18-252 Crowe Horwath for Audit Services -Cupertino CA 2018 Engagement LetterCrowe Horwath
Crowe Horwath LLP
Independent Member Croee HopnWh International
650 Town Center Drive, Suite 740
Costa Mesa, California 92626-7192
Tel +1 714 668 1234
Fax +1 714 668 1235
www.crowehorwath.com
April 12, 2018
To the Honorable Mayor and City Council
City of Cupertino, California
10300 Torre Avenue
Cupertino, CA 95014-3202
This letter confirms the arrangements for Crowe Horwath LLP ("Crowe' or "us" or "we" or "our") to provide
the professional services discussed in this letter to the City of Cupertino, California ("the City" or "you",
"your" or "Entity" or "Client") for the year ending June 30, 2018. The attached Crowe Engagement Terms
is an integral part of this letter, and its terms are incorporated herein.
AUDIT SERVICES
Our Responsibilities
We will audit and report on the financial statements of the governmental activities, the business -type
activities, each major fund, and the aggregate remaining fund information, including the individual fund
financial statements of the TDA which collectively comprise the basic financial statements of the City for
the period indicated.
In addition to our report on the financial statements, we plan to evaluate the presentation of the following
supplementary information in relation to the financial statements as a whole, and to report on whether this
supplementary information is fairly stated, in all material respects, in relation to the financial statements as
a whole.
• Combining and Individual Fund Financial Statements and Schedules
In addition to our report on the financial statements, we also plan to perform specified procedures in order
to describe in our report whether the following required supplementary information is presented in
accordance with applicable guidelines. However, we will not express an opinion or provide any assurance
on this information due to our limited procedures.
• Management's Discussion and Analysis
• Schedule of Changes in the Net Pension Liability and Related Ratios
• Schedule of Contributions — Miscellaneous Plan
• Schedule of Changes in the Net OPEB Liability and Related Ratios
• Schedule of Contributions — OPEB
• Schedule of Investment Rate of Return — OPEB
The document will also include the following additional information that will not be subjected to the
auditing procedures applied in our audit of the financial statements, and for which our auditor's report will
disclaim an opinion:
Introductory Section of the Comprehensive Annual Financial Report
Statistical Section of the Comprehensive Annual Financial Report
Community Profile
To the Honorable Mayor and City Council
City of Cupertino, California
April 12, 2018
Page 2
The objective of the audit is the expression of an opinion on the financial statements. We will plan and
perform the 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. Those standards require that we obtain reasonable, rather
than absolute, assurance about whether the financial statements are free of material misstatement
whether caused by error or fraud. Because of inherent limitations of an audit, together with the inherent
limitations of internal control, an unavoidable risk that some material misstatements may not be detected
exists, even though the audit is properly planned and performed in accordance with applicable standards
An audit is not designed to detect error or fraud that is immaterial to the financial statements.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditor's judgment including the
assessment of the risks that the financial statements could be misstated by an amount we believe would
influence the financial statement users. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of significant accounting estimates made by
management, as well as evaluating the overall presentation of the financial statements.
In making our risk assessments, we consider internal control relevant to the preparation and fair
presentation of the financial statements in order to design audit procedures that are appropriate in the
circumstances but not for the purpose of expressing an opinion on the effectiveness of the City's internal
control. However, we will communicate in writing to those charged with governance and management
concerning any significant deficiencies or material weaknesses in internal control relevant to the audit of
the financial statements that we have identified during the audit. We will communicate to management
other deficiencies in internal control identified during the audit that have not been communicated to
management by other parties and that, in our professional judgment, are of sufficient importance to merit
management's attention. We will also communicate certain matters related to the conduct of the audit to
those charged with governance, including (1) fraud involving senior management, and fraud (whether
caused by senior management or other employees) that causes a material misstatement of the financial
statements, (2) illegal acts that come to our attention (unless they are clearly inconsequential) (3)
disagreements with management and other significant difficulties encountered in performing the audit and
(4) various matters related to the City's accounting policies and financial statements. Our engagement is
not designed to address legal or regulatory matters, which matters should be discussed by you with your
legal counsel.
We expect to issue a written report upon completion of our audit of the financial statements. Our report
will be addressed to the City Council of the City. Circumstances may arise in which it is necessary for us
to modify our opinion, add an emphasis of matter or other matter paragraph, or withdraw from the
engagement.
In addition to our report on the financial statements and supplemental information, we plan to issue the
following reports:
• Independent Auditor's Report on Internal Control Over Financial Reporting and on
Compliance and Other Matters Based on an Audit of Financial Statements Performed in
Accordance with Government Auditing Standards — The purpose of this report is solely to
describe the scope of our testing of internal control over financial reporting and compliance
and the results of that testing, and not to provide an opinion on internal control over financial
reporting or on compliance. This report is an integral part of an audit performed in
accordance with Government Auditing Standards in considering the City's internal control and
compliance. Accordingly, this communication is not suitable for any other purpose.
As part of obtaining reasonable assurance about whether the financial statements are free of material
misstatement, we will also perform tests of your compliance with applicable laws, regulations, contracts
and grants. However, because of the concept of reasonable assurance and because we will not perform
To the Honorable Mayor and City Council
City of Cupertino, California
April 12, 2018
Page 3
a detailed examination of all transactions, there is a risk that material errors, irregularities, or illegal acts,
including fraud or defalcations, may exist and not be detected by us. The objective of our audit of
compliance relative to the financial statements will not be to provide an opinion on overall compliance with
such provisions, and we will not express such an opinion. We will advise you, however, of any matters of
that nature that come to our attention, unless they are clearly inconsequential.
Our audit and work product are intended for the benefit and use of the City only. The audit will not be
planned or conducted in contemplation of reliance by any other party or with respect to any specific
transaction and is not intended to benefit or influence any other party. Therefore, items of possible
interest to a third party may not be specifically addressed or matters may exist that could be assessed
differently by a third party.
The working papers for this engagement are the property of Crowe and constitute confidential
information. However, we may be requested to make certain working papers available to your oversight
agency or grantors pursuant to authority given to them by law, regulation, or contract. If requested,
access to such working papers will be provided under the supervision of our personnel. Furthermore,
upon request, we may provide photocopies of selected working papers to your oversight agency or
grantors. The working papers for this engagement will be retained for a minimum of three years after the
date our report is issued or for any additional period requested by the oversight agency 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 contesting the audit finding for guidance prior to destroying the
working papers.
Government Auditing Standards require that we provide you with a copy of our most recent peer review
report, which accompanies this letter along with the related letter of comment and response thereto.
The City's Responsibilities
The City's management is responsible for the preparation and fair presentation of the financial statements
in accordance with accounting principles generally accepted in the United States of America.
Management is also responsible for the design, implementation and maintenance of internal control
relevant to the preparation and fair presentation of financial statements that are free from material
misstatement, whether due to error or fraud. The City's management is also responsible for complying
with applicable laws, regulations, contracts and grants and such responsibility extends to identifying the
requirements and designing internal control policies and procedures to provide reasonable assurance that
compliance is achieved.
Management has the responsibility to adopt sound accounting policies, maintain an adequate and
efficient accounting system, safeguard assets, and design and implement programs and controls to
prevent and detect fraud. Management's judgments are typically based on its knowledge and experience
about past and current events and its expected courses of action. Management's responsibility for
financial reporting includes establishing a process to prepare the accounting estimates included in the
financial statements.
Management is responsible for providing to us, on a timely basis, all information of which management is
aware that is relevant to the preparation and fair presentation of the financial statements, such as
records, documentation, and other matters. Management is also responsible for providing such other
additional information we may request for the purpose of the audit, and unrestricted access to persons
within the City from whom we determine it necessary to obtain audit evidence. Additionally, those charged
with governance are responsible for informing us of their views about the risks of fraud within the City,
and their knowledge of any fraud or suspected fraud affecting the City.
Management is responsible for adjusting the financial statements to correct material misstatements
related to accounts or disclosures. As part of our audit process, we will request from management written
confirmation concerning representations made to us in connection with the audit, including that the effects
To the Honorable Mayor and City Council
City of Cupertino, California
April 12, 2018
Page 4
of any uncorrected misstatements aggregated by us during the audit are immaterial, both individually and
in the aggregate, to the financial statements and to compliance with the requirements of its Federal
programs. Management acknowledges the importance of management's representations and responses
to our inquiries, and that they will be utilized as part of the evidential matter we will rely on in forming our
opinion. Because of the importance of management's representations to an effective audit, you agree to
release Crowe and its personnel from any liability and costs relating to our services under this letter
attributable to any misrepresentations by management.
Management is responsible for the preparation of the supplementary information identified above in
accordance with the applicable criteria. As part of our audit process, we will request from management
certain written representations regarding management's responsibilities in relation to the supplementary
information presented, including but not limited to its fair presentation in accordance with the applicable
criteria, the method of measurement and presentation and any significant assumptions or interpretations
underlying the supplementary information. In addition, it is management's responsibility to include the
auditor's report on supplementary information in any document that contains the supplementary
information and that indicates that we have reported on such supplementary information. It is also
management's responsibility to present the supplementary information with the audited financial
statements or, if the supplementary information will not be presented with the audited financial
statements, to make the audited financial statements readily available to the intended users of the
supplementary information no later than the date of issuance by the City of the supplementary information
and the auditor's report thereon.
Management is responsible for the preparation of the required supplementary information identified above
in accordance with the applicable guidelines. We will request from management certain written
representations regarding management's responsibilities in relation to the required supplementary
information presented, including but not limited to whether it has been measured and presented in
accordance with prescribed guidelines, the method of measurement and presentation and any significant
assumptions or interpretations underlying the supplementary information.
OTHER SERVICES
Preparation of the following additional reports on behalf of the City:
1. State of California Annual State Controller's Report
Financial Statement Preparation
The City will provide us with the necessary information to assist in the preparation of the draft financial
statements including the notes thereto. We are relying on the City to provide us with the detailed trial
balance, note disclosure information and any other relevant report information in a timely fashion and
ensure the data is complete and accurate. Management is solely responsible for the presentation of the
financial statements.
With respect to the above other services, we will perform the services in accordance with applicable
professional standards. We, in our sole professional judgment, reserve the right to refuse to do any
procedure or take any action that could be construed as making management decisions or assuming
management responsibilities. In connection with performing the above other services, you agree to:
assume all management responsibilities including making all management decisions; oversee the service
by designating an individual, preferably within senior management, who possesses suitable skill,
knowledge, and/or experience; evaluate the adequacy and results of the services performed; and accept
responsibility for the results of the services.
To the Honorable Mayor and City Council
City of Cupertino, California
April 12, 2018
Page 5
BOND OFFERINGS
With respect to any official statements issued by the City with which Crowe is not involved, the official
statement should indicate that the auditor is not involved with the contents of such official statement. The
disclosure should read as:
"Crowe Horwath 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. Crowe Horwath LLP also has not performed any
procedures relating to this official statement."
FEES
Our fees, including out-of-pocket expenses and certain internal technology charges, are outlined below.
Certain internal technology charges will be billed per hour of professional time or at a flat fee. Internal
technology charges reflect our estimate of the costs for technology and related support on this
engagement. Our invoices are due and payable upon receipt. Invoices that are not paid within 30 days of
receipt are subject to a monthly interest charge of one percent per month or the highest interest rate
allowed by law, whichever is less, which we may elect to waive at our sole discretion, plus costs of
collection including reasonable attorneys' fees. If any amounts invoiced remain unpaid 30 days after the
invoice date, you agree that Crowe may, in its sole discretion, cease work until all such amounts are paid
or terminate this engagement.
Audit of City financial statements for the year ending June 30, 2018 (includes
CAFR, TDA, City Investment Policy, Proposition 111, City State Controller
Report and Report on Internal Controls) $ 76,000
Circumstances may arise under which we must perform additional work and, thus, require additional
billings for our services. Examples of such circumstances include, but are not limited to:
• Changing audit requirements
• New professional standards or regulatory requirements
• New financial statement disclosures
• Work caused due to the identification of, and management's correction of, inappropriate
application of accounting pronouncements
• Erroneous or incomplete accounting records
• New or unusual transactions
• Change in your organizational structure or size due to merger and acquisition activity or other
events
• Change in your controls
• Agreed -upon level of preparation and assistance from your personnel not provided
• Failure of your staff to prepare information in a timely manner
• Numerous revisions to your information
• Lack of availability of appropriate City personnel during audit fieldwork
Additionally, to accommodate requests to reschedule audit fieldwork without reasonable notice, additional
billings for our services could be required, and our assigned staffing and ability to meet agreed -upon
deadlines could be impacted.
To the Honorable Mayor and City Council
City of Cupertino, California
April 12, 2018
Page 6
Our fee assumes that we will be provided with auditable trial balances for all funds at year end, that all
bank accounts and investment accounts will be reconciled through the end of the year being audited to
the trial balances, that interfund and transfer accounts will balance, that subsidiary ledgers will reconcile
to the general ledger and that beginning fund equity amounts will be reconcilable to prior year audited
ending fund equity. We assume that the City will cooperate with our requests for information such as
explanations of account activity.
Additionally, we assume the City will provide a copy of the capital assets ledger including current year
additions and dispositions and depreciation by functional expense. We assume that requested records
such as invoices, contracts, grant agreements and supporting documentation will be located and provided
to us. We also assume the City will prepare confirmation letters, the Introductory Section, the MD&A
section, the Statistical section and the Community Profile section of the report.
Our fee does not include implementation of any other future accounting or auditing pronouncements
and/or government requirements that may change, thus, the scope or amount of auditing necessary to
complete our engagements may increase beyond what is currently anticipated. Should such events
occur, we would present you with our estimate of any possible increase prior to beginning our audit for
the given year. An equitable adjustment in the proposed fee will be negotiated if the cost of time required
for performance of the audit service is increased or decreased pursuant to a change in scope of the audit
requested by the City or required by State or Federal regulations.
When we become aware of circumstances which impact the amount or scheduling of our work, we will
issue, for your approval, a formal change order detailing the reason and the anticipated impact of the
change.
Our fees are exclusive of taxes or similar charges, as well as customs, duties or tariffs, imposed in
respect of the Services, any work product or any license, all of which Client agrees to pay if applicable or
if they become applicable (other than taxes imposed on Crowe's income generally), without deduction
from any fees or expenses invoiced to Client by Crowe.
To facilitate Crowe's presence at Client's premises, Client will provide Crowe with internet access while
on Client's premises. Crowe will access the internet using a secure virtual private network. Crowe will be
responsible for all internet activity performed by its personnel while on Client's premises.
MISCELLANEOUS
For purposes of this Miscellaneous section, the Acceptance section below, and all of the Crowe
Engagement Terms, "Client" will mean the entity(ies) defined in the first paragraph of this letter and will
also include all related parents, subsidiaries, and affiliates of Client who may receive or claim reliance
upon any Report.
Crowe will provide the services to Client under this Agreement as an independent contractor and not as
Client's partner, agent, employee, or joint venturer under this Agreement. Neither Crowe nor Client will
have any right, power or authority to bind the other party.
This engagement letter agreement (the "Agreement") reflects the entire agreement between the parties
relating to the services (or any reports, deliverables or other work product) covered by this Agreement.
The engagement letter and any attachments (including without limitation the attached Crowe Engagement
Terms) are to be construed as a single document, with the provisions of each section applicable
throughout. This Agreement may not be amended or varied except by a written document signed by each
party. It replaces and supersedes any other proposals, correspondence, agreements and understandings,
whether written or oral, relating to the services covered by this letter, and each party agrees that in
entering this Agreement, it has not relied on any oral or written representations, statements or other
To the Honorable Mayor and City Council
City of Cupertino, California
April 12, 2018
Page 7
information not contained in or incorporated into this Agreement. Any non -disclosure or other
confidentiality agreement is replaced and superseded by this Agreement. The agreements of the parties
contained in this Agreement will survive the completion or termination of this Agreement. If any provision
(in whole or in part) of this Agreement is found unenforceable or invalid, this will not affect the remainder
of the provision or any other provisions in this Agreement, all of which will continue in effect as if the
stricken portion had not been included. This Agreement may be executed in two or more actual, scanned,
emailed, or electronically copied counterparts, each and all of which together are one and the same
instrument. Accurate transmitted copies (transmitted copies are reproduced documents that are sent via
mail, delivery, scanning, email, photocopy, facsimile or other process) of the executed Agreement or
signature pages only (whether handwritten or electronic signature), will be considered and accepted by
each party as documents equivalent to original documents and will be deemed valid, binding and
enforceable by and against all parties. This Agreement must be construed, governed, and interpreted
under the laws of the State of California, without regard for choice of law principles.
(Signature Page follows)
To the Honorable Mayor and City Council
City of Cupertino, California
April 12, 2018
Page 8
We are pleased to have this opportunity to serve you, and we look forward to a continuing relationship. If
the terms of this letter and the attached Crowe Engagement Terms are acceptable to you, please sign
below and return one copy of this letter at your earliest convenience. Please contact us with any
questions or concerns.
ACCEPTANCE:
I have reviewed the arrangements outlined above and in the attached "Crowe Engagement Terms," and I
accept on behalf of the Client the terms and conditions as stated. By signing below, I represent and
warrant that I am authorized by Client to accept the terms and conditions as stated.
IN WITNESS WHEREOF, the City of Cupertino, California and Crowe have duly executed this
engagement letter effective the date first written above.
Crowe Horwath LLP and the Engagement Authorized Signer below are licensed or
otherwise authorized by the California Board of Accountancy.
City Of Cupertino, Calornia
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April 12, 2018
Date
The City Council has reviewed the services and Crowe Engagement Terms described in this letter and
evaluated the services pursuant to the City's policies. After considering all relevant factors, the City
Council hereby approves hiring Crowe to provide the services described above.
Author' Reppresentative of the City Council:
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Crowe Engagement Terms
Crowe wants Client to understand the terms under which Crowe provides its services to Client and the basis
under which Crowe determines its fees. These terms are part of the Agreement and apply to all services
described in the Agreement as well as all other services provided to Client (collectively, the "Services"), unless
and until a separate written agreement is executed by the parties for separate services. Any advice provided by
Crowe is not intended to be, and is not, investment advice.
CLIENT'S ASSISTANCE — For Crowe to provide Services effectively and efficiently, Client agrees to provide
Crowe timely with information requested and to make available to Crowe any personnel, systems, premises,
records, or other information as reasonably requested by Crowe to perform the Services. Access to such
personnel and information are key elements for Crowe's successful completion of Services and determination
of fees. If for any reason this does not occur, a revised fee to reflect additional time or resources required by
Crowe will be mutually agreed. Client agrees Crowe will have no responsibility for any delays related to a delay
in providing such information to Crowe. Such information will be accurate and complete, and Client will inform
Crowe of all significant tax, accounting and financial reporting matters of which Client is aware.
PROFESSIONAL STANDARDS — As a regulated professional services firm, Crowe must follow professional
standards when applicable, including the Code of Professional Conduct of the American Institute of Certified
Public Accountants ("AICPA"). Thus, if circumstances arise that, in Crowe's professional judgment, prevent it
from completing the engagement, Crowe retains the right to take any course of action permitted by professional
standards, including declining to express an opinion or issue other work product or terminating the
engagement.
REPORTS — Any information, advice, recommendations or other content of any memoranda, reports,
deliverables, work product, presentations, or other communications Crowe provides under this Agreement
("Reports'), other than Client's original information, are for Client's internal use only, consistent with the
purpose of the Services. Client will not rely on any draft Report. Unless required by an audit or other attestation
professional standard, Crowe will not be required to update any final Report for circumstances of which we
become aware or events occurring after delivery.
CONFIDENTIALITY— Except as otherwise permitted by this Agreement or as agreed in writing, neither Crowe
nor Client may disclose to third parties the contents of this Agreement or any information provided by or on
behalf of the other that ought reasonably to be treated as confidential and/or proprietary. Client use of any
Crowe work product will be limited to its stated purpose and to Client business use only. However, Client and
Crowe each agree that either party may disclose such information to the extent that it: (i) is or becomes public
other than through a breach of this Agreement, (ii) is subsequently received by the recipient from a third party
who, to the recipient's knowledge, owes no obligation of confidentiality to the disclosing party with respect to
that information, (iii) was known to the recipient at the time of disclosure or is thereafter created independently,
(iv) is disclosed as necessary to enforce the recipient's rights under this Agreement, or (v) must be disclosed
under applicable law, regulations, legal process or professional standards.
THIRD PARTY PROVIDER — Crowe may use a third -party provider in providing Services to Client, which may
require Crowe to share Client confidential information with the provider. If Crowe uses a third -party provider,
Crowe will enter into a confidentiality agreement with the provider to require the provider to protect the
confidentiality of Client's confidential information, and Crowe will be responsible to Client for maintaining its
confidentiality.
CLIENT -REQUIRED CLOUD USAGE — If Client requests that Crowe access files, documents or other
information in a cloud -based or web -accessed hosting service or other third -party system accessed via the
internet, including, without limitation iCloud, Dropbox, Google Docs, Google Drive, a data room hosted by a
third -party, or a similar service or website (collectively, "Cloud Storage"), Client will confirm with any third -
parties assisting with or hosting the Cloud Storage that either such third -party or Client (and not Crowe) is
responsible for complying with all applicable laws relating to the Cloud Storage and any information contained
in the Cloud Storage, providing Crowe access to the information in the Cloud Storage, and protecting the
information in the Cloud Storage from any unauthorized access, including without limitation unauthorized
access to the information when in transit to or from the Cloud Storage. Client represents that it has authority to
provide Crowe access to information in the Cloud Storage and that providing Crowe with such access complies
with all applicable laws, regulations, and duties owed to third -parties.
DATA PROTECTION — If Crowe holds or uses Client information that can be linked to specific individuals who
are Client's customers ("Personal Data"), Crowe will treat it as confidential as described above and comply with
1 of 4
applicable US state and federal law and professional regulations in disclosing or using such information to carry
out the Services. Crowe has implemented and will maintain physical, electronic and procedural safeguards
reasonably designed to (1) protect the security, confidentiality and integrity of the Personal Data, (ii) prevent
unauthorized access to or use of the Personal Data, and (iii) provide proper disposal of the Personal Data
(collectively, the "Safeguards"). Client warrants that it has the authority to provide the Personal Data to Crowe
in connection with the Services and that Client has processed the Personal Data provided to Crowe in
accordance with applicable law. To provide the Services, Client may also need to provide Crowe with access to
Personal Data consisting of protected health information, financial account numbers, Social Security or other
government -issued identification numbers, or other data that, if disclosed without authorization, would trigger
notification requirements under applicable law ("Restricted Personal Data"). In the event Client provides Crowe
access to Restricted Personal Data, Client will consult with Crowe on appropriate measures (consistent with
professional standards applicable to Crowe) to protect the Restricted Personal Data, such as: deleting or
masking unnecessary information before making it available to Crowe, encrypting it when transferring it to
Crowe, or providing it to Crowe only during on -site review on Client's site. Client will provide Crowe with
Restricted Personal Data only in accordance with mutually agreed protective measures. Otherwise, Client and
Crowe agree each may use unencrypted electronic media to correspond or transmit information and such use
will not in itself constitute a breach of this Agreement.
INTELLECTUAL PROPERTY — Crowe may use ideas, concepts, methodologies, data, software, designs,
utilities, tools, models, techniques, systems, Reports, or other know-how that it develops, owns or licenses
("Materials") in performing the Services. Crowe retains all intellectual property rights in the Materials (including
any improvements or knowledge developed while performing the Services), and in any working papers
compiled in providing the Services, but not in the Client information reflected in them. Upon payment for
Services and subject to the other terms of this Agreement, Client will use Reports, as well as any Materials
therein, only to the extent necessary and permitted under this Agreement.
AGGREGATED DATA — Client hereby acknowledges and agrees that Crowe may aggregate Client content
and data with content and data from other clients ("Data Aggregations") for purposes including, without
limitation, product and service development, commercialization, industry benchmarking, or quality improvement
initiatives. Crowe will scrub the content and data so that Client sensitive information is not disclosed and so that
all data is anonymized. All Data Aggregations will be the sole and exclusive property of Crowe.
LEGAL AND REGULATORY CHANGE — Crowe may periodically communicate to Client changes in laws, rules
or regulations. However, Client has not engaged Crowe, and Crowe does not undertake an obligation, to
advise Client of changes in (a) laws, rules, regulations, industry or market conditions, or (b) Client's own
business practices or other circumstances (except to the extent required by professional standards). The scope
of Services and the fees for Services are based on current laws and regulations. If changes in laws or
regulations change Client's requirements or the scope of the Services, Crowe's fees will be modified to a
mutually agreed amount to reflect the changed level of Crowe's effort.
PUBLICATION — Client agrees to obtain Crowe's specific permission before using any Report or Crowe work
product or Crowe's firm's name in a published document, and Client agrees to submit to Crowe copies of such
documents to obtain Crowe's permission before they are filed or published.
CLIENT REFERENCE — From time to time Crowe is requested by prospective clients to provide references for
Crowe service offerings. Client agrees that Crowe may use Client's name and generally describe the nature of
Crowe's engagement(s) with Client in marketing to prospects, and Crowe may also provide prospects with
contact information for Client personnel familiar with Crowe's Services.
NO PUNITIVE OR CONSEQUENTIAL DAMAGES — Any liability of Crowe will not include any consequential,
special, incidental, indirect, punitive, or exemplary damages or loss, nor any lost profits, goodwill, savings, or
business opportunity, even if Crowe had reason to know of the possibility of such damages.
LIMIT OF LIABILITY — Except where it is judicially determined that Crowe performed its Services with gross
negligence or willful misconduct, Crowe's liability will not exceed fees paid by Client to Crowe for the portion of
the work giving rise to liability. A claim for a return of fees paid is the exclusive remedy for any damages. This
limit of liability will apply to the full extent allowed by law, regardless of the grounds or nature of any claim
asserted, including, without limitation, to claims based on principles of contract, negligence or other tort,
fiduciary duty, warranty, indemnity, statute or common law. This limit of liability will also apply after this
Agreement.
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INDEMNIFICATION FOR THIRD -PARTY CLAIMS — In the event of a legal proceeding or other claim brought
against Crowe by a third party, except where it is judicially determined that Crowe performed Services with
gross negligence or willful misconduct, Client agrees to indemnify and hold harmless Crowe and its personnel
against all costs, fees, expenses, damages and liabilities, including attorney fees and any other fees or defense
costs, associated with such third -party claim, relating to or arising from any Services performed or work product
provided by Crowe that Client uses or discloses to others or this engagement generally. This indemnification is
intended to apply to the full extent allowed by law, regardless of the grounds or nature of any claim, liability, or
damages asserted, including, without limitation, to claims, liability or damages based on principles of contract,
negligence or other tort, fiduciary duty, warranty, indemnity, statute or common law. This indemnification will
also apply after termination of this Agreement.
NO TRANSFER OR ASSIGNMENT OF CLAIMS — No claim against Crowe, or any recovery from or against
Crowe, may be sold, assigned or otherwise transferred, in whole or in part.
TIME LIMIT ON CLAIMS — In no event will any action against Crowe, arising from or relating to this
engagement letter or the Services provided by Crowe relating to this engagement, be brought after the earlier
of 1) two (2) years after the date on which occurred the act or omission alleged to have been the cause of the
injury alleged; or 2) the expiration of the applicable statute of limitations or repose.
RESPONSE TO LEGAL PROCESS — If Crowe is requested by subpoena, request for information, or through
some other legal process to produce documents or testimony pertaining to Client or Crowe's Services, and
Crowe is not named as a party in the applicable proceeding, then Client will reimburse Crowe for its
professional time, plus out-of-pocket expenses, as well as reasonable attorney fees, Crowe incurs in
responding to such request.
MEDIATION — If a dispute arises, in whole or in part, out of or related to this engagement, or after the date of
this agreement, between Client or any of Client's affiliates or principals and Crowe, and if the dispute cannot be
settled through negotiation, Client and Crowe agree first to try, in good faith, to settle the dispute by mediation
administered by the American Arbitration Association, under its mediation rules for professional accounting and
related services disputes, before resorting to litigation or any other dispute -resolution procedure. The results of
mediation will be binding only upon agreement of each party to be bound. Costs of any mediation will be
shared equally by both parties. Any mediation will be held in Cupertino, California.
JURY TRIAL WAIVER — FOR ALL DISPUTES RELATING TO OR ARISING BETWEEN THE PARTIES, THE
PARTIES AGREE TO WAIVE A TRIAL BY JURY TO FACILITATE JUDICIAL RESOLUTION AND TO SAVE
TIME AND EXPENSE. EACH PARTY AGREES IT HAS HAD THE OPPORTUNITY TO HAVE ITS LEGAL
COUNSEL REVIEW THIS WAIVER. THIS WAIVER IS IRREVOCABLE, MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND APPLIES TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, OR
MODIFICATIONS TO THIS AGREEMENT. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE
FILED AS WRITTEN CONSENT TO A BENCH TRIAL WITHOUT A JURY. HOWEVER, AND
NOTWITHSTANDING THE FOREGOING, IF ANY COURT RULES OR FINDS THIS JURY TRIAL WAIVER TO
BE UNENFORCEABLE AND INEFFECTIVE IN WAIVING A JURY, THEN ANY DISPUTE RELATING TO OR
ARISING FROM THIS ENGAGEMENT OR THE PARTIES' RELATIONSHIP GENERALLY WILL BE
RESOLVED BY ARBITRATION AS SET FORTH IN THE PARAGRAPH BELOW REGARDING
"ARBITRATION."
ARBITRATION — If any court rules or finds that the JURY TRIAL WAIVER section is not enforceable, then any
dispute between the parties relating to or arising from this Agreement or the parties' relationship generally will
be settled by binding arbitration in Cupertino, California (or a location agreed in writing by the parties). Any
issues concerning the extent to which any dispute is subject to arbitration, or concerning the applicability,
interpretation, or enforceability of any of this Section, will be governed by the Federal Arbitration Act and
resolved by the arbitrator(s). The arbitration will be governed by the Federal Arbitration Act and resolved by the
arbitrator(s). The parties will use the International Institute for Conflict Prevention & Resolution (the "CPR
Institute') Global Rules for Accelerated Commercial Arbitration (the "Accelerated Rules") then in effect, or such
other rules or procedures as the parties may agree in writing. In the event of a conflict between those rules and
this Agreement, this Agreement will control. The parties may alter each of these rules by written agreement. If a
party has a basis for injunctive relief, this paragraph will not preclude a party seeking and obtaining injunctive
relief in a court of proper jurisdiction. The parties will agree within a reasonable period of time after notice is
made of initiating the arbitration process whether to use one or three arbitrators, and if the parties cannot agree
within fifteen (15) business days, the parties will use a single arbitrator. In any event the arbitrator(s) must be
retired federal judges or attorneys with at least 15 years commercial law experience and no arbitrator may be
appointed unless he or she has agreed to these procedures. If the parties cannot agree upon arbitrator(s)
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within an additional fifteen (15) business days, the arbitrator(s) will be selected by the CPR Institute. Discovery
will be permitted only as authorized by the arbitrator(s), and as a rule, the arbitrator(s) will not permit discovery
except upon a showing of substantial need by a party. To the extent the arbitrator(s) permit discovery as to
liability, the arbitrator(s) will also permit discovery as to causation, reliance, and damages. The arbitrator(s) will not
permit a party to take more than six depositions, and no depositions may exceed five hours. The arbitrator(s)
will have no power to make an award inconsistent with this Agreement. The arbitrator(s) will rule on a summary
basis where possible, including without limitation on a motion to dismiss basis or on a summary judgment
basis. The arbitrator(s) may enter such prehearing orders as may be appropriate to ensure a fair hearing. The
hearing will be held within one year of the initiation of arbitration, or less, and the hearing must be held on
continuous business days until concluded. The hearing must be concluded within ten (10) business days absent
written agreement by the parties to the contrary. The time limits in this section are not jurisdictional. The
arbitrator(s) will apply substantive law and may award injunctive relief or any other remedy available from a
judge. The arbitrator(s) may award attorney fees and costs to the prevailing party, and in the event of a split or
partial award, the arbitrator(s) may award costs or attorney fees in an equitable manner. Any award by the
arbitrator(s) will be accompanied by a reasoned opinion describing the basis of the award. Any prior agreement
regarding arbitration entered by the parties is replaced and superseded by this agreement. The arbitration will be
governed by the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq., and judgment upon the award rendered by the
arbitrator(s) may be entered by any court having jurisdiction thereof. All aspects of the arbitration will be treated
by the parties and the arbitrator(s) as confidential.
NOTIFICATION OF NON -LICENSEE OWNERSHIP — Crowe ("the Firm') and certain owners of the Firm are
licensed by the California State Board of Accountancy. However, the Firm has owners not licensed by the
California State Board of Accountancy who may provide Services under this agreement. If Client has any
questions regarding licensure of the personnel performing Services under this engagement, please do not
hesitate to contact Crowe.
NON -SOLICITATION — Client and Crowe acknowledge the importance of retaining key personnel. Accordingly,
both parties agree that during the period of this agreement, and for one (1) year after its expiration or
termination, neither party will solicit any personnel or subcontractors (if any) of the other party for employment
without the written consent of the other party. If an individual becomes an employee of the other party, the
other party agrees to pay a fee equal to the individual's compensation for the prior full twelve-month period to
the original employer.
AFFILIATES — Crowe Horwath LLP is an independent member of Crowe Horwath International, a Swiss verein.
Each member firm of Crowe Horwath International is a separate and independent legal entity. Crowe Horwath
LLP and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath International or
any other member of Crowe Horwath International and specifically disclaim any and all responsibility or liability
for acts or omissions of Crowe Horwath International or any other member of Crowe Horwath International.
Crowe Horwath International does not render any professional services and does not have an ownership or
partnership interest in Crowe Horwath LLP. Crowe Horvath International and its other member firms are not
responsible or liable for any acts or omissions of Crowe Horwath LLP and specifically disclaim any and all
responsibility or liability for acts or omissions of Crowe Horvath LLP.
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�a% Cherry Bekaer
so
System Review Report
To the Partners of Crowe Horvath LLP
and the AICPA National Peer Review Committee
We have reviewed the system of quality control for the accounting and auditing practice of Crowe Horwath LLP
(the "firm') applicable to engagements not subject to PCAOB permanent inspection in effect for the year ended
March 31, 2016. 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. As a part of our peer review, we considered reviews by regulatory entities, if applicable, in
determining the nature and extent of our procedures. 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. Our responsibility is to express an
opinion on the design of the system of quality control and the firms compliance therewith based on our review.
The nature, objectives, scope, limitations of and the procedures performed in a System Review are described in
the standards at www.acpa-org/prsunrtnary-
As required by the standards, engagements selected for review included engagements performed under
Government Auditing Standards, audits of employee benefit plans, audits performed under FDICIA, audits of
carrying broker -dealers, and exantinatio ns of service organ¢abons (Service Organizations Control (SOC) 1 and
SOC 2 engagements].
In our opines, the system of quality control for the accounting and auditing practice of Crowe Horwath LLP
applicable to engagements not subject to PCAOB permanent inspection in effect for the year ended March 31,
2016, has been suitably designed and complied with to provide the fine with reasonable assurance of
perfomvng and reporting in conformity with applicable professional standards in all material respects. Firms can
receive a rating of pass, pass with deficiency(ies) or fang. Crowe Horwath LLP has received a peer review rating
of pass.
AICPAj Peer Review Program
Administered by the National Peer Review Committee
October 31, 2016
James L Powers
Crowe Horwath LLP
225 W Wacker Dr Ste 2600
Chicago, IL 60606
Dear Mr. Powers:
American Instltwe of CPAs
220 Leigh Farm Road
Durham. NC 27707-8110
It is my pleasure to notify you that on October 27, 2016 the National Peer Review Committee accepted
the report on the most recent system peer review of your firm. The due date for your next review is
September 30, 2019. This is the date by which all review documents should be completed and submitted
to the administering entity.
As you know, the report had a peer review rating of pass. The Committee asked me to convey its
congratulations to the firm.
Sincerely,
Michael Fawley
Chair —National PRC
nprc@aiepa.org 919 4024502
cc: Samuel Edward Johnson; Scot D Ivey
Firm Number: 10014904
Letter ID: 1122915A
Review Number 446067
T_ 1.919 402.4502 1 F_ 1,919 402,4876 1 nprc@aicpa.org