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Page 1 November 11, 2021 Board of Trustees Chandler Worker’s Compensation and Employer Liability Trust We have audited the financial statements Chandler Worker’s Compensation and Employer Liability Trust (Trust), an internal service fund of the City of Chandler, Arizona, for the year ended June 30, 2021. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards, Government Auditing Standards as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our engagement letter provided to you during the planning phase of the audit. Professional standards also require that we communicate to you the following matters related to our audit. Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by Chandler Worker’s Compensation and Employer Liability Trust are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during the year. We noted no transactions entered into by the Trust during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates are an integral part of the financial statements prepared by management and are based on management’s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the financial statements are management’s estimates of the insurance claims incurred but not reported (IBNR) and case reserves, which are based on information provided by the entity’s third party administrator and subsequent claims activity. The financial statement disclosures are neutral, consistent, and clear. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Page 2 Audit Adjustments Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that we believe are trivial, and communicate them to the appropriate level of management. During the course of the audit we did not identify any misstatements which require communication. In addition, as part of the professional services we provided to the Trust we assisted with the preparation of the financial statements and the notes to financial statements. In providing these services we prepared adjusting journal entries (if necessary) to convert the accounting records to the basis of accounting required by generally accepted accounting principles. If applicable, those adjusting journal entries have been provided to management who reviewed and approved those entries and accepted responsibility for them. Disagreements with Management For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor’s report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain written representations from management, which are included in the management representation letter provided to us at the conclusion of the audit. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves application of an accounting principle to the Trust’s financial statements or a determination of the type of auditor’s opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants regarding auditing and accounting matters. Discussions with Management We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management throughout the course of the year. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention as the Trust’s auditors. Other Matters – Accounting Restatement The auditor’s report includes an emphasis-of-matter paragraph related to the Trust’s inclusion of actuarially-determined case reserves in the current year claims liability. As a result of this change, and as discussed in Note 4 to the financial statements, the beginning net position has been restated to reflect this correction for prior periods. Our opinion is not modified with respect to this matter. Page 3 Compliance with Ethics Requirements Regarding Independence The engagement team, others in our firm, and as appropriate, our firm, have complied with all relevant ethical requirements regarding independence. Heinfeld, Meech & Co., P.C. continually assesses client relationships to comply with relevant ethical requirements, including independence, integrity, and objectivity, and policies and procedures related to the acceptance and continuance of client relationships and specific engagements. Our firm follows the “Independence Rule” of the AICPA Code of Professional Conduct and the rules of state boards of accountancy and applicable regulatory agencies. It is the policy of the firm that all employees be familiar with and adhere to the independence, integrity, and objectivity rules, regulations, interpretations, and rulings of the AICPA, U.S. Government Accountability Office (GAO), and applicable state boards of accountancy. Responsibility for Fraud It is important for both management and the members of the governing body to recognize their role in preventing, deterring, and detecting fraud. One common misconception is that the auditors are responsible for detecting fraud. Auditors are required to plan and perform an audit to obtain reasonable assurance that the financial statements do not include material misstatements caused by fraud. Unfortunately most frauds which occur in an organization do not meet this threshold. The attached document prepared by the Association of Certified Fraud Examiners (ACFE) is provided as a courtesy to test the effectiveness of the fraud prevention measures of your organization. Some of these steps may already be in place, others may not. Not even the most well-designed internal controls or procedures can prevent and detect all forms of fraud. However, an awareness of fraud related factors, as well as the active involvement by management and the members of the governing body in setting the proper “tone at the top”, increases the likelihood that fraud will be prevented, deterred and detected. Other Important Communications Related to the Audit Attached to this letter are a copy of the signed engagement letter provided to us at the initiation of the audit, and a copy of the management representation letter provided to us at the conclusion of the audit. If there are any questions on the purpose or content of these letters please contact the engagement partner identified in the attached engagement letter. Restriction on Use This information is intended solely for the use of the members of the Board of Trustees and management of Chandler Worker’s Compensation and Employer Liability Trust and is not intended to be, and should not be, used by anyone other than these specified parties. Very truly yours, Heinfeld, Meech & Co., P.C. Tucson, Arizona Fraud Prevention Checklist The most cost-effective way to limit fraud losses is to prevent fraud from occurring. This checklist is designed to help organizations test the effectiveness of their fraud prevention measures. 1. Is ongoing anti-fraud training provided to all employees of the organization? Do employees understand what constitutes fraud? Have the costs of fraud to the company and everyone in it — including lost profits, adverse publicity, job loss and decreased morale and productivity — been made clear to employees? Do employees know where to seek advice when faced with uncertain ethical decisions, and do they believe that they can speak freely? Has a policy of zero-tolerance for fraud been communicated to employees through words and actions? 2. Is an effective fraud reporting mechanism in place? Have employees been taught how to communicate concerns about known or potential wrongdoing? Is there an anonymous reporting channel available to employees, such as a third-party hotline? Do employees trust that they can report suspicious activity anonymously and/or confidentially and without fear of reprisal? Has it been made clear to employees that reports of suspicious activity will be promptly and thoroughly evaluated? Do reporting policies and mechanisms extend to vendors, customers and other outside parties? 3. To increase employees’ perception of detection, are the following proactive measures taken and publicized to employees? Is possible fraudulent conduct aggressively sought out, rather than dealt with passively? Does the organization send the message that it actively seeks out fraudulent conduct through fraud assessment questioning by auditors? Are surprise fraud audits performed in addition to regularly scheduled audits? Is continuous auditing software used to detect fraud and, if so, has the use of such software been made known throughout the organization? 4. Is the management climate/tone at the top one of honesty and integrity? Are employees surveyed to determine the extent to which they believe management acts with honesty and integrity? Are performance goals realistic? Have fraud prevention goals been incorporated into the performance measures against which managers are evaluated and which are used to determine performance-related compensation? Has the organization established, implemented and tested a process for oversight of fraud risks by the board of directors or others charged with governance (e.g., the audit committee)? 5. Are fraud risk assessments performed to proactively identify and mitigate the company’s vulnerabilities to internal and external fraud? 6. Are strong anti-fraud controls in place and operating effectively, including the following? Proper separation of duties Use of authorizations Physical safeguards Job rotations Mandatory vacations 7. Does the internal audit department, if one exists, have adequate resources and authority to operate effectively and without undue influence from senior management? 8. Does the hiring policy include the following (where permitted by law)? Past employment verification Criminal and civil background checks Credit checks Drug screening Education verification References check 9. Are employee support programs in place to assist employees struggling with addictions, mental/ emotional health, family or financial problems? 10. Is an open-door policy in place that allows employees to speak freely about pressures, providing management the opportunity to alleviate such pressures before they become acute? 11. Are anonymous surveys conducted to assess employee morale? Page 1 August 9, 2021 Board of Trustees and Management P. O. Box 4008 Chandler, AZ 85244-4008 Compensation and Employer Liability Trust (Trust) for the year ended June 30, 2021. We encourage you to read this letter carefully as it includes important information regarding the services we will be providing to the Trust. If there are any questions on the content of the letter, or the services we will be providing, we would welcome the opportunity to meet with you to discuss this information further. Audit Scope and Objectives We will audit the financial statements and the related notes to the financial statements of Chandler as of and for the year ended June 30, 2021. Accounting standards generally accepted in the United States provide for certain required information, although not 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 proce 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 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. The objectives of our audit are to obtain reasonable assurance about whether the financial statements report that includes our opinion about whether your financial statements are fairly presented, in all material respects, in conformity with accounting principles generally accepted in the United States of America. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with auditing standards generally accepted in the United States of America will always detect a material misstatement when it exists. Misstatements, including omissions, can arise from fraud or error and are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment of a reasonable user made based on the financial statements. Page 2 An important aspect to our expression of opinions on the financial statements is understanding the concept of materiality. Our determination of materiality is a matter of professional judgment and is affected by our perception of the financial information needs of users of the financial statements. In 1. have a reasonable knowledge of business and economic activities and accounting principles, and a willingness to study the information in the financial statements with reasonable diligence; 2. understand that financial statements are prepared, presented, and audited to levels of materiality; 3. recognize the uncertainties inherent in the measurement of amounts based on the use of estimates, judgment, and the consideration of future events; and 4. make reasonable economic decisions on the basis of the information in the financial statements. Audit of the Financial Statements We will conduct our audit in accordance with auditing standards generally accepted in the United States of America 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 opinions. As part of an audit in accordance with auditing standards generally accepted in the United States of America, we exercise professional judgment and maintain professional skepticism throughout the audit. We will evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management. We will also evaluate the overall presentation of the financial statements, including the disclosures, and determine whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We will plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, 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 Trust or to acts by management or employees acting on behalf of the Trust. Because the determination of abuse is subjective, Government Auditing Standards do not expect auditors to perform specific procedures to detect waste or abuse in the financial statements nor do they expect auditors to provide reasonable assurance of detecting waste or abuse. Because of the inherent limitations of an audit, combined with the inherent limitations of internal control, and because we will not perform a detailed examination of all transactions, there is an unavoidable risk that some material misstatements may not be detected by us, even though the audit is properly planned and performed in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards. 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 of any material errors, fraudulent financial reporting, or misappropriation of assets that comes to our attention. We will also inform the appropriate level of management of any violations of laws or governmental regulations that come to our attention, unless clearly inconsequential. We will include such matters in the report the Government Auditing Standards report on internal control over financial reporting and on compliance and other matters. 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. Page 3 We will obtain an understanding of the Trust and its environment, including internal control relevant to the audit, sufficient to identify and assess the risks of material misstatement of the financial statements, whether due to error or fraud, and to design and perform audit procedures responsive to those risks and obtain evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentation, or the override of internal control. An audit is not designed to provide assurance on internal control or to identify deficiencies in internal control. Accordingly, we will express no such opinion. However, during the audit, we will communicate to you and those charged with governance internal control related matters that are required to be communicated under professional standards. We will also conclude, based on the audit evidence obtained, whether there are conditions or events, considered in the aggregate, that raise substantia concern for a reasonable period of time. Our procedures will include tests of documentary evidence supporting the transactions recorded in the accounts. Our procedures will also include, as deemed necessary, tests of the physical existence of inventories, and direct confirmation of receivables and certain assets and liabilities by correspondence with selected individuals, funding sources, creditors, and financial institutions. We will also request, if they may bill you for responding to this inquiry. An audit is not designed to provide assurance on internal control or to identify significant deficiencies or material weaknesses. Accordingly, we will express no such opinion in our report on internal control issued pursuant to Government Auditing Standards. However, during the audit, we will communicate to management and those charged with governance internal control related matters 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 s compliance with applicable laws, regulations, contracts, and agreements, including grant agreements. However, the objective of those procedures 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. Reporting We will issue a written report upon completion of our audit of Employer Liability Trust of the Trust. Circumstances may arise in which our report may differ from its expected form and content based on the results of our audit. Depending on the nature of these circumstances, it may be necessary for us to modify our opinion or add an emphasis-of-matter or other-matter paragraph to our auditor's report, or if necessary, withdraw from this engagement. If our opinion is other than unmodified, we will discuss the reasons with you in advance. If, for any reason, we are unable to complete the audit or are unable to form or have not formed an opinion, we may decline to express an opinion or withdraw from this engagement. Page 4 We will issue a written report on Internal control over financial reporting and compliance with provisions of laws, regulations, contracts, and award agreements, noncompliance with which could have a material effect on the financial statements in accordance with Government Auditing Standards. The Government Auditing Standards report on internal control over financial reporting and on compliance and other matters will include a paragraph that states that (1) the purpose of the report is solely to describe the scope of testing of internal control and compliance and the results of that testing, and (2) the report is an integral part of an audit performed in accordance with Government Auditing Standards Nonaudit Services As part of the audit, we will assist with preparation of your financial statements and notes to the financial statements. You have expressed your intention to use these nonaudit services within the scope of your request for proposal for audit services. These nonaudit services do not constitute an audit and such services will not be conducted in accordance with Government Auditing Standards. Upon engagement of the audit we will utilize the general ledger, accounting records, Trust prepared schedules and other information provided by Trust personnel in order to prepare the necessary year- end adjusting journal entries and to prepare drafts of the financial statements and notes to the financial statements. You are responsible for the information provided by the Trust and for assuming all management responsibilities related to the financial statements, notes to the financial statements, and the nonaudit services we provide. You are also responsible for designing, implementing, and maintaining internal controls over the financial statements process. Prior to their issuance you will be required to acknowledge in the management representation letter that you have reviewed and approved the financial statements and acknowledge that you have accepted responsibility for them. Further, you are required to designate an individual with suitable skill, knowledge, or experience to oversee the nonaudit services we provide; evaluate the adequacy and results of these nonaudit services; and accept responsibility for the nonaudit services. andards place specific requirements on our provision of certain nonaudit services. We are strictly prohibited from assuming management responsibilities or making management decisions; therefore, the nonaudit services we provide are limited to those indicated above. We, in our sole professional judgment, reserve the right to refuse to perform any procedure or take any action that could be construed as assuming management responsibilities or making management decisions. Accordingly, to maintain our independence it is imperative that management understand its responsibilities and is capable of fulfilling these responsibilities. If there are any questions or concerns regarding manage responsibilities we request that you immediately contact us so that we may assess the circumstance and our continued independence with respect to providing audit services. Responsibilities of Management for the Financial Statements Our audit will be conducted on the basis that you acknowledge and understand your responsibility for designing, implementing, and maintaining internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, including monitoring ongoing activities; for the selection and application of accounting principles; and for the preparation and fair presentation of the financial statements in conformity with accounting principles generally accepted in the United States of America. Page 5 Management is also responsible for making all financial records, and related information available to us and for the accuracy and completeness of that information (including information from outside of the general and subsidiary ledgers). You are also responsible 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, identification of all related parties and all related- party relationships and transactions, and other matters; (2) additional information that we may request for the purpose of the audit; (3) other information as needed to perform an audit under Government Auditing Standards; (4) and unrestricted access to persons within the Trust from whom we determine it necessary to obtain audit evidence. At the conclusion of our audit, we will require certain written representations from you about the financial statements; compliance with laws, regulations, contracts, and grant agreements; and other responsibilities required by generally accepted auditing standards. misstatements and confirming to us in the representation letter that the effects of any uncorrected misstatements aggregated by us during the current engagement and pertaining to the latest period presented are immaterial, both individually and in the aggregate, to the financial statements taken as a whole. Management is responsible for the financial statements and all accompanying information as well as all representations contained therein. Management is also responsible for identifying government award programs and understanding and complying with the compliance requirements. Management is responsible for (1) designing, implementing, establishing and maintaining effective internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, including internal controls over federal awards, and for evaluating and monitoring ongoing activities, to help ensure that appropriate goals and objectives are met; (2) following laws and regulations; (3) ensuring that there is reasonable assurance that government programs are administered in compliance with compliance requirements; and (4) ensuring that management is reliable and financial information is reliable and properly reported. Management is also responsible for implementing systems designed to achieve compliance with applicable laws, regulations, contracts, and grant agreements. You are also responsible for the selection and application of accounting principles; for the preparation and fair presentation of the financial statements, and all accompanying information in conformity with accounting principles generally accepted in the United States of America; and for compliance with applicable laws and regulations (including federal statutes) and the provisions of contracts and grant agreements (including award agreements). 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. Management is required to disclose in the financial statements the date through which subsequent events have been evaluated and whether that date is the date the financial statements were issued or were available to be issued. You agree that you will not date the subsequent event note earlier than the date of your management representation letter. Page 6 Management is responsible for establishing and maintaining a process for tracking the status of audit findings and recommendations. Management is also responsible for identifying and providing report copies of previous financial audits, attestation engagements, performance audits or 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 studies. You are also responsible for your planned corrective actions, for the report, and for the timing and format for providing that information. With regard to the electronic dissemination of audited financial statements, including financial statements published electronically on your website, management understands 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. 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 tests will not include a detailed check of all transactions for the period. We have identified the following significant risks of material misstatement as part of our audit planning: 1. Management override of controls 2. Improper revenue recognition Our audit 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 could 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 August 2021 and conclude audit procedures and date our report in December 2021. Page 7 Use of Third-Party Service Providers We maintain internal policies, procedures, and safeguards to protect the confidentiality of your information. We may, depending on the circumstances, use third-party service providers in providing our professional services. The following service providers may be utilized in the completion of our engagement: You hereby consent and authorize us to use the above service providers, if deemed necessary, to complete the professional services outlined in this letter. Engagement Administration, Fees, and Other Mike Hoerig is the engagement partner and is responsible for supervising the engagement and signing the reports or authorizing another individual to sign them. We will provide copies of our reports to the Trust; however, management is responsible for distribution of the reports and the financial statements. The audit documentation for this engagement is the property of Heinfeld, Meech & Co., P.C., and constitutes confidential information. However, we may be requested to make certain audit documentation available to a cognizant or oversight agency or its designee, a federal agency providing direct or indirect funding, the U.S. Government Accountability Office, or other authorized governmental agency for the 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 Heinfeld, Meech & Co., P.C., personnel. Furthermore, upon request, we may provide copies of selected audit documentation to the aforementioned parties. These parties may intend, or decide, to distribute the copies or information contained therein to others, including other governmental agencies. The audit documentation for this engagement will be retained for a minimum of five (5) years after the report release date, or for any additional period requested by a regulator, cognizant agency, oversight agency for audit, or pass through entity. Upon expiration of the five year period, or any additional period, we will commence the process of destroying the contents of our engagement files. 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. In the event we are required to respond to a subpoena, court order or other legal process for the production of documents and/or testimony relative to information we obtained and/or prepared during the course of this engagement, you agree to compensate us at our hourly rates, for the time we expend in connection with such response, and to reimburse us for all of our out-of-pocket costs incurred in that regard. Page 8 that may arise from any aspect of our services, including this engagement or any prior engagement, will be submitted to mediation. The parties will engage in the mediation process in good faith once a written request to mediate has been given by any party. Any mediation initiated as a result of this engagement shall be administered by The American Arbitration Association, according to its mediation rules before resorting to litigation. The results of any such mediation shall be binding only upon agreement of each party to be bound. Each party will bear its own costs in the mediation. The fees and expenses of the mediator will be shared equally. 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 us. 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 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 of the existence or possible existence of a dispute. Professional standards prohibit auditors from agreeing to indemnify attest clients for damages, losses acts. As such, professional standards will prevail for indemnification clauses included in audit contracts. In addition, we are unable to obtain waivers on our professional liability insurance policy for certain provisions, including indemnification provisions, provisions requiring the firm to name the Trust as an additional insured party, and a waiver of subrogation rights. Professional standards require us to be independent with respect to you in the performance of these services. Any discussion that you have with our personnel regarding potential employment with you could impair our independence with respect to this engagement. Therefore, we request that you inform us prior to any such discussions so that we can implement appropriate safeguards to maintain our independence and objectivity. Further, any employment offers to any staff members working on this engagement without our prior knowledge may require substantial additional procedures to ensure our independence. You will be responsible for any additional costs incurred to perform these procedures. Our fee for these services will be $6,950. We exercised care in estimating the fee and believe it accurately indicates the scope of the work. Our invoices for these fees will be rendered each month as work progresses and are payable on presentation. Our fees are based on anticipated cooperation from your personnel, timely receipt of information, and the assumption that unexpected circumstances will not be encountered during the audit, including factors beyond our control, such as new accounting pronouncements or legal requirements, additional consultation, and assistance in correcting errors in your financial records. We will plan the engagement based on the assumption that your personnel will prepare and provide us with the items listed in our request for audit information, including preparing requested schedules, retrieving supporting documents, and preparing confirmations. If, for whatever reason, your personnel are unavailable to provide the necessary assistance in a timely manner, it may substantially increase the work we have to do to complete the engagement within the established deadlines, resulting in an increase in fees over our original fee estimate. If significant additional time is necessary, we will discuss it with you and arrive at a new fee estimate before we incur the additional costs. Additional fees incurred will be billed at the following hourly rates: Partner - $284; Manager - $207; Senior - $163; Staff - $114. Page 9 If any term or provision of this agreement is determined to be invalid or unenforceable, such term or provision will be deemed stricken, and all other terms and provisions will remain in full force and effect. 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 2018 peer review report accompanies this letter. We appreciate the opportunity to be of service to you and believe this letter accurately summarizes the significant terms of our engagement. Please feel free to contact us at any time if you have any questions or concerns. If you have any questions regarding this letter, 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. Very truly yours, Heinfeld, Meech & Co., P.C. Tucson, Arizona cc: Dawn Lang, Management Services Director Kristi Smith, Accounting Manager RESPONSE Please indicate the name of the individual responsible for overseeing the nonaudit services of preparing the year-end adjusting journal entries and the preparation of the financial statements: Name: __________________________________________________ Employer Liability Trust. Printed Name: ____________________________________________ Title: ___________________________________________________ Signature: _______________________________________________ Date: ___________________________________________________ Grant Bennett Associates A PROFESSIONAL CORPORATION www.gbacpa.com 1375 Exposition Boulevard, Suite 230 P.O. Box 223096 Sacramento, CA 95815 Princeville, HI 96722 916/922 5109 FAX 916/641 5200 888/769 7323 Report on the Firm·s System of Quality Control August 16, 2018 To the Shareholders of Heinfeld, Meech & Co., P. C. and the Peer Review Committee of the California Society of CPAs We have reviewed the system of quality control for the accounting and auditing practice of Heinfeld, Meech & Co., P. C. (the firm) in effect for the year ended May 31, 2018. Our peer review was conducted in accordance with the Standards for Performing and Reporting on Peer Reviews established by the Peer Review Board of the American Institute of Certified Public Accountants (Standards). A summary of the nature, objectives, scope, limitations of, and the procedures performed in a System Review as described in the Standards may be found at www.aicpa.org/prsummary. The summary also includes an explanation of how engagements identified as not performed or reported in conformity with applicable professional standards, if any, are evaluated by a peer reviewer to determine a peer review rating. Firm·s Responsibility The firm is responsible for designing a system of quality control and complying with it to provide the firm with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects. The firm is also responsible for evaluating actions to promptly remediate engagements deemed as not performed or reported in conformity with professional standards, when appropriate, and for remediating weaknesses in its system of quality control, if any. Peer Reviewer·s Responsibility Our responsibility is to express an opinion on the desi compliance therewith based on our review. Required Selections and Considerations Engagements selected for review included engagements performed under Government Auditing Standards, including compliance audits under the Single Audit Act and an audit of an employee benefit plan. As a part of our peer review, we considered reviews by regulatory entities as communicated by the firm, if applicable, in determining the nature and extent of our procedures. Opinion In our opinion, the system of quality control for the accounting and auditing practice of Heinfeld, Meech & Co., P. C. in effect for the year ended May 31, 2018, has been suitably designed and complied with to provide the firm with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects. Firms can receive a rating of pass, pass with deficiency(ies) or fail. Heinfeld, Meech & Co., P. C. has received a peer review rating of pass. GRANT BENNETT ASSOCIATES A PROFESSIONAL CORPORATION Certified Public Accountants Heinfeld, Meech & Co., P.C. CPAs and Business Consultants 10120 N. Oracle Road Tucson, AZ 85704 This representation letter is provided in connection with your audit of the financial statements of ility Trust (Trust), an internal service fund of the City of Chandler, Arizona, which comprises the financial position as of June 30, 2021, and the respective changes in financial position and cash flows for the period then ended, and the e of expressing opinions as to whether the financial statements are presented fairly, in all material respects, in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). Certain representations in this letter are described as being limited to matters that are material. Items are considered material, regardless of size, if they involve an omission or misstatement of accounting information that, in light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would be changed or influenced by the omission or misstatement. An omission or misstatement that is monetarily small in amount could be considered material as a result of qualitative factors. We confirm, to the best of our knowledge and belief, as of the date of our signature, the following representations made to you during your audit. Financial Statements 1. We have fulfilled our responsibilities, as set out in the terms of the audit engagement letter, including our responsibility for the preparation and fair presentation of the financial statements in accordance with U.S. GAAP. 2. The financial statements referred to above are fairly presented in conformity with U.S. GAAP and include all properly classified financial information required by generally accepted accounting principles to be included in the financial reporting entity. 3. We acknowledge our responsibility for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. 4. We acknowledge our responsibility for the design, implementation, and maintenance of internal control to prevent and detect fraud. Page 2 5. Significant assumptions we used in making accounting estimates, including those measured at fair value, are reasonable. 6. Related party relationships and transactions, including revenues, expenditures/expenses, loans, transfers, leasing arrangements, and guarantees, and amounts receivable from or payable to related parties have been appropriately accounted for and disclosed in accordance with U.S. GAAP. 7. Adjustments or disclosures have been made for all events, including instances of noncompliance, subsequent to the date of the financial statements that would require adjustment to or disclosure in the financial statements or in the schedule of findings and responses. 8. The effects of all known actual or possible litigation, claims, and assessments have been evaluated, and if necessary, have been accounted for and disclosed in accordance with U.S. GAAP. 9. Guarantees, whether written or oral, under which the Trust is contingently liable, if any, have been properly recorded or disclosed. Information Provided 10. We have provided you with: a. Access to all information, of which we are aware, that is relevant to the preparation and fair presentation of the financial statements, such as records (including information obtained from outside of the general and subsidiary ledgers), documentation, and other matters and all audit or relevant monitoring reports, if any, received from funding sources. b. Additional information that you have requested from us for the purpose of the audit. c. Unrestricted access to persons within the Trust from whom you determined it necessary to obtain audit evidence. d. Minutes of the meetings of the Board of Trustees or summaries of actions of recent meetings for which minutes have not yet been prepared. 11. All material transactions have been recorded in the accounting records and are reflected in the financial statements. 12. We have disclosed to you the results of our assessment of the risk that the financial statements may be materially misstated as a result of fraud. 13. We have no knowledge of any fraud or suspected fraud that affects the Trust and involves: Management, Employees who have significant roles in internal control, or Others where the fraud could have a material effect on the financial statements. Page 3 14. We have no knowledge of any allegations of fraud or suspecte financial statements communicated by employees, former employees, grantors, regulators, or others. 15. We have no knowledge of any instances of noncompliance or suspected noncompliance with provisions of laws, regulations, contracts, or grant agreements, or waste or abuse, whose effects should be considered when preparing financial statements. 16. We have disclosed to you all known actual or possible litigation, claims, and assessments whose effects should be considered when preparing the financial statements. 17. We have disclosed to you the identity of the relationships and transactions, including any side agreements. Government-specific 18. There have been no communications from regulatory agencies concerning noncompliance with, or deficiencies in, financial reporting practices. 19. If applicable we have taken timely and appropriate steps to remedy fraud, noncompliance with provisions of laws, regulations, contracts, and grant agreements that you have reported to us. 20. We have a process to track the status of audit findings and recommendations. 21. We have identified and communicated to you any previous audits, attestation engagements, and other studies related to the audit objectives and whether related recommendations have been implemented. 22. We have identified to you any investigations or legal proceedings that have been initiated with respect to the period under audit. 23. If applicable, we have provided our views on reported findings, conclusions, and recommendations, as well as our planned corrective actions, for the report. 24. The Trust has no plans or intentions that may materially affect the carrying value or classification of assets, liabilities, deferred outflows/inflows of resources, and net position. 25. We are responsible for compliance with the laws, regulations, and provisions of contracts and grant agreements applicable to us, including tax or debt limits and debt contracts, and legal and contractual provisions for reporting specific activities in separate funds. 26. We have appropriately disclosed all information for conduit debt obligations in accordance with U.S. GAAP. Page 4 27. We have identified and disclosed to you all instances of identified fraud and suspected fraud that we believe have a material effect on the financial statements or other financial data significant to the audit objectives, and any other instances that warrant the attention of those charged with governance. 28. We have identified and disclosed to you all instances of identified noncompliance with provisions of contracts and grant agreements that we believe have a material effect on the determination of financial statement amounts or other financial data significant to the audit objectives. 29. We have identified and disclosed to you all instances of identified abuse that could be quantitatively or qualitatively material to the financial statements or other financial data significant to the audit objectives. 30. There are no violations or possible violations of budget ordinances, laws and regulations (including those pertaining to adopting, approving, and amending budgets), provisions of contracts and grant agreements, tax or debt limits, and any related debt covenants whose effects should be considered for disclosure in the financial statements, or as a basis for recording a loss contingency, or for reporting on noncompliance. 31. In addition to your audit, you assisted with preparation of the financial statements and notes to the financial statements. We acknowledge our responsibility as it relates to those nonaudit services, including that we assume all management responsibilities; oversee the nonaudit services by designating an individual, preferably within senior management, who possesses suitable skill, knowledge, or experience; evaluate the adequacy and results of the nonaudit services performed; and accept responsibility for the results of the nonaudit services. 32. We have reviewed, approved, and accepted responsibility for the financial statements, and notes to the financial statements. 33. The Trust has satisfactory title to all owned assets, and there are no liens or encumbrances on such assets nor has any asset been pledged as collateral. 34. The Trust has complied with all aspects of contractual agreements that would have a material effect on the financial statements in the event of noncompliance. 35. We have followed all applicable laws and regulations in adopting, approving, and amending budgets. 36. If applicable, the financial statements include all component units, appropriately present majority equity interest in legally separate organizations and joint ventures with an equity interest, and properly disclose all other joint ventures and other related organizations. 37. The financial statements include all fiduciary activities required by U.S. GAAP. Page 5 38. The financial statements properly classify all funds and activities in accordance with U.S. GAAP. 39. Components of net position are properly classified and, if applicable, approved. 40. Investments are properly valued. 41. With regard to investments and other instruments reported at fair value: The underlying assumptions are reasonable and they appropriately reflect management's intent and ability to carry out its stated courses of action. The measurement methods and related assumptions used in determining fair value are appropriate in the circumstances and have been consistently applied. The disclosures related to fair values are complete, adequate, and in conformity with U.S. GAAP. There are no subsequent events that require adjustments to the fair value measurements and disclosures included in the financial statements. 42. If applicable, provisions for uncollectible receivables have been properly identified and recorded. 43. Expenses have been appropriately classified in the statement of revenues, expenses and changes in net position; and allocations have been made on a reasonable basis. 44. Revenues are appropriately classified in the statement of revenues, expenses and changes in net position. 45. Special and extraordinary items, if any, are appropriately classified and reported. 46. Deposits and investment securities are properly classified as to risk and are properly disclosed. 47. y regarding whether to first apply restricted or unrestricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position is available and have determined that net position is properly recognized under the policy. 48. We have disclosed to you all significant estimates and material concentrations known to management that are required to be disclosed. Significant estimates are estimates at the balance sheet date that could change materially within the next year. Concentrations refer to volumes of business, revenues, available sources of supply, or markets or geographic areas for which events could occur that would significantly disrupt normal finances within the next year. 49. We acknowledge our responsibility for the required supplementary information (RSI). The RSI is measured and presented within prescribed guidelines and the methods of measurement and presentation have not changed from those used in the prior period. We have disclosed to you any significant assumptions and interpretations underlying the measurement and presentation of the RSI. Page 6 We have reviewed the drafts of the financial statements and related notes and believe the amounts are properly presented based on the books and records of our Trust. We hereby take responsibility for the financial statements and authorize Heinfeld, Meech & Co., P.C. to issue the reports in final form and to distribute to those parties as outlined in the contract. We understand that at the conclusion of the audit Heinfeld, Meech & Co, P.C. will submit to the Board of Trustees a communication to those charged with governance that will include a copy of this representation letter and a copy of the engagement letter. ________________________________________________ ___________________ Dawn Lang, Deputy City Manager | CFO Date