. 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 error
fraudulent financial reporting, misappropriation of assets, or violations of laws, governmental
regulations, grant agreements, or contractual agreements;
3. For safeguarding assets;
4. For identifying all federal awards expended during the year ended December 31, 2016 including
federal awards and funding increments.
5. For preparing the schedule of expenses of federal awards (including notes and noncash assistance
received) in accordance with the Uniform Guidance requirements;
6. For the design, implementation, and maintenance of internal control over compliance;
7. For identifying and ensuring that the entity complies with laws, regulations, grants, and contracts
applicable to its activities and its federal award programs;
8. For following up and taking corrective action on reported audit findings from prior periods and
preparing a summary schedule of prior audit findings;
9. For following up and taking corrective action on current year audit findings and preparing a corrective
action plan for such findings;
10. For submitting the reporting package and data collection form to the appropriate parties;
11. For making the auditor aware of any significant vendor relationships where the vendor is responsible
for program compliance;
December 27, 2017
Town of Avon, Colorado
Page 5
Management Responsibilities (continued)
12. 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 financial statements, and relevant to federal
award programs, such as records, documentation, and other matters;
b. Additional information that we may request from management for the purpose of the
audit; and
c. Unrestricted access to persons within the entity from whom we determine it necessary to
obtain audit evidence.
13. For adjusting 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 current year period(s) under audit are
immaterial, both individually and in the aggregate, to the financial statements as a whole; and
14. For confirming your understanding of your responsibilities as defined in this letter to us in your
management representation letter.
15. For informing us about all known or suspected fraud or illegal acts affecting Town of Avon, Colorado
involving (1) management, (2) employees who have significant roles in internal control, and (3) others
where the fraud or illegal acts could have a material effect on the financial statements.
16. For informing us of your knowledge of any allegations of fraud or suspected fraud affecting Town of
Avon, Colorado received in communications from employees, former employees, grantors, regulators,
or others.
17. For informing us of any changes to the methods of measurement or presentation from those used in
the prior period and the reasons for such changes
With regard to the supplementary information, including the schedule of expenditures of federal awards,
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 financial statements, or if the supplementary information will not be presented
with the audited financial statements, to make the audited 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.
We understand that your employees will prepare all confirmations we request and will locate any
documents or invoices selected by us for testing.
With regard to using the auditor's report, you understand that you must obtain our prior written consent to
reproduce or use our report in bond offering official statements or other documents.
With regard to the electronic dissemination of audited financial statements, including financial statements
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.
December 27, 2017
Town of Avon, Colorado
Page 6
Engagement Administration, Fees, and Other
The audit documentation for this engagement is the property of McMahan & 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 Town of Avon, Colorado's cognizant or
oversight agency or its designee, a federal agency providing direct or indirect funding, or the U.S.
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 & Associates, LLC
personnel. Furthermore, upon request, we may provide copies of selected audit documentation to the
aforementioned parties. These parties may intend, or decide, to distribute the copies or information
contained therein to others, including other governmental agencies.
The audit documentation for this engagement will be retained for a minimum of five years after the report
release or for any additional period requested by Town of Avon, Colorado. If we are aware that a federal
awarding agency, pass-through entity, or auditee is contesting an audit finding, we will contact the party
or parties contesting the audit finding for guidance prior to destroying the audit documentation.
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 date.
At the conclusion of our audit engagement, we will communicate to the Governing Board 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.
December 27, 2017
Town of Avon, Colorado
Page 7
Engagement Administration, Fees, and Other (continued)
Our fee for these services will be at our standard hourly rates plus out-of-pocket costs (such as report
reproduction, word processing, postage, travel, copies, telephone, etc.) except that we agree that our
gross fee, including expenses will not exceed $21,300. If a single audit is required, the additional audit
fee will not exceed $3,100. Our standard hourly rates vary according to the degree of responsibility
involved and the experience level of the personnel assigned to your audit. 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. Our fees are 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. We want the Town to feel that the value of services provided by our
firm is commensurate with the fee charged.
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 latest available peer review report accompanies this letter.
We appreciate the opportunity to be of service to Town of Avon, Colorado 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.
Sincerely,
McMAHAN and ASSOCIATES, L.L.C.
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.
Town of Avon, Colorado
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