17-126 Crowe Horwath, Audit ServicesCrowe Horwath.
February 27, 2017
To the Honorable Mayor and City Council
City of Cupertino, California
10300 Torre Avenue
Cuperti no, Cal iforn ia 95014-3202
Crowe Horwath LLP
l ndependenl Member Crowe Hoiwath 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
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 "Cl ient") for the year ending June 30, 2017 . 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 financia l statements of the governmental activities, the business-type
activities, each major fund , and the aggregate remaini ng fund information which collect ively 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 presentat ion of the following
supplementary information in relat ion to the financia l statements as a whole, and to report on whether this
supplementary info rmat ion is fairly stated , in all material respects, in relat ion to the financia l statements as
a whole.
• Combining and Individual Fund Financial Statements and Schedules
• Schedule of Expenditures of Federal Awards
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 in formation due to our limited procedures.
• Management's Discussion and Analysis
• Schedule of Changes in Net Pension Liab ility and Related Ratios -Pensions
• Schedule of Contributions -Pensions
• Schedule of Funding Progress -OP ES
The document will a lso include the following additional information that will not be subjected to the
auditing procedures a pplied in our aud it of the financial statements, and for whic h our auditor's re port will
disclaim an opinion :
• Introductory Section of the Comprehensive Annual Financial Report
• Statistical Section of the Comprehensive Annual Financial Report
The objective of the audit is the express ion 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
Am e rica , the standards for financia l aud its con t ained in Governm ent Auditing Standards , issued by the
Comptroller General of th e United Stat es, and t he a udit requ irements of T itl e 2 U.S. Cod e of Fe deral
Regulations Part 200 , Uniform Administrative Requirements, Cost Principles, and Audit Requirements for
To the Honorable Mayor and City Council
City of Cupertino , California
February 27 , 2017
Page 2
Federal Awards (Uniform Guidance). 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 , and that we report on the Schedule of Expenditures of Federal Awards (as
noted above), and on your compliance with Federal statutes , regulations , and the terms and conditions of
Federal awards and on its internal controls as required for a Single Aud it. 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) var ious 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 .
• Independent Auditor's Report on Compliance for Each Major Federal Program and Report on Internal
Control Over Compliance --The purpose of this report on internal control over compliance is solely to
describe the scope of our testing of internal control over compliance and the results of that testing
To the Honorable Mayor and City Council
City of Cupertino, California
February 27 , 2017
Page 3
based on the requirements of the Uniform Guidance. Accordingly, th is report is not su itable for any
other purpose.
We will also perform tests of controls including testing underlying transactions, as required by the Uniform
Guidance, to evaluate the effectiveness of the design and operation of controls that we consider relevant
to preventing or detecting material noncompl iance with compliance requirements applicable to each of
your major federal awards programs. We will determine major programs in accordance with the Uniform
Guidance. Our tests will be less in scope than would be necessary to render an op inion on these controls
and, accordingly, no opinion will be expressed. We will inform you of any deficiencies or other matters
involving internal control , if any, as required by the Uniform Guidance.
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
a detailed examination of all transactions , there is a risk that material errors , irregularit ies , 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 w ill advise you , however, of any matters of
that nature that come to our attention, unless they are clearly inconsequential.
The Un iform Guidance requires that we plan and perform the aud it to obtain reasonable assurance about
whether you have complied with certain provisions of laws, regulations, contracts and grants. Our
procedures w ill consist of the applicable procedures described in the United States Office of Management
and Budget (0MB) Compliance Supplement for the types of compl iance requirements that could have a
d irect and material effect on each of your major programs. The purpose of our audit w ill be to express an
opinion on your compliance with requirements applicable to major Federal award programs. Because an
audit is designed to provide reasonable assurance , but not absolute assurance , the aud it is not designed
to detect immaterial violations o r instances of noncompliance.
Our audit and work product are intended for the benefit and use of the City only. T he audit will not be
planned or conducted in contemplation of reliance by any other party or w ith 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 engage ment are the property of Crowe and constit ute confidential
infor mation. Howeve r, we may be requested to make ce rtain working papers available to your oversight
agency or g ranters pursuant to authority given to them by law, regulation , or contract. If requested ,
access to such working papers w ill be provided under the supervision of our personnel. Furthermore,
upon request , we may provide photocopies of selected working papers to your oversight agency or
granters. 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 t he oversight agency or pass-through
entity. If we are aware that a federal awarding agency, pass-through entity, or a uditee 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 Res ponsibil ities
T he City's ma nage me nt is respon s ibl e for th e prepa rat ion a nd fair prese ntation of the fin a ncia l stat e me nts
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
To the Honorable Mayor and City Council
City of Cupertino, California
February 27 , 2017
Page4
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. Additionally , as required by the Uniform Guidance , it is management's
responsibility to follow up and take corrective action on reported audit findings and to prepare a summary
schedule of prior audit findings, which should be available for our review , and a corrective action plan .
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
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.
To the Honorable Mayor and City Council
City of Cupertino, California
February 27, 2017
Page 5
At the conclusion of the engagement , it is management's responsibility to submit the reporting package
(including financial statements , schedule of expenditures of federal awards , summary schedule of prior
audit findings , auditor's reports , and corrective action plan) along with the Data Collection Form to the
designated federal clearinghouse and, if appropriate , to pass-through entit ies. The Data Collection Form
and the reporting package must be submitted w ithin the earlier of thirty days after receipt of the auditor's
reports or nine months after the end of the audit period.
OTHER SERVICES
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 respons ible for the presentation of the
financial statements .
Preparation of the Schedule of Expenditure of Federal Awards
The City will provide us with the necessary information to prepare the draft schedule of expenditu re of
federal awards including the notes thereto. We are relying on the City to provide us with all information
required by the Uniform Guidance for the schedule, notes and other relevant reporting information in a
timely fash ion and ensure the data is complete and accurate . Management is solely responsible for the
presentation of the schedule of expend itures of federal awards .
Annual State Controller's Report
We will assist management in compiling the State Controller's Report in ac t ordance with the format and
requirements prescribed by the California State Controller. While we may provide this data entry service
and assist you in satisfying your electronic data communication requirements to the California State
Controller's Office, the completeness and accuracy of this information remains the responsibility of you r
management.
Data Collection Form input services
We will provide assistance in completing sections of the Data Collection Form (DCF) relative to its federal
award programs pursuant to the requirements of Section §200.512 of the Uniform Guidance that are
promulgated to be completed by the City. While we may provide this data entry service and assist you in
satisfying your electronic data communication requirements to the Federal Audit Clearinghouse , the
completeness and accuracy of this information remains the responsibility of your management.
With respect to 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
February 27, 2017
Page 6
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 w ith 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 th is
official statement."
FEES
Our fees, including out-of-pocket expenses , are outlined below. 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 , 2017,
including TOA, City Investment Policy , Proposition 111 , City State Controller
Report and Internal Controls
Single Audit for the year ending June 30, 2017
$ 76 ,000
7 ,500
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 and the Statistical section of the report.
Our fee does not include implementation of any other future 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.
To the Honorable Mayor and City Council
City of Cupertino, California
February 27, 2017
Page 7
We have agreed to the following fees for the next two subsequent years as follows :
Aud it of City financial statements for the year ending June 30 , 2018 ,
including TOA, City Investment Policy , Proposition 111 , City State Controller
Report and Internal Controls
Single Audit for the year ending June 30 , 2018
Audit of City financial statements for the year ending June 30 , 2019 ,
including TOA, City Investment Policy , Proposition 111 , City State Controller
Report and Internal Controls
Single Audit for the year ending June 30, 2019
$ 76 ,000
7 ,500
76 ,000
7 ,500
Because each year is a separate engagement and this three-year period does not constitute a continuous
engagement , we will require execution of a new engagement letter for each subsequent year listed
above.
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 the City 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 the City by Crowe.
To facilitate Crowe's presence at Client's premises, the City will provide Crowe with internet access while
on the City '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 the City's premises . In the event
the C ity does not provide Crowe with internet access while on the City 's premises , the City will reimburse
Crowe for the cost of internet access through other means while on the City's site .
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
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
To the Honorable Mayor and City Council
City of Cupertino , California
February 27 , 2017
Page 8
of the provision or any other provisions in this Agreement , all of wh ich w ill 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 electron ically copied counterparts, each and all of wh ich 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 signatu re), will be consider ed and accepted by
each party as documents equ ivalent to original documents and will be deemed val id , bi nding and
enforceable by and against all parties. This Agreement must be construed , governed , and interpreted
under the laws of the State of California, w ithout regard for cho ice of law principles.
We are pleased to have this opportunity to serve you , and we look forward to a continuing relationship . If
the terms of th is letter and the attached Crowe Engagement Terms are acceptable to you , please sign
below and return one copy of this lette r at your earliest conven ience. Please contact us w ith any
questions or concerns.
(S ignature Page follows)
To the Honorable Mayor and City Council
City of Cupertino , Cal ifornia
February 27 , 2017
Page 9
ACCEPTANCE
I have rev iewed the arrangements outlined above and in the attached "Crowe Engagement Terms ," and I
accept on behalf of the City the terms and cond it ions as stated . By signing below , I represent and warrant
that I am authorized by the City to accept the terms and condit ions as stated .
IN WITNESS WHEREOF , the City of Cupertino , California and Crowe have duly e xecuted 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.
, CALIFORNIA CROWE HORWATH LLP
Signature
Ka the rine V. La i
Pr inted Name Pr inted Name
Partner
Titl e
Date l I
February 27 , 2017
Date
CITY COUNCIL APPROVAL:
The City Council has reviewed the services and Crowe Engagement Terms described in this letter and
evaluated the services pursuant to the Ci ty 's policies . After considering all relevant factors , the City
Council hereby approves hiring Crowe to provide the services described above.
Authorized Representative of the City Council :
~ignature
Printed Name
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1) ~ 1ec:t1J r at fr)u,1 1~5jytrnJ~ .Xvvlc~_s
Title
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Date
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 confidential ity 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 .
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 w ith applicable US state and federal law and professional regulations disclosing or using such
information to carry out the Services. Crowe has implemented and will maintain physical, electronic and
procedural safeguards reasonably designed to (i) 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
1 of 4
provide t he 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-i ssued identification numbers, or other
data that, if disclosed without authorization , would trigger notification requi rements 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 w ith professional standards applicable
to Crowe) to protect the Restricted Persona l 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. Clien t 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
const itute a breach of this Agreement.
INTELLECTUAL PROPERTY -Crowe may use ideas, concepts, methodolog ies, data, software, des igns ,
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 (i ncluding 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 wi ll use Reports , as
well as any Materials there in, only to the extent necessary and perm itted under this Agreement.
AGGREGATED DATA-Client agrees Crowe may from time to time use and process Client's confident ial
information for data aggregation or industry benchmarking purposes . In using Cl ient's confidential
information in this way , Crowe will maintain the information as confidential unless Crowe removes data
that specifically identifies Client and Client cust omers.
LEGAL AND REGULA TORY CHANGE -Crowe may pe riodically communicate to Cl ient changes in law s ,
rules or regu lations . However, Client has not engaged Crowe , an d Crowe does not undertake an
obl igation , to advise Cl ient of changes in (a) laws , rules , regulations, industry or market conditions , or (b)
Cli e nt's own business practices or other c ircumstances (except to the extent required by professional
standards). The scop e of Services and t he fees for Services are based on cu rrent laws and regulations . If
c hanges in laws or regulations change C li ent's requirem ents or the scope of th e Services , Crowe's fees
will be mod ified to a mutually agreed amount to reflect the changed level of Crowe's effort.
PUBLICATION - Client agrees to obta in Crowe's specific permission befo re using any Report or Crowe
work product or Crowe's fi rm's name in a publ ished document, and Client agrees to subm it to Crowe
copies of such documents to obtain Crowe's permission before they are filed or published .
CLIENT REFER E NCE -From tim e to time Crowe is requ ested by prosp ective clients to provide
refe re nces for C rowe service offerings. Client agrees that Crowe may use Cl ient's nam e and generally
describe the nature of Crowe's engagement(s) with Client in market ing to prospects , and Crowe may also
provide prospects w ith contact information fo r Cli e nt personnel familiar w ith Crowe's Services.
NO PUNITIVE OR CONSEQUENTIAL DAMAG ES -Any liability of Crowe w ill not include any
consequential , speci al , in c idental , indirect, pu n itive , o r exemplary damages or loss, nor any lost profits ,
goodwill , savings , or business opportunity , even if Crowe had reason to know of the poss ib ility of s uch
damages.
LIMIT OF LIABILITY -Except where it is judic ially determined that Crowe performed its Services with
gross negligence or willfu l misconduct, C rowe's liability will not exceed fees pa id by Client to Crowe for t he
porti o n of the work g iving rise to liability . A cl aim for a return of fees paid is th e exclusive remedy for any
damages. This limit of liability w ill apply to the f ull extent a llowed by law, reg a rdless of t he grounds or
nature of any cla im asserted , incl udin g, w ithou t limitation , to cla ims based on pri nci ples of contract,
neg lige nce or oth e r to rt , fidu cia ry duty, w a rra nty , ind emnity, statute or common law. This lim it of liabili ty
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 aga inst Crowe by a third party , except where it is judicially determined that Crowe performed
Services w ith gross negligence or w illful 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, relat ing 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 expirat ion 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 fa ith, 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 med iation 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 th is 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 Comme rcial Arb itration (the "Accelerated
Rules ") then in effect , or such other rules or procedures as the parties may agree in writing . In the event
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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 re li ef, this paragraph will not
preclude a party seeking and obtaining injunctive relief in a court of proper jurisdiction . The parties will
agree with in a reasonable period of time after notice is made of initi ating 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) 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 arbitra tor(s) w ill 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, rel iance, 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 w ith this Agreement. The arbitrator(s) w ill
rule on a summary basis where possible, including without limitation on a motion to d ismiss 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 spl it 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 describin g the basis of the award . Any prior agreement regarding arbitration entered by the parties
is replaced and superseded by this agreement. The arbitration w ill 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 jur isdiction 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 retain in g key personnel.
Accordingly, both parties agree that during the period of this agreement, and for one (1) year after its
expiration or term ination , 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 , ~he oth er 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 Internati onal , a Swiss
verein. Each member fi rm 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 Internat ional. Crowe Horwath International does not render any professional services
and does not have an ownership or partnership interest in Crowe Horwath LLP . Crowe Horwath
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 respons ibility or liability for acts or omissions of Crowe
Horwath LLP .
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,. -. Cherry Be kae rrp
System Review Report
To the Partners of Crowe Horwath 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 firm's 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.aicpa.org/prsummary.
As requ ired 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 examinations of service organizations [Service Organizations Control (SOC) 1 and
SOC 2 engagements].
In our opinion, 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 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 . Crowe Horwath LLP has received a peer review rating
of pass.
Cherry Bekaert LLP
August23,2016
,AICPA) Pe er Review Program
Ad ministered by the National Peer Review Comm ittee
October 31 , 2016
James L Powers
Crowe Horwath LLP
225 W Wacker Dr Ste 2600
Chicago, 1L 60606
Dear 1vfr . Powers:
Ame m:an ln slitut(I of CPAs
220 Le:19h Fa rm Road
Durham. NC 27707 -8110
It is my pleasure to notify you that on October 27 , 2016 the National Peer Review Commjttce 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.
Michael Fawley
Chair-National PRC
nprc @aicpa.org 919 4024502
cc: Samuel Edward Johnson; Scot D Ivey
Firm Number: 10014904
Letter ID: 1122915A
Review Number 446067
T 1 .9 1 9 .402-4 502 I F· 1 .91 9.402 .4876 I nprc@a i cpa .org