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HomeMy WebLinkAboutAgenda Packet - Finance & Human Resources Committee - 06/08/2021FINANCE AND HUMAN RESOURCES COMMITTEE June 8, 2021 - 3:30 PM In an effort to prevent the spread of COVID-19 and in accordance with Governor Newsom's Executive Order N-25-20 and N-29-20, this meeting is being conducted via teleconference. There will be no public location for attending this meeting in person. Members of the public may listen and provide public comment telephonically. Anyone wishing to join the meeting may do so using the following information: DIAL: 1-209-425-5876 and enter CONFERENCE ID: 308 612 348# You may also join by clicking HERE to connect and participate in the Microsoft Team Meeting AGENDA CALL TO ORDER PLEDGE OF ALLEGIANCE PUBLIC COMMENTS NEW BUSINESS 1.Review Engagement Letter and Planning Document from CliftonLarsonAllen, LLP for Preparation of the District's FY 2020-21 Audit ADJOURN PLEASE NOTE: Pursuant to Government Code Section 54954.2(a), any request for a disability-related modification or accommodation, including auxiliary aids or services, that is sought in order to participate in the above- agendized public meeting should be directed to the District Clerk at (909) 885-4900 at least 72 hours prior to said meeting. S TAF F R E P O RT Agend a Item #1. Meeting Date: June 8, 2021 Dis cus s ion Item To: F I NANC E A ND HUMAN R ES O UR C ES C O MMI T T E E F rom: C hief F inanc ial O fficer Subject: R eview Engagement Letter and P lanning Doc ument fro m C liftonLars o nAllen, L L P fo r P reparatio n o f the Dis tric t's F Y 2020-21 Aud it R E C OMME N DAT IO N: S taff rec o mmends that the F inanc e and Human R es o urc es C o mmittee (C ommittee) review the Engagement Letter and p lanning d o cument from C liftonLars o nAllen, L L P (C LA) for the p rep aration of the Aud it o f F inanc ials for EVW D for the year end ed June 30, 2021. B AC KG R OUN D / AN ALYS IS : S taff has plac ed this item o n the C o mmittee meeting agend a in order to reintroduce the p rinc ip als fro m the Dis tric t’s audit firm. In ad d ition, as aud iting is a review o f managements ’ ac tivities , bes t prac tic es dic tate that a line o f c o mmunic ation be es tablished between the Dis trict aud itors and G overning Bo ard . T herefo re, attac hed fo r the C o mmittee to review is the Engagement Letter from C L A to p ro vide aud iting s ervic es to EVW D for the fis cal year ended June 30, 2021. T he Engagement Letter exp lains what the o b jectives o f thes e s ervic es will b e and d es cribe the p ro cedures that will b e used to perform their work. Als o attached is the firm’s ‘O verall P lan to Ac c omplish the Aud it d o c ument which provid es ins ight as to what aud it s ervic es will be p ro vided d uring the aud it, in ac cord anc e with, generally acc ep ted acc o unting p rinc iples (G AAP ). Auditing S tandards req uire thes e doc uments b e c o mmunic ated to tho s e charged with G o vernanc e and C LA is p res ent to ans wer any q uestio ns. AG E N C Y G O ALS AN D O B J E C T IVE S : G o al and O bjec tives II - Maintain a C ommitment to S ustainability, Transp arenc y, and Ac countab ility a) P rac tic e Trans parent and Ac countab le F is c al Management R E VIE W B Y O T HE R S : T his agend a item has b een reviewed by the F inanc e Department. F IS C AL IMPACT T here is no fis c al imp act assoc iated with this agend a item. ATTAC H M EN TS: Description Type C L A P resentation P resentation E VW D Engageme nt Letter Backup Material Addendum 1 Backup Material Addendum 2 Backup Material P lanning Document Backup Material WEALTH ADVISORY  |  OUTSOURCING  |  AUDIT, TAX, AND CONSULTING Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC‐registered investment advisor ©2 0 1 9  Cl i f t o n L a r s o n A l l e n  LL P East Valley Water District Pre‐audit Planning Meeting June 8, 2021 ©2 0 1 9  Cl i f t o n L a r s o n A l l e n  LL P Create Opportunities  |  We promise to know you and help you. Contents Topic Page Emerging Issues Industry Trends Impacting Your  Organization 3 Your Service Team Team  of Professionals 7 Your  Service Plan Scope and Deliverables Timeline Responsibilities Risk Assessment Governance Input 10 11 12 13 14 Appendix Resources About CLA 17 18 2 ©2 0 1 9  Cl i f t o n L a r s o n A l l e n  LL P WEALTH ADVISORY  |  OUTSOURCING  |  AUDIT, TAX, AND CONSULTING Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC‐registered investment advisor Emerging Issues 3 ©2 0 1 9  Cl i f t o n L a r s o n A l l e n  LL P Create Opportunities  |  We promise to know you and help you. Key Issues and Challenges Facing State  & Local Government Organizations 4 COVID ‐19  Cybersecurity  and data  breaches New  Accounting  Standards  ©2 0 1 9  Cl i f t o n L a r s o n A l l e n  LL P Create Opportunities  |  We promise to know you and help you. CLA Service during COVID‐19 Our “New Normal”:  On‐site vs Off‐site work 5 ©2 0 1 9  Cl i f t o n L a r s o n A l l e n  LL P Create Opportunities  |  We promise to know you and help you. Accounting Standard Changes  6 Statement No. 84 – Fiduciary Activities: •Effective  in current the fiscal year Statement No. 87 – Leases: •Postponed to fiscal year 2021‐22 Statement No. 90 – Majority Equity Interests: •Effective  in the current fiscal year Statement No. 91 – Conduit Debt Obligations: •Postponed to fiscal year 2022‐23 Statement No. 92 – Conduit Debt Obligations: •Postponed to fiscal year 2022‐23 ©2 0 1 9  Cl i f t o n L a r s o n A l l e n  LL P Create Opportunities  |  We promise to know you and help you. Accounting Standard Changes  7 Statement No. 93 – Replacement of Interbank Offered Rates (IBOR): •Postponed to fiscal year 2022‐23 Statement No. 94 – Public‐Private and Public‐Public Partnerships and  Availability Payment Arrangements: •Postponed to fiscal year 2022‐23 Statement No. 96 – Subscription‐based Information Technology  Arrangements: •Effective  fiscal year 2022‐23 Statement No. 97 –Certain Component Unit Criteria and Accounting and  Financial Report for IRS 457 Deferred Compensation Plans: •Effective  fiscal year 2021‐22 ©2 0 1 9  Cl i f t o n L a r s o n A l l e n  LL P WEALTH ADVISORY  |  OUTSOURCING  |  AUDIT, TAX, AND CONSULTING Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC‐registered investment advisor Your Service Team 8 ©2 0 1 9  Cl i f t o n L a r s o n A l l e n  LL P Create Opportunities  |  We promise to know you and help you. CLA Service Team 9 We are committed to providing top quality service throughout the engagement and throughout the year. The team that will serve the audit is made up of individuals dedicated to state & local government – Water District districts industry. Engagement Team Member Responsibility Renee Graves ‐Principal Principal in‐charge Daphne Liu ‐Director Director in‐charge Melissa Suraya ‐Senior Audit in‐charge ©2 0 1 9  Cl i f t o n L a r s o n A l l e n  LL P WEALTH ADVISORY  |  OUTSOURCING  |  AUDIT, TAX, AND CONSULTING Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC‐registered investment advisor Your Service Plan 10 ©2 0 1 9  Cl i f t o n L a r s o n A l l e n  LL P Create Opportunities  |  We promise to know you and help you. Scope and Deliverables 11 Audit Scope • Audit the financial  statements included in the  Comprehensive Annual  Financial Report for East  Valley Water District as of  June 30, 2021 • Single audit – Federal  Programs, if applicable  Deliverables • Opinion on the financial  statements and  supplementary information  included in the  Comprehensive Annual  Financial Report for the  Year  Ended June 30, 2021 •Board Reporting Packet:  Required communications • Independent auditors’  report on internal control  over financial reporting and  on compliance and other  matters. • Independent auditors’  reports on compliance for  major Federal Programs, if  applicable  Other  •Preparation and  transmission of the State  Controller’s Annual  Financial Transaction   Report for California Special  Districts. • Federal Data Collection  Form SF‐SAC, if applicable ©2 0 1 9  Cl i f t o n L a r s o n A l l e n  LL P Create Opportunities  |  We promise to know you and help you. Timeline 12 Audit Planning  Continuous  Preliminary  Procedures April  Substantive  Work   September Final Reporting October We  utilize a collaborative approach, which  includes seeking input from management  and governance, to develop an audit plan  that focuses on areas of risk and areas of  significance to stakeholders of your  Organization. Any items of significance, warranting  communication with governance, that  arise throughout  the audit process   will be promptly communicated. If you  do not hear from us prior to the final  audit presentation in November,  everything went as planned and  discussed here today. ©2 0 1 9  Cl i f t o n L a r s o n A l l e n  LL P Create Opportunities  |  We promise to know you and help you. Responsibilities  East Valley  Water   District Governance Management Independent  Auditor 13 Responsibilities of Parties  Involved  Governance Strategic Direction Accountability, including financial reporting Management Internal Controls Accounting Policies Management Decisions Fair Presentation of Financial Statements Programs to Prevent and Detect Fraud Independent  Auditor Opinion on Fair Presentation of Financial Statements Audit in Accordance with GAAS Reasonable, not Absolute Assurance Understanding of Internal Controls Risk Based Audit Approach ©2 0 1 9  Cl i f t o n L a r s o n A l l e n  LL P Create Opportunities  |  We promise to know you and help you. Risk Assessment •New tests annually to  mitigate familiarity with  audit process •Use of data analytics on  large volumes of data •Cash/Revenue • Capital Assets •Estimates/Valuation   ‐OPEB & Pension •Review design and  perform tests to validate  they are functioning. •Revenue Recognition  •Management  Override of Controls  Significant or  Fraud Risks  (Other Risks  Deemed Significant  or Fraudulent in  Nature) Control Risk  (Internal Controls  Fail to Prevent or  Detect a Material  Misstatement) Detection Risk (Audit Procedures  Fail to Detect a  Material  Misstatement) Inherent Risk  (Due to the Nature  of the Account) 14 Audit Risk = the risk of  an undetected material  misstatement due to  error or fraud. Preliminary Risk  Assessment to reduce  the audit risk to an  appropriately low level. Audit  Risk ©2 0 1 9  Cl i f t o n L a r s o n A l l e n  LL P Create Opportunities  |  We promise to know you and help you. Governance Input •Individual Accounts •Transactions •Processes •Controls Areas of  Focus? •Litigation •Operations •Industry Trends Other  Concerns?•Knowledge of  Fraud •Threshold for  communication Fraud? 15 As independent auditors, we work for governance and work with management to accomplish  the audit. Your  input is valued as we develop our audit plan and approach.     ©2 0 1 9  Cl i f t o n L a r s o n A l l e n  LL P Create Opportunities  |  We promise to know you and help you. Finance/HR Committee Input Areas of Concern? •Any concerns or items you want to make sure we incorporate into our audit plan? •Are there specific transactions, general ledger accounts, etc. that you feel we should  prioritize when considering our audit procedures to be performed? Fraud? •Are you aware of any fraud within the organization during the year?  Fraud could  include fraudulent financial reporting or misappropriation of the organization’s  assets.  Other Items? 16 ©2 0 1 9  Cl i f t o n L a r s o n A l l e n  LL P WEALTH ADVISORY  |  OUTSOURCING  |  AUDIT, TAX, AND CONSULTING Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC‐registered  investment advisor •Resources •About CLA Appendix 17 ©2 0 1 9  Cl i f t o n L a r s o n A l l e n  LL P Create Opportunities  |  We promise to know you and help you. Articles, Webinars, and Tools www.claconnect.com Click to Learn More About Other Ways  CLA Can Help You Meet Your Goals Financial Department  Assessments – People, Processes  and Tools IT Security Services Enterprise Risk  Assessments Grant Compliance Resources   18 ©2 0 1 9  Cl i f t o n L a r s o n A l l e n  LL P Create Opportunities  |  We promise to know you and help you. About CLA Firm stats •More than 60 years of quality, service, and experience • $1.1 billion in revenue •More than 120 locations across the United States  Our clients • Unprecedented emphasis on serving privately held businesses and their owners, as well as nonprofits and  governmental entities •Serving more than 150,000 clients • Primary industries served include agribusiness, construction and real estate, commercial services, cooperatives,  dealerships, federal government, financial institutions, government contractors, health care, higher education,  manufacturing and distribution, nonprofit, professional services, and state and local government including K‐12  Education. •Service areas include wealth advisory, outsourcing, and public accounting (audit, tax, and consulting) Our people •More than 6,100 professionals, including 700+ principals •More than 2,590 CPAs  •A career building and "Best Place to Work" firm  19 ©2 0 1 9  Cl i f t o n L a r s o n A l l e n  LL P Create Opportunities  |  We promise to know you and help you. You don’t have  to do it alone ____________ CLA: The Premier  Resource for State  and Local  Government  Organizations and  their  Leaders ©2 0 1 9  Cl i f t o n L a r s o n A l l e n  LL P CLAconnect.com Renee Graves, CPA CGFM Principal Renee.Graves@claconnect.com 626‐387‐8213 Daphne Liu, CPA  Director Daphne.Liu@claconnect.com 626‐857‐7300 ext. 78244 March 12, 2021 East Valley Water District Mr. Brian Tompkins 31111 Greenspot Road Highland, CA 92346 Dear Mr. Tompkins: Cliftonl arsonAllcn LLP 2210 Eas t Ro ut e 66 Glendora, CA 91740 626.857.73 00 I fa x 626 .85i.7302 CLAcon ne ct.co m We are pleased to confirm our understanding of the terms and objectives of our engagement and the nature and limitations ofthe audit and nonaudit services CliftonlarsonAllen LLP ("CLA," "we," "us," and "our") will provide for East Valley Water District ( "EVWD", "you," "your," or "the entity") for the year ended June 30, 2021. Renee Graves is responsible for the services provided to you. She will be assisted by Daphne Liu, who is responsible for the performance of the audit engagement. Audit services We will audit the basic financial statements included in the Comprehensive Annual Financial Report, as of and for the year ended June 30, 2021, and the related notes to the financial statements. The Governmental Accounting Standards Board (GASB) provides for certain required supplementary information (RSI) to accompany the entity's basic financial statements. The following RSI will be subjected to certain limited procedures, but will not be audited. 1. Management's discussion and analysis. 2. GASB-required supplementary pension and OPEB information under modified reporting. We will also evaluate and report on the presentation ofthe supplementary information accompanying the financial statements in relation to the financial statements as a whole . Nonaudit services We will also provide the following nonaudit services: • Preparation of a trial balance. • Preparation of adjusting journal entries. • Preparation and transmission of the State Controller's Annual Financial Transaction Report for California Special Districts. A rnember of Nexia International March 12 , 2021 East Val ley Water District Page 2 Audit objectives The objective of our audit is the expression of an opinion about whether your basic financial statements are fairly presented, in all material respects, in conformity with accounting principles generally accepted in the United States of America (U.S . GAAP). Our audit will be conducted in accordance with auditing standards generally accepted in the United States of America (U.S. GAAS) and the standards for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, and will include tests of your accounting records and other procedures we consider necessary to enable us to express such an opinion. We will apply certain limited procedures to the RSI in accordance with U.S. GAAS . However, we will not express an opinion or provide any assurance on the RSI because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. We will also perform procedures to enable us to express an opinion on whether the supplementary i nformation other than RSI accompanying the financial statements is fairly stated, in all material respects, in relation to the financial statements as a whole. We will issue a written report upon completion of our audit of your financial statements. 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. If our opinions are other than unmodified, we will discuss the reasons with you in advance . If circumstances occur related to the condition of your records, the availability of sufficient, appropriate audit evidence, or the existence of a significant risk of materia l misstatement of the financial statements caused by error, fraudulent financial reporting, or misappropriation of assets, which in our professional judgment prevent us from completing the audit or forming opinions on the financial statements, we retain the right to take any course of action permitted by professional standards, including declining to express opinions or issue a report, or withdrawing from the engagement. We will also provide a report (which does not include an opinion) on internal control related to the financial statements and on compliance with the provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a material effect on the financial statements, as required by Government Auditing Standards . The report on internal control over financial reporting and on compliance and other matters will include a paragraph that states (1) that the purpose of the report is solely to describe the scope of our testing of internal control and compliance and the result of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance, and (2) that the report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. The paragraph will also state that the report is not suitable for any other purpose. If during our audit we become aware that the entity is subject to an audit requirement that is not encompassed in the terms of this engagement, we will communicate to management and those charged with governance that an audit conducted in accordance with U.S. GAAS and the standards for financial audits contained in Government Auditing Standards may not satisfy the relevant legal, regulatory, or contractual requirements. Auditor responsibilities, procedures, and limitations We will conduct our audit in accordance with U.S. GAAS and the standards for financial audits contained in Government Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the basic financial statements as a whole are free from material misstatement, whether due to fraud or error. An audit involves performing procedures to obtain suffi cient appropriate audit evidence about the amounts and disclosures in the basic financial statements . The procedures March 12, 2021 East Valley Water District Page 3 selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. 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 basic financial statements. There is an unavoidable risk, because of the inherent limitations of an audit, together with the inherent limitations of internal control, that some material misstatements may not be detected, even though the audit is properly planned and performed in accordance with U.S. GAAS and Government Auditing Standards. Because we will not perform a detailed examination of all transactions, material misstatements, whether from (1) errors, (2) fraudulent financial reporting, (3) misappropriation of assets, or (4) violations of laws or governmental regulations that are attributable to the entity or to acts by management or employees acting on behalf of the entity, may not be detected. Because the determination of waste and abuse is subjective, Government Auditing Standards do not require auditors to perform specific procedures to detect waste or abuse in financial audits nor do they expect auditors to provide reasonable assurance of detecting waste or abuse. 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 the financial statements. However, we will inform the appropriate level of management and those charged with governance of any material errors, fraudulent financial reporting, or misappropriation of assets that come to our attention. We will also inform the appropriate level of management and those charged with governance of any violations of laws or governmental regulations that come to our attention, unless clearly inconsequential. In making our risk assessments, we consider internal control relevant to the entity's preparation and fair presentation of the basic 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 ofthe entity's internal control. Tests of controls may be performed to test the effectiveness of certain controls that we consider relevant to preventing and detecting fraud or errors that are material to the financial statements and to preventing and detecting misstatements resulting from noncompliance with provisions of laws, regulations, contracts, and grant agreements that have a material effect on 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 deficiencies, significant deficiencies, or material weaknesses in internal control. However, we will communicate to you in writing significant deficiencies or material weaknesses in internal control relevant to the audit of the basic financial statements that we identify during the audit that are required to be communicated under AICPA professional standards and Government Auditing Standards. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we will perform tests of the entity's compliance with the provisions of laws, regulations, contracts, and grant agreements that have a material effect on the financial statements . However, the objective of our audit 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. We will include in our report on internal control over financial reporting and on compliance relevant information about any identified or suspected instances of fraud and any identified or suspected noncompliance with March 12, 2021 East Val ley Water District Page 4 provisions of laws, regulations, contracts, or grant agreements that may have occurred that are required to be communicated under Government Auditing Standards. 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. Management responsibilities Our audit w i ll be conducted on the basis that you (management and, when appropriate, those charged with governance) acknowledge and understand that you have certain responsibilities that are fundamental to the conduct of an audit. You are responsible for the preparation and fair presentation of the financial statements, RSI and statistical section in accordance with U.S. GAAP . Management's responsibilities include the selection and application of accounting principles; recording and reflecting all transactions in ,the financial statements; determining the reasonableness of significant accounting estimates included in the financial statements; 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 latest per iod presented are immaterial, both individually and in the aggregate, to the financial statements taken as a whole. You are responsible for the design, implementation, and maintenance of effective i nterna l control, including evaluating and monitoring ongoing activities, to help ensure that appropriate goals and objectives are met relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. You are responsible for the design, implementation, and maintenance of internal controls to prevent and detect fraud; assessing the risk that the financ i al statements may be materially misstated as a result of fraud; and for informing us about all known or suspected fraud affecting the entity involving (1) management, (2) employees who have significant roles in internal control, and (3) others where the fraud could have a material effect on the financial statements. Your responsibilities include informing us of your knowledge of any allegations of fraud or suspected fraud affecting the entity received in communications from employees, former employees, grantors, regulators, or others. I n addition, you are responsible for implementing systems designed to achieve compliance with applicable laws and regulations and the provisions of contracts and grant agreements; identifying and ensuring that the entity complies with applicable laws, regulations, contracts, and grant agreements; and informing us of all instances of identified or suspected noncompliance whose effects on the financial statements should be considered. You are responsible for taking timely and appropriate steps to remedy any fraud; noncompliance with provis i ons of laws, regulations, contracts, or grant agreements; or abuse that we may r eport. You are responsible for ensuring that management is reliable and for providing us with (1) access to all information of which you are aware that is relevant to the preparation and fair presentation of the financial statements, such as records, documentation, and other matters, and for the accuracy and completeness of that information, and for ensuring the information is reliable and properly reported; (2) additional information that we may request for the purpose of the audit; and (3) unrestricted access to persons within the entity from whom we determ i ne it necessary to obtain audit evidence. You agree to inform us of events occurring or facts discovered subsequent to the date of the financial statements that may affect the financial statements. March 12, 2021 East Valley Water District Page 5 Management is responsible for the preparation of the supplementary information in accordance with U.S. GAAP . You agree to include our report on the supplementary information in any document that contains, and indicates that we have reported on, the supplementary information. You also agree to include the audited financial statements with any presentation of the supplementary information that includes our report thereon or make the audited financial statements readily available to users of the supplementary information no later than the date the supplementary information is issued with our report thereon. You agree to provide us written representations related to the presentation of the supplementary information. Management is responsible for providing us with a written confirmation concerning representations made by you and your staff to us in connection with the audit and the presentation of the basic financial statements and RSI. During our engagement, we will request information and explanations from you regarding, among other matters, the entity's activities, internal control, future plans, specific transactions, and accounting systems and procedures. The procedures we will perform during our engagement and the conclusions we reach as a basis for our report will be heavily influenced by the representations that we receive in the representation letter and otherwise from you . Accordingly, inaccurate, incomplete, or false representations could cause us to expend unnecessary effort or could cause a material fraud or error to go undetected by our procedures. In view of the foregoing, you agree that we shall not be responsible for any misstatements in the entity's financial statements that we may fail to detect as a result of misrepresentations made to us by you. 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 other 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 other engagements 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. Responsibilities and limitations related to nonaudit services For all nonaudit services we may provide to you, management agrees to assume all management responsibilities; oversee the services by designating an individual, preferably within senior management, who possesses suitable skill, knowledge, and/or experience to understand and oversee the services; evaluate the adequacy and results of the services; and accept responsibility for the results of the services. Management is also responsible for ensuring that your data and records are complete and that you have received sufficient information to oversee the services . The responsibilities and limitations related to the nonaudit services performed as part of this engagement are as follows: • We will prepare a trial balance for use during the audit. Our preparation of the trial balance is limited to formatting information into a working trial balance based on management's chart of accounts or general ledger. You will be required to review, approve, and accept responsibility for the trial balance. • We will propose adjusting journal entries as needed. You will be required to review and approve those entries and to understand the nature of the changes and their impact on the financial statements. March 12, 2021 Ea st Valley Water District Page 6 • We will prepare the Annual Financial Transactions Report for California Special Districts as required by the State Controller's Office. You will be required to review and approve the report prior to its transmission to the State Controller's Office . These nonaudit services do not constitute an audit under Government Auditing Standards and such services will not be conducted in accordance with Government Auditing Standards. Use of financial statements The financial statements and our report thereon are for management's use . If you intend to reproduce and publish the financial statements and our report thereon, they must be reproduced in their entirety. Inclusion of the audited financial statements in a document, such as an annual report or an offering document, should be done only with our prior approval of the document. You are responsible to provide us the opportunity to review such documents before issuance. If the parties (i.e ., you and CLA) agree that CLA will not be involved with your official statements related to municipal securities filings or other offering documents, we will require that any official statements or other offering documents issued by you with which we are not i nvolved clearly indicate that CLA is not i nvolved with the contents of such documents . Such disclosure should read as follows : CliftonlarsonAllen LLP, our independent auditor, has not been engaged to perform and has not performed, since the date of its report included herein, any procedures on the financial statements addressed in that report. CliftonlarsonAllen LLP also has not performed any procedures relating to this offering document. With regard to the electronic dissemination of audited financial statements, including financial statements published electronically on your website or submitted on a regulator website, you understand that electronic sites are a means to distribute information and, therefore, we are not required to read the information contained in those sites or to consider the consistency of other information in the electronic site with the origina l document. We may issue preliminary draft financial statements to you for your review. Any preliminary draft financial statements should not be relied on or distributed. Engagement administration and other matters We expect to begin our audit interim work in April 2021 and our final field work in September 2021. We understand that your employees will prepare all confirmations, account analyses, and audit schedules we request and will locate any documents or invoices selected by us for testing. A list of information we expect to need for our audit and the dates required will be provided in a separate communication. We will provide copies of our reports to the entity; however, management is responsible for distribution of the reports and the financial statements. Unless restricted by law or regulation, or containing privileged and confidential information, copies of our reports are to be made available for public inspection. March 12, 2021 East Valley Water District Page 7 The audit documentation for this engagement is the sole and exclusive property of CLA and constitutes confidential and proprietary information. However, subject to applicable laws and regulations, audit documentation and appropriate individuals will be made available upon request and in a timely manner to a regulator or its designee, the U.S. Government Accountability Office for purposes of a quality review ofthe 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 CLA 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 seven years after the report release date or for any additional period requested by the regulator. If we are aware that a federal awarding agency, pass-through entity, or auditee is contesting an audit finding, we will contact the party(ies) contesting the audit finding for guidance prior to destroying the audit documentation. CLA will not disclose any confidential, proprietary, or privileged information ofthe entity to any persons without the authorization of entity management or unless required by law. This confidentiality provision does not prohibit us from disclosing your information to one or more of our affiliated companies in order to provide services that you have requested from us or from any such affiliated company . Any such affiliated company shall be subject to the same restrictions on the use and disclosure of your information as apply to us . Our engagement and responsibility end on delivery of our signed report. Any additional services that might be requested will be a separate, new engagement. The terms and conditions of that new engagement will be governed by a new, specific engagement letter for that service . Government Auditing Standards require that we make our most recent external peer review report publicly available. The r eport is posted on our website at www.CLAconnect.com/Aboutus/. Mediation Any disagreement, controversy, or claim ("Dispute") that may arise out of any aspect of our services or relationship with you, including this engagement, shall be submitted to non-binding mediation by written notice ("Mediation Notice") to the other party. In mediation, we will work with you to resolve any differences voluntarily with the aid of an impartial mediator. The mediation will be conducted as specified by the mediator and agreed upon by the parties. The parties agree to discuss their differences in good faith and to attempt, with the assistance of the mediator, to reach an amicable resolution of the Dispute. Each party will bear its own costs in the mediation. The fees and expenses of the mediator will be shared equally by the parties. Any Dispute will be governed by the laws of the state of California, without giving effect to choice of law principles. March 12, 2021 East Valley Water District Page 8 Time limitation The nature of our services makes it difficult, with the passage of time, to gather and present evidence that fully and fairly establishes the facts underlying any Dispute that may arise between the parties. The parties agree that, notwithstanding any statute or law of limitations that might otherwise apply to a Dispute, including one arising out of this agreement or the services performed under this agreement, for breach of contract or fiduciary duty, tort, fraud, misrepresentation or any other cause of action or remedy, any action or legal proceeding by you against us must be commenced within twenty-four (24) months ("Limitation Period") after the date when we deliver our final audit report under this agreement to you, regardless of whether we do other services for you relating to the audit report, or you shall be forever barred from commencing a lawsuit or obtaining any legal or equitable relief or recovery. The Limitation Period applies and begins to run even if you have not suffered any damage or loss, or have not become aware ofthe existence or possible existence of a Dispute . Fees Our professional fees will be billed based on the time involved and the degree of responsibility and skills required . Based on our preliminary estimates, the total fees and expenses for the engagement should approximate $20,300 for the audit, $900 for preparation and transmission of the State Controller's Annual Financial Transaction Report for California Special Districts, and $4,500 for single audit examination of all federal grants, if applicable. This estimate is based on anticipated cooperation from your personnel and their assistance with preparing confirmations and requested schedules. lfthe requested items are not available on the dates required or are not accurate, the fees and expenses will likely be higher. If unexpected circumstances require significant additional time, we will advise you before undertaking work that would require a substantial increase in the fee and expense estimate . Our invoices, including applicable state and local taxes, 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 30 days or more overdue and will 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 even if we have not issued our reports. You will be obligated to compensate us for all time expended and related fees and to reimburse us for all out-of-pocket expenditures through the date of termination . Changes in accounting and audit standards Standard setters and regulators continue to evaluate and modify standards. Such changes may result in new or rev ised financial reporting and disclosure requirements or expand the nature, timing, and scope of the activities we are requ i red to perform. To the extent that the amount of time required to provide the services described in this letter increases due to such changes, our fee may need to be adjusted. We will discuss such circumstances with you prior to performing the additional work. Changes related to COVID-19 COVID -19 continues to have significant direct and indirect impacts on financial reporting, disclosure requirements, and the nature, timing, and scope of the activities we are required to perform . To the extent that the amount of time required to provide the services described in this letter increases due to such changes, our fee may need to be adjusted . We will discuss such circumstances with you prior to performing the additiona l work . March 12, 2021 East Valley Water District Page 9 Other fees You also agree to compensate us for any time and expenses, including time and expenses of legal counsel, we may incur in responding to discovery requests or participating as a witness or otherwise in any legal, regulatory, or other proceedings that we are asked to respond to on your behalf. Subcontractors CLA may, at times, use subcontractors to perform services under this agreement, and they may have access to your information and records . Any such subcontractors will be subject to the same restrictions on the use of such information and records as apply to CLA under this agreement . Agreement We appreciate the opportunity to be of service to you and believe this letter accurately summarizes the significant terms of our engagement. This letter constitutes the entire agreement regarding these services and supersedes all prior agreements (whether oral or written), understandings, negotiations, and discussions between you and CLA . If you have any questions, please let us know. Please sign, date, and return a copy of this letter to us to indicate your acknowledgment and understanding of, and agreement with, the arrangements for our audit of your financial statements including the terms of our engagement and the parties' respect ive responsibilities. Sincerely, CliftonlarsonAllen LLP Renee S. Graves, CPA, CGFM Principal 626-857-7300 Renee .Graves@CLAconnect.com Response: This letter correctly sets forth the understanding of East Valley Water District. Authorized governance signature : ___________________ _ Title: ___________________________ _ Date: _____________________________ _ March 12, 2021 East Valley Water District Page 10 Authorized management signature:--,,~-=::.---~·~~--=.-~--------- Title : ____ C-Fi;>--'----------------------- Date: ___ ...3.~(t_,s~/u_?(~-------------- March 15, 2021 Mr. Brian Tompk i ns East Valley Water District 31111 Greenspot Road Highland, CA 92346 Dear Mr. Tompkins : Cltflon l msonAllon LLP 22 10 East Ro ute 66 Glendora, CA 91740 626 .857.7300 I tax 626 .857.7302 CLAcon nect.corn We are pleased to confi r m ou r understanding of the additiona l services CliftonlarsonAllen LLP ("C LA," "we," "us," and "ou r") will provide for East Valley Water District ("you," "your," "District," or "the entity") for the ended June 30, 2021. This lette r constitutes an addendum to our original audit engagement letter dated March 12, 2021. The purpose of this letter is to outl i ne additional se rvices you wish us to perform in connection with that aud it engagement. Scope of additional services We will complete additional audit services associated with audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Audit objective Our audit will be conducted i n accordance with aud iting requ i rements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Our audit w i ll include tests of your accounting records, a determination of major program(s) in accordance w ith the Uniform Guidance, and other procedures we cons i der necessary to enable us to express opinions and rende r the required repo rts. The objectives of our audit also i nclude : • Reporting on i nternal con t rol over compl i ance related to major programs and expressing an opinion (or disclaime r of opinion) on compliance with federal statutes , regulations, and the terms and conditions of federa l awards that could have a direct and material effect on each major program i n accordance with the Uniform Guidance . The Uniform Gu idance report on i nternal control over compliance will i nclude a paragraph that states that the purpose of the report on internal control over compliance is solely to describe the scope of our testing of interna l contro l over comp l iance and the result of that testing based on the requirements of the Un iform Gu idance . The report w i ll state that t he report is not suitable for any other purpose . We wi ll issue written reports upon completion of our audit of your financial statements and compliance w ith requirements applicable to majo r programs . We cannot provide assurance that unmodified opinions will be @ Amemberof Nexia International March 15, 2021 East Valley Water District Page 2 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 . If our opinions on the single audit compliance opinion are other than unmodified, we will discuss the reasons with you in advance. If circumstances occur related to the condition of your records, the availability of sufficient, appropriate audit evidence, or the existence of a significant risk of the material noncompliance caused by error, fraudulent financial reporting, or misappropriation of assets, which in our professional judgment prevent us from completing the audit or forming opinions on compliance, we retain the right to take any course of action permitted by professional standards, including declining to express opinions or issue reports, or withdrawing from the engagement. Auditor responsibilities, procedures, and limitations There is an unavoidable risk, because of the inherent limitations of an audit, together with the inherent limitations of internal control, that some material misstatements or noncompliance may not be detected, even though the audit is properly planned and performed in accordance with the Uniform Guidance. Because we will not perform a detailed examination of all transactions, material misstatements, whether from (1) errors, (2) fraudulent financial reporting, (3) misappropriation of assets, or (4) violations of laws or governmental regulations that are attributable to the entity or to acts by management or employees acting on behalf of the entity, may not be detected . 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 the financial statements or on major programs. However, we will inform the appropriate level of management and those charged with governance of any material errors, fraudulent financial reporting, or misappropriation of assets that come to our attention. We will also inform the appropriate level of management and those charged with governance of any violations of laws or governmental regulations that come to our attention, unless clearly inconsequential. We will include such matters in the reports required for a single audit. In making our risk assessments, we consider internal control relevant to the entity's compliance 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. Tests of controls may be performed to test the effectiveness of certa i n controls that we consider relevant to preventing and detecting misstatements resulting from noncompliance with provisions of laws, regulations, contracts, and grant agreements that have a material effect on 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. As required by the Uniform Guidance, we will perform tests of controls over compliance to evaluate the effectiveness of the design and operation of controls that we consider relevant to preventing or detecting material noncompliance with the direct and material compliance requirements applicable to each major federal award program. However, our tests will be less in scope than would be necessary to render an opinion on those controls and, accordingly, no opinion will be expressed in our report on internal control issued pursuant to the Uniform Guidance . An audit is not designed to provide assurance on internal control or to identify deficiencies, significant deficiencies, or material weaknesses in internal control. However, we will communicate to you in writing significant deficiencies or material weaknesses in internal control relevant to the audit of the basic financial March 15, 2021 East Valley Water District Page 3 statements that we identify during the audit that are required to be communicated under the Uniform Guidance. The Uniform Guidance requires that we also plan and perform the audit to obtain reasonable assurance about whether the auditee has complied with federal statutes, regulations, and the terms and conditions of federal awards that may have a direct and material effect on each of the entity's major programs. Our procedures will consist oftests of transactions and other applicable procedures described in the "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 these 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 . We will evaluate the presentation of the schedule of expenditures of federal awards accompanying the financial statements in relation to the financial statements as a whole. We will make certain inquiries of management and evaluate the form, content, and methods of preparing the schedule to determine whether the information complies with U.S. GAAP and the Uniform Guidance, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We will compare and reconcile the schedule to the underlying accounting records and other records used to prepare the financial statements or to the financial statements themselves. 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. Management responsibilities Our audit will be conducted on the basis that you (management and, when appropriate, those charged with governance) acknowledge and understand that you have certain responsibilities that are fundamental to the conduct of an audit. You are responsible for the preparation and fair presentation of the schedule of expenditures of federal awards in accordance with U.S. GAAP. Management is also responsible for identifying all federal awards received, understanding and complying with the compliance requirements, and for the preparation of the schedule of expenditures of federal awards (including notes and non cash assistance received) in accordance with the requirements of the Uniform Guidance. Management is responsible for compliance with applicable laws and regulations and the provisions of contracts and grant agreements, including compliance with federal statutes, regulations, and the terms and conditions of federal awards applicable to the entity's federal programs . Your responsibilities also include identifying significant contractor relationships in which the contractor has responsibility for program compliance and for the accuracy and completeness of that information. You are responsible for the design, implementation, and maintenance of effective internal control, including internal control over compliance, and for evaluating and monitoring ongoing activities to help ensure that appropriate goals and objectives are met relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; and that there is reasonable assurance that government programs are administered in compliance with compliance requirements. March 15 , 2021 East Valley Wate r District Page 4 Management is responsible for designing and implementing systems designed to achieve compliance with applicable laws and regu lations and the provisions of contracts and grant agreements, including compliance with federal statutes, regulations, and the terms and conditions of federal awards applicable to the entity's federal programs; identifying and ensuring that the entity complies with applicable laws, regulations, contracts, and grant agreements, including compliance with federal statutes, regulations, and the terms and conditions of federal awards applicable to the entity's federal programs; and informing us of all instances of identified or suspected noncompliance whose effects on the financial statements should be considered . You are responsible for taking timely and appropriate steps to remedy any fraud and noncompliance with provisions of laws, regulations, contracts, and grant agreements that we may report. Additi onally, as required by the Unifor m Guidance, it is management's responsibility to evaluate and monitor noncompliance with federal statutes, regu lations, and the terms and conditions of federal awards; take prompt action when instances of noncompliance are identified, including noncompliance identified in audit findings; and to follow up and take prompt corrective action on reported audit findings and to prepare a summary schedule of prior audit findings and a corrective action plan . You are responsible for ensuring that management is reliable and for providing us with access to personnel, accounts, books, records, support i ng documentation, and other information as needed to perform an audit under the Uniform Guidance. You agree to include our report on the schedule of expenditures of federal awards in any document that contains and indicates that we have reported on the schedule of expenditures of federal awards. You also agree to include the aud ited financial statements with any presentation of the schedule of expenditures of federal awards that i ncludes our report thereon or make the audited financial statements readily available to intended users of the schedule of expenditures of federal awards no later than the date the schedule of expenditures of federa l awards is issued with our report thereon . Your responsibilities include acknowledging to us in the representation letter that (1) you are responsible for presentation of the schedule of expenditures of federal awards in accordance with the Uniform Guidance; (2) You believe the schedule of expenditures of federal awards, including its form and content, is fairly presented in accordance with the Uniform Guidance; (3) the methods of measurement or presentation have not changed from those used in the prior period (or, ifthey have changed, the reasons for such changes); and (4) you have disclosed to us any significant assumptions or interpretations underlying the measurement or presentation of the schedule of expenditures of federal awards. Engagement administration and other matters At the conclusion of the engagement, we will complete the auditor sections of the electronic Data Collection Form SF-SAC and perform the steps to certify the Form SF -SAC and single audit reporting package . It is management's responsibility to complete the auditee sections of the Data Collection Form . We will create the single audit reporting package PDF file for submission; however, it is management's responsibility to review for completeness and accuracy and electronically submit the reporting package (including financial statements, schedule of expenditures of federal awards, summary schedule of prior audit findings, auditors' reports, and corrective action plan) along with the Data Collection Form to the federal audit clearinghouse and, if appropriate, to pass -through entities . The Data Collection Form and the reporting package must be electronically submitted within the earlier of 30 calendar days after receipt of the auditors' reports or nine months after the end of the audit period. March 15, 2021 East Valley Water District Page S The audit documentation for this engagement is the sole and exclusive property of CLA and constitutes confident ial and proprietary information . However, subject to applicable laws and regulations, audit documentation and appropriate individuals will be made available upon request and in a timely manner to oversight agency for audit or pass-through entity, 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 CLA 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 seven years after the report release date or for any additional period requested by the oversight agency for audit or pass-through entity. If we are aware that a federal awarding agency, pass-through entity, or auditee is contesting an audit finding, we will contact the party(ies) contesting the audit finding for guidance prior to destroying the audit documentation. Fees Based on our experience with the various federal programs applicable to the District, we estimate the fee required to complete the current year single audit, and to complete the auditor sections of the electronic Data Collection Form SF-SAC and perform the steps to certify the Form SF-SAC and single audit reporting package and will be $4,500 . Agreement We appreciate the opportunity to be of service to you and believe this letter accurately summarizes the significant terms of our engagement. All terms of our original audit engagement letter will apply to this addendum. This addendum will become effective as soon as you sign and date the response and return a signed copy to us. If you have any questions, please let us know. Sincerely, CliftonlarsonAllen LLP Renee Graves, CPA, CGFM Principal Response: Th is letter correctly sets forth the understanding of the East Valley Water District March 15, 2021 East Valley Water District Page 6 Authorized Signature: _ ___..,..~,c._-·---~---------- Title: _______ c,r()~-------------- Date: ______ 3/2.__1$i-+0-~_l)t_l _______ _ Authorized Signature: _________________ _ Title: _______________________ _ Date: _______________________ _ March 15, 2021 Mr. Brian Tompkins East Valley Water District 31111 Greenspot Road Highland, CA 92346 Dear Mr. Tompkins: Cliflo nL arsonAllc n LLP 22 10 Eas t Ro ut e 66 Gle ndo ra, CA 91740 626 .857.7300 I ta x 626 .857.7302 CLAcon ncct.com We are pleased to confirm our understanding ofthe additional services CliftonlarsonAllen LLP ("CLA," "we," "us," and "our"} will provide for East Valley Water District ("you," "your," "District," or "the entity"} for the ended June 30, 2021. This letter constitutes an addendum to our original audit engagement letter dated March 15, 2021. The purpose of this letter is to outline additional services you wish us to perform in connection with that audit engagement. Scope of additional services We will complete additional nonaudit services associated with the implementation of GASB Statement No. 75 and the continued disclosures required by GASB Statement No. 68 as they relate to calculations, discussions and guidance with the District's actuary and other procedures that fall within management's responsibilities. Audit objective Management is responsible for ensuring that the financial information is reliable and properly reported, for the selection and application of accounting principles and for the preparation and fair presentation of the financial statements . The District is responsible to continue to record and disclose transactions and balances related to the OPEB plan on an annual basis beginning with the fiscal year 2017-18: Statement No. 75 -Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions Implement the recognition, measurement, and presentation of information about OPEB, including new footnote disclosures and required supplementary information schedules. The District is responsible to continue to record and disclose transactions and balances related to the pension plan offered through CalPERs on an annual basis beginning with the fiscal year 2014-15: Statement No. 68 -Accounting and Financial Reporting for Pensions-an amendment of GASB Statement No. 27 March 15, 2021 East Valley Water District Page 2 Management responsibilities Management is responsible for the accuracy of the information related to the accounting and disclosures for Pension Plans and Other Post-Employment Benefit Plans. Management is responsible for making all financial records and related information available to us and for the accuracy and completeness of that information . Management's responsibilities include providing us with a management representation letter confirming to us that all relevant information related to Pension Plans and Other Post-Employment Benefit Plans has been provided to us and that management is responsibility for the preparation and fair presentation of the financial statements in accordance with U.S. GAAP. Fees GASB Statement No. 75 Based on our experience with the GASB Statement applicable to Other Post-Employment Benefits (OPEB), we estimate the fee required to complete the necessary calculations to adjust beginning net position and properly report all required disclosures and Required Supplementary Information, and to derive the relevant entries necessary to report the annual audited financial statements in accordance with governmental accounting standards to range between $750-$1,000. GASB Statement No. 68 Based on our experience with the various GASB Statements applicable to Pensions, we estimate the fee required to complete the current year calculations to record 2020-21 activity, and to update current year disclosures and required supplementary information will range between $750-$1,000. Total additional billings related to this addendum will not exceed $2,000. Agreement We appreciate the opportunity to be of service to you and believe this letter accurately summarizes the significant terms of our engagement. All terms of our original audit engagement letter will apply to this addendum. This addendum will become effective as soon as you sign and date the original and copy of this letter and return a signed copy to us. If you have any questions, please let us know . Sincerely, CliftonlarsonAllen LLP Renee Graves, CPA, CGFM Principal March 15, 2021 East Valley Water District Page 3 Response: This letter correctly sets forth the understanding of the East Valley Water District Authorized Signature :--~---=-'/)=-· -'/j)'-=_,,_¥-""""'~=-------- Title: c.,_r-, ------------------------- Date : ------"'-3'+-'rfL_¥-='l...c....02.;;;_;_I _______ _ Authorized Signa t ure : __________________ _ Ti t le: _______________________ _ Date : ________________________ _ June 8, 2021    Finance Committee  East Valley Water District  Highland, California    We are engaged to audit the financial statements of East Valley Water District as of and for the year ended June  30, 2021. Professional standards require that we communicate to you the following information related to our  audit. We will contact you to schedule a meeting to discuss this information since a two‐way dialogue can  provide valuable information for the audit process.  Our responsibility under Auditing Standards Generally Accepted in the United States of America and OMB  Circular A‐133  Our responsibilities, as described by professional standards, are as follows:   Forming and expressing opinions about whether the financial statements prepared by management with  your oversight are fairly presented, in all material respects, in conformity with accounting principles  generally accepted in the United States of America.    Considering, as part of planning and performing our audit, the entity’s internal control over financial  reporting in order to determine our auditing procedures for the purpose of expressing our opinions on  the financial statements and not to provide assurance on the internal control over financial reporting.    Considering internal control over compliance with requirements that could have a direct and material  effect on a major federal program in order to determine our auditing procedures for the purpose of  expressing our opinion on compliance and to test and report on internal control over compliance in  accordance with OMB Circular A‐133.   Planning and performing the audit to obtain reasonable, rather than absolute, assurance about whether  the financial statements as a whole are free from material misstatement.   Performing, as part of obtaining reasonable assurance about whether the entity’s financial statements  are free of material misstatement, tests of the entity’s compliance with certain provisions of laws,  regulations, contracts, and grants, noncompliance with which could have a direct and material effect on  the determination of financial statement amounts. However, providing an opinion on compliance with  those provisions is not an objective of our audit.    Examining, in accordance with OMB Circular A‐133, on a test basis, evidence about the entity’s  compliance with the types of compliance requirements described in the “U.S. Office of Management  and Budget (OMB) Circular A‐133 Compliance Supplement” applicable to each of its major federal  programs for the purpose of expressing an opinion on the entity’s compliance with those requirements.  While our audit will provide a reasonable basis for our opinion, it will not provide a legal determination  on the entity’s compliance with those requirements.  June 8, 2021  East Valley Water District  Page 2   Communicating significant matters related to the financial statement audit that are, in our professional  judgment, relevant to your responsibilities in overseeing the financial reporting process. However, we  are not required to design procedures specifically to identify such matters.   Communicating matters required by law, regulation, agreement, or other requirements.   Our audit of the financial statements does not relieve you or management of your responsibilities.  With respect to the required supplementary information (RSI) accompanying the financial statements, we will  make certain inquiries of management about the methods of preparing the RSI, including whether the RSI has  been measured and presented in accordance with prescribed guidelines, whether the methods of measurement  and preparation have been changed from the prior period and the reasons for any such changes, and whether  there were any significant assumptions or interpretations underlying the measurement or presentation of the  RSI. We will compare the RSI for consistency with management’s responses to the foregoing inquiries, the basic  financial statements, and other knowledge obtained during the audit of the basic financial statements. Because  these limited procedures do not provide sufficient evidence, we will not express an opinion or provide any  assurance on the RSI.  Our responsibility for the schedule of expenditures of federal awards (SEFA) accompanying the financial  statements, as described by professional standards, is to evaluate the presentation of the SEFA in relation to the  financial statements as a whole and to report on whether the SEFA is fairly stated, in all material respects, in  relation to the financial statements as a whole. We will make certain inquiries of management and evaluate the  form, content, and methods of preparing the SEFA to determine whether the SEFA complies with the  requirements of U.S. Office of Management and Budget Circular A‐133, Audits of States, Local Governments, and  Non‐Profit Organizations, the method of preparing it has not changed from the prior period, and the SEFA is  appropriate and complete in relation to our audit of the financial statements. We will compare and reconcile the  SEFA to the underlying accounting records used to prepare the financial statements or to the financial  statements themselves.   Our responsibility for other supplementary information accompanying the financial statements, as described by  professional standards, is to evaluate the presentation of the supplementary information in relation to the  financial statements as a whole and to report on whether the supplementary information is fairly stated, in all  material respects, in relation to the financial statements as a whole. We will make certain inquiries of  management and evaluate the form, content, and methods of preparing the information to determine whether  the information complies with accounting principles generally accepted in the United States of America, the  method of preparing it has not changed from the prior period, and the information is appropriate and complete  in relation to our audit of the financial statements. We will compare and reconcile the supplementary  information to the underlying accounting records used to prepare the financial statements or to the financial  statements themselves.   Our auditors’ opinions, the audited financial statements, and the notes to financial statements should only be  used in their entirety. Inclusion of the audited financial statements in a document you prepare, such as an  annual report, should be done only with our prior approval and review of the document. Our responsibility for  other information in documents containing the entity’s financial statements and our auditors’ report does not  extend beyond the financial information identified in the report. We have no responsibility for determining  June 8, 2021  East Valley Water District  Page 3  whether such other information is properly stated and do not have an obligation to perform any procedures to  corroborate other information contained in such documents. We are required by professional standards to read  the other information in order to identify material inconsistencies between the audited financial statements and  the other information because the credibility of the audited financial statements and our report may be  undermined by material inconsistencies between the audited financial statements and other information.   Planned scope and timing of the audit  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial  statements; therefore, our audit will involve judgment about the number of transactions to be examined and  the areas to be tested.  Our audit of the financial statements will include obtaining an understanding of the entity and its environment,  including internal control, sufficient to assess the risks of material misstatement of the financial statements and  to design the nature, timing, and extent of further audit procedures. Material misstatements may result from  (1) errors, (2) fraudulent financial reporting, (3) misappropriation of assets, or (4) violations of laws or  governmental regulations that are attributable to the entity or to acts by management or employees acting on  behalf of the entity. We will generally communicate our significant findings at the conclusion of the audit.  However, some matters may be communicated sooner, particularly if significant difficulties are encountered  during the audit where assistance is needed to overcome the difficulties or if the difficulties may lead to a  modified opinion. We will also communicate any internal control related matters that are required to be  communicated under professional standards.   We expect to begin our audit in April 2021 and issue our report in October 2021.  Other planning matters   Recognizing the importance of two‐way communication, we encourage you to provide us with information you  consider relevant to the audit. This may include, but is not limited to, the following items:   Your views about the following matters:   o The appropriate person(s) in the entity's governance structure with whom we should  communicate.  o The allocation of responsibilities between those charged with governance and management.  o The entity's objectives and strategies and the related business risks that may result in material  misstatements.  o Matters you believe warrant particular attention during the audit and any areas for which you  request additional procedures to be undertaken.   o Significant communications with regulators.  o Other matters you believe are relevant to the audit of the financial statements.  June 8, 2021  East Valley Water District  Page 4   The attitudes, awareness, and actions of those charged with governance concerning (a) the entity's  internal control and its importance in the entity, including how those charged with governance oversee  the effectiveness of internal control, and (b) the detection or the possibility of fraud.    The actions of those charged with governance in response to developments in law, accounting  standards, corporate governance practices, and other related matters.   The actions of those charged with governance in response to previous communications with the auditor.   Your understanding of the risks of fraud and the controls in place to prevent and detect fraud.   How you oversee the entity’s (1) compliance with laws, regulations, and provisions of contracts and  grant agreements (2) policies relative to the prevention of noncompliance and illegal acts, and (3) use of  directives (for example, a code of ethics) and periodic representations obtained from management‐level  employees about compliance with laws, regulations, and provisions of contracts and grant agreements.   Whether you are aware of any noncompliance with laws, regulations, contracts, and grant agreements,  including measures taken to address the noncompliance.   If the entity uses a service organization, your knowledge of any fraud, noncompliance, or uncorrected  misstatements affecting the entity’s financial statements or federal award programs reported by the  service organization or otherwise known to you.  New Governmental Accounting Standards   Statement No. 84 – Fiduciary Activities   The objectives of the statement are to improve guidance regarding the recognition of fiduciary activities  for accounting and financial reporting purposes by establishing criteria for identifying fiduciary activities  of all state and local governments. The statement is effective for the fiscal year 2020‐2021.     Statement No. 87 – Leases   The objectives of the statement are to improve the accounting and financial reporting for leases by  requiring recognition of certain lease assets and liabilities for leases that previously were classified as  operating leases. Inflows of resources or outflows of resources will be recognized based on the payment  provisions of the contract. The statement establishes a single model for lease accounting based on the  foundational principle that leases are financings of the right to use an underlying asset. The statement is  effective for the fiscal year 2021‐2022.     Statement No. 90 – Majority Equity Interests  Reporting a majority equity interest in a legally separate organization and provides guidance for  reporting a component unit if 100 percent equity interest is acquired in that component unit. The  statement is effective for the fiscal year 2020‐2021.          June 8, 2021  East Valley Water District  Page 5   Statement No. 91 – Conduit Debt Obligations  The objectives of this statement are to provide a single method of reporting conduit debt obligations by  issuers and eliminate diversity by clarifying the existing definitions of the issuer, establishing standards  for accounting and financial reporting of additional arrangements associated with conduit debt  obligations, and improving required note disclosures. The statement is effective for the fiscal year 2022‐ 23.     Statement No. 92 – Omnibus 2020 (implementation may be postponed)  The objectives of this statement are to enhance comparability in accounting and financial reporting and  to improve the consistency of authoritative literature by addressing practice issues that have been  identified during implementation and application of certain GASB Statements. The statement addresses  a variety of topics. Some requirements are effective upon issuance of the statement and other  requirements are effective for the fiscal year 2022‐23.     Statement No. 93 – Replacement of Interbank Offered Rates (IBOR)  As a result of global reference rate reform, the London Interbank Offered rate (LIBOR) is expected to  cease to exist in its current form at the end of 2021. The objective of this statement is to address  accounting and financial reporting implications that result from replacement of an IBOR. The statement  is effective for the fiscal year 2022‐23.   Statement No. 94 – Public‐Private and Public‐Public Partnerships and Availability Payment  Arrangements  Addresses issues related to public‐private and public‐public partnership arrangements (PPPs). A PPP is  an arrangement in which a government (the transferor) contracts with an operator (a governmental or  nongovernmental entity) to provide public services by conveying control of the right to operate or use a  nonfinancial asset, such as infrastructure or other capital asset (the underlying PPP asset), for a period  of time in an exchange or exchange‐like transaction. The statement is effective for the fiscal year 2022‐ 23.   Statement No. 96 – Subscription‐based Information Technology Arrangements:  Guidance on the accounting and financial reporting for subscription‐based information technology  arrangements (SBITAs) for government end users (governments). The statement is effective for the fiscal  year 2022‐23.     Statement No. 97 – Certain Component Unit Criteria and Accounting and Financial Report for IRS 457  Deferred Compensation Plans:  Objectives of this Statement are to (1) increase consistency and comparability related to the reporting of  fiduciary component units; (2) mitigate costs associated with the reporting of certain defined  contribution pension plans, defined contribution other postemployment benefit (OPEB) plans, and  employee benefit plans other than pension plans or OPEB plans (other employee benefit plans); and (3)  enhance the relevance, consistency, and comparability of the accounting and financial reporting for  Internal Revenue Code (IRC) Section 457 deferred compensation plans (Section 457 plans). The  statement is effective for the fiscal year 2021‐22  * * *  June 8, 2021  East Valley Water District  Page 6  This communication is intended solely for the information and use of the Board of Director and management of  East Valley Water District and is not intended to be, and should not be, used by anyone other than these  specified parties.  Sincerely,  CliftonLarsonAllen LLP    Renee S. Graves, CPA, CGFM  Principal  626‐857‐7300  Renee.Graves@CLAconnect.com