OUR RESPONSIBILITY UNDER GENERALLY ACCEPTED AUDITING STANDARDS AND GOVERNMENT AUDITING STANDARDS

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1 October 31, 2012 Board of Education School District No. 1 Bellevue Public Schools Sarpy County, Nebraska Dear Members of the Board of Education: We have performed an audit of the financial statements modified cash basis of School District No. 1, Bellevue Public Schools, Sarpy County, Nebraska (the District ) as of and for the year ended August 31, 2012, in accordance with auditing standards generally accepted in the United States of America ( generally accepted auditing standards ) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States ( generally accepted government auditing standards ), and have issued our report thereon dated October 31, We have prepared the following comments to assist you in fulfilling your obligation to oversee the financial reporting and disclosure process for which management of the District is responsible. OUR RESPONSIBILITY UNDER GENERALLY ACCEPTED AUDITING STANDARDS AND GOVERNMENT AUDITING STANDARDS Our responsibility under generally accepted auditing standards and generally accepted government auditing standards has been described in our engagement letter dated September 19, As described in that letter, the objectives of a financial statement audit conducted in accordance with generally accepted auditing standards and generally accepted government auditing standards are to: Express an opinion on the fairness of the presentation of the District s financial statements, and to disclaim an opinion on the required supplementary information for the year ended August 31, 2012, in conformity with the modified cash basis of accounting, which is permitted by the State of Nebraska Department of Education and is a comprehensive basis of accounting other than principles generally accepted in the United States of America ( generally accepted accounting principles ), in all material respects. Express an opinion on whether the supplementary information that accompanies the basic financial statements, including the schedule of expenditures of federal awards, are presented fairly, in all material respects, in relation to the basic financial statements taken as a whole. Report on the District s internal control over financial reporting and on its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters for the year ended August 31, 2012, based on an audit of basic financial statements performed in accordance 1

2 with the standards applicable to financial audits contained in generally accepted government auditing standards. Report on the District s compliance with requirements applicable to each major program and on internal control over compliance in accordance with the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement ( OMB Circular A-133 ). Our responsibilities under generally accepted auditing standards include forming and expressing an opinion about whether the financial statements that have been prepared by management with the oversight of the Board of Education are presented fairly, in all material respects, in conformity with the modified cash basis of accounting. The audit of the financial statements does not relieve management or the Board of Education of their responsibilities. ACCOUNTING ESTIMATES Accounting estimates are an integral part of the financial statements prepared by management and are based on management s current judgments. Those judgments are ordinarily based on knowledge and experience about past and current events and on assumptions about future events. Significant accounting estimates reflected in the District s 2012 financial statements include the following: Compensated Absences The District discloses in the footnotes to the financial statements the liability for compensating employees for accumulated leave days and vacation days. Management calculates these absences based on contractual terms, including accumulated days, salary information, contract days, and maximum accumulation limits. The liability for compensated absences of the District totaled approximately $3,500,000 at August 31, Voluntary Separation Program The District discloses in the footnotes to the financial statements the liability for voluntary separation benefits for certified employees and administrators that have achieved certain age and years of service requirements. Management calculates this liability based on contractual terms, including years of credited service, age, and current salary. The liability for voluntary separation benefits of the District totaled approximately $8,400,000 at August 31, Severance Pay Years of Service The District discloses in the footnotes to the financial statements the liability for severance pay for administrative staff. Management calculates these absences based on contractual terms, including accumulated salary (excluding fringe benefits), years of service, and an established factor as outlined in the Severance Pay Years of Service plan. The liability for severance pay of the District totaled approximately $610,000 at August 31, During the year ended August 31, 2012, there were no significant changes in accounting estimates or in management s judgments relating to such estimates. 2

3 UNCORRECTED MISSTATEMENTS Our audit of the financial statements was designed to obtain reasonable, rather than absolute, assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud. There were no uncorrected misstatements or disclosure items passed identified during our audit. SIGNIFICANT ACCOUNTING POLICIES The District s significant accounting policies are set forth in Note 1 to the District s 2012 financial statements. During the year ended August 31, 2012, there were no significant changes in previously adopted accounting policies or their application. The District s financial statements are prepared in conformity with the modified cash basis of accounting, which is a comprehensive basis of accounting other than generally accepted accounting principles, in accordance with Rule 1 of the Nebraska Department of Education. DISAGREEMENTS WITH MANAGEMENT We have not had any disagreements with management related to matters that are material to the District s 2012 financial statements. CONSULTATION WITH OTHER ACCOUNTANTS We are not aware of any consultations that management may have had with other accountants about auditing and accounting matters during SIGNIFICANT ISSUES DISCUSSED, OR SUBJECT OF CORRESPONDENCE, WITH MANAGEMENT PRIOR TO OUR RETENTION Throughout the year, routine discussions were held, or were the subject of correspondence, with management regarding the application of accounting principles or auditing standards in connection with transactions that have occurred, transactions that are contemplated, or reassessment of current circumstances. In our judgment, such discussions or correspondence were not held in connection with our retention as auditors. OTHER SIGNIFICANT ISSUES DISCUSSED, OR SUBJECT OF CORRESPONDENCE, WITH MANAGEMENT Throughout the year, routine discussions were held, or were the subject of correspondence, with management. In our judgment, such discussions or correspondence did not involve significant issues requiring communication to the Board of Education. SIGNIFICANT DIFFICULTIES ENCOUNTERED IN PERFORMING THE AUDIT In our judgment, we received the full cooperation of the District s management and staff and had unrestricted access to the District s senior management in the performance of our audit. MANAGEMENT S REPRESENTATIONS We have made specific inquiries of the District s management about the representations embodied in the financial statements. Additionally, we have requested that management provide to us the written 3

4 representations the District is required to provide to its independent auditors under generally accepted auditing standards. We have attached to this letter, as Appendix A, a copy of the representation letter we obtained from management. * * * * * * This report is intended solely for the information and use of the Board of Education, and others within the organization and is not intended to be and should not be used by anyone other than these specified parties. Yours truly, cc: The Management of the District 4

5 APPENDIX A MANAGEMENT S REPRESENTATIONS Management Representation Letter (see attached) 5

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