Finance and Audit Committee Kentucky Community and Technical College System Foundation, Inc. 300 North Main Street Versailles, Kentucky 40383 Attention: Mr. Lee Hess: This letter is to explain our understanding of the arrangements for the services we are to perform for Kentucky Community and Technical College System Foundation, Inc. (the Foundation) for the year ended June 30, 2012. We ask that you confirm this understanding. Audit Services We will perform an audit of Kentucky Community and Technical College System Foundation, Inc. s financial statements as of and for the year ended June 30, 2012. We understand that the financial statements will be prepared in accordance with accounting principles generally accepted in the United States of America. The objective of an audit of financial statements is to express an opinion on those statements. We will also prepare, review and sign the following business tax returns for the Foundation for the year ended June 30, 2012: Form 990 Return of Organizations Exempt from Income Tax The objective of our audit is the expression of an opinion about whether your financial statements are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles. Our audit will be conducted in accordance with auditing standards generally accepted in the United States of America and will include tests of your accounting records and other procedures we consider necessary to enable us to express such an opinion. If our opinion is other than unqualified, we will discuss the reasons with you in advance. If, for any reason, we are unable to complete the audit or are unable to form or have not formed an opinion, we may decline to express an opinion or to issue a report as a result of this engagement. We are responsible for forming and expressing an opinion about whether the financial statements that have been prepared by management with the oversight of the finance and audit committee are presented fairly, in all material respects, in conformity with accounting principles generally accepted in the United States of America.
Page 2 We will conduct the audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable, rather than absolute, assurance about whether the financial statements are free of material misstatement whether caused by error or fraud. Accordingly, a material misstatement, may remain undetected. Also, an audit is not designed to detect errors or fraud that are immaterial to the financial statements. An audit of financial statements also includes obtaining an understanding of the entity and its environment, including its internal control, sufficient to assess the risks of material misstatement of the financial statements, and to design the nature, timing, and extent of further audit procedures. An audit is not designed to provide assurance on internal control or to identify significant deficiencies or material weaknesses. However, we will communicate to management and the finance and audit committee any significant deficiencies or material weaknesses that become known to us during the course of the audit. We will also communicate to the finance and audit committee (a) any fraud involving senior management and fraud (whether caused by senior management or other employees) that causes a material misstatement of the financial statements, (b) any illegal acts that come to our attention (unless they are clearly inconsequential), (c) any disagreements with management and other serious difficulties encountered in performing the audits, and (d) various matters related to the entityʹs accounting policies and financial statements. Kentucky Community and Technical College System Foundation, Inc. s Responsibilities Management is responsible for the financial statements, including the selection and application of accounting policies, adjusting the financial statements to correct material misstatements, and for making all financial records and related information available to us. Management is responsible for providing us with a written management representation letter confirming certain representations made during the course of our audit of the financial statements and affirming to us that it believes the effects of any uncorrected misstatements aggregated by us during the current engagement and pertaining to the latest period presented are immaterial, both individually and in the aggregate, to the financial statements taken as a whole. Management is responsible for establishing and maintaining effective internal control over financial reporting and for informing us of all significant deficiencies and material weaknesses in the design or operation of such controls of which it has knowledge. Management is responsible for identifying and ensuring that the entity complies with the laws and regulations applicable to its activities, and for informing us about all known material violations of such laws or regulations. In addition, management is responsible for the design and implementation of programs and controls to prevent and detect fraud, and for informing us about all known or suspected fraud affecting the entity involving management, employees who have significant roles in internal control, and others where the fraud could have a
Page 3 material effect on the financial statements. Management is also responsible for informing us of its knowledge of any allegations of fraud or suspected fraud affecting the entity received in communications from employees, former employees, analysts, regulators, or others. The finance and audit committee is responsible for informing us of its views about the risks of fraud within the entity, and its knowledge of any fraud or suspected fraud affecting the entity. If, in connection with our audit, you request us to perform accounting services necessary for the preparation of the financial statements (such as maintaining depreciation schedules, computing the provision for income taxes, drafting the financial statements, etc.), you agree to designate an appropriate individual to oversee the services, make all management decisions involved in those services, evaluate the adequacy and results of the services, and accept responsibility for the results of the services. Kentucky Community and Technical College System Foundation, Inc. s Records and Assistance If circumstances arise relating to the condition of the entityʹs records, the availability of appropriate audit evidence, or indications of a significant risk of material misstatement of the financial statements because of error, fraudulent financial reporting, or misappropriation of assets, which in our professional judgment prevent us from completing the audit or forming an opinion, we retain the unilateral right to take any course of action permitted by professional standards, including declining to express an opinion, issue a report, or withdrawal from the engagement. During the course of our engagement, we may accumulate records containing data that should be reflected in the entityʹs books and records. The entity will determine that all such data, if necessary, will be so reflected. Accordingly, the entity will not expect us to maintain copies of such records in our possession. The assistance to be supplied by entity personnel, including the preparation of schedules and analyses of accounts, has been discussed and coordinated with Kay Yates. The timely and accurate completion of this work is an essential condition to our completion of the audit and issuance of our audit report. Fees, Costs, and Access to Workpapers Our fees for these services will not exceed $8,500 for the audit and $2,600 for the Form 990. Interim billings will be submitted as work progresses and as expenses are incurred. We will submit our bill for these services promptly upon rendering the report. Billings are due upon submission. This fee estimate will be subject to adjustments based on unanticipated changes in the scope of our work and/or the incomplete or untimely receipt by us of the information on the client participation list. All other provisions of this letter will survive any fee adjustment.
Page 4 Release and Indemnification During the course of our engagement, we will request information and explanations from management regarding the Foundationʹs operations, internal controls, future plans, specific transactions, and accounting systems and procedures. At the conclusion of our engagement, we will require, as a precondition to the issuance of our report, that management provide certain representations in a written representation letter. The procedures we will perform in our engagement and the conclusions we reach as a basis for our report will be heavily influenced by the written and oral representations that we receive from management. In view of the foregoing, the Foundation agrees to release our firm and its personnel from any liability and costs relating to our services under this letter resulting from false and misleading representations made to us by any member of the Foundationʹs management. In the unlikely event that differences concerning our services or fees should arise that are not resolved by mutual agreement, to facilitate resolution of the differences and to save both parties time and expense, the Foundation and Dean Dorton Allen Ford, PLLC (DDAF) agree to try in good faith to settle their differences by mediation administered by the American Arbitration Association under the Dispute Resolution Rules for Professional Accounting and Related Services Disputes before resorting to litigation. In the event litigation cannot be avoided, the Foundation and DDAF agree not to demand a trial by jury. Termination and Other Terms Our audit engagement ends on delivery of our audit report. You may request that we perform additional services not addressed in this engagement letter. If this occurs, we will communicate with you the scope of the additional services and the estimated fees. We also may issue a separate engagement letter covering the additional services. In the absence of any other written communication from us documenting such additional services, our services will continue to be governed by the terms of this engagement letter. We appreciate the opportunity to be of service to you and believe this letter accurately summarizes the significant terms of our engagement. If you have any questions, please let us know. If you agree with the terms of our engagement as described in this letter, please sign the enclosed copy and return it to us. Very truly yours, Dean Dorton Allen Ford, PLLC By: Crissy R. Fiscus
Page 5 RESPONSE: This letter correctly sets forth the understanding of Kentucky Community and Technical College System Foundation, Inc. Officer signature: Title: Date: