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! <br /> <br /> ABDO <br /> EICK& <br /> <br /> Cen~fied Pu]~lic Accountants & Consultants <br /> <br />7241 Otnns Lane <br /> <br />Suite 200 <br /> <br />Minneapolis. MN 55439 <br /> <br />March 3, 1998 <br /> <br />To the Chairperson and Members of the Commission <br />Elk River Municipal Utilities <br />Elk River, Minnesota <br /> <br />Professional standards require that we provide you with the following information related to our audit <br /> <br />Our Responsibility Under Generally Accepted Auditing Standards and Government Auditing Standardu <br /> <br />As stated in our engagement letter, our responsibility, as described by professional standards, is to plan and perform our audit <br />to obtain reasonable, but not absolute, assurance that the combined financial statements are free of material misstatement and <br />are fairly presented in accordance with generally accepted accounting principles. Our audit is designed to provide reasonable <br />assurance of detecting misstatements that, in our professional judgment, would have a material effect on the financial <br />statements taken as a whole. Consequently, our audit will not necessarily detect misstatement less than this materiality level <br />that might exist due to error, fraudulent financial reporting or misappropriation of assets. <br /> <br />As part of our audit, we considered the internal control of the Utilities. Such considerations were solely for the purpose of <br />determining our audit procedures and not to provide any assurance concerning such internal control. As part of obtaining <br />reasonable assurance about whether the financial statements are free of material misstatement, we performed tests of <br />compliance with certain provisions of laws, regulations, contracts and grants. However, the objective of our tests was not to <br />provide an opinion on compliance with such provisions. <br /> <br />Accounting Estimates <br /> <br />Accounting estimates are an integral part of the combined financial statements prepared by management and are based on <br />management's knowledge and experience about past and current events and assumptions about future events. Certain <br />accounting estimates are particularly sensitive because of their significance to the general purpose £mancial statements and <br />because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive <br />estimates affecting the financial statements were depreciation on fixed assets. <br /> <br />Management's estimate of depreciation is based on estimated useful lives of the assets. We evaluated the key factors and <br />assumptions used to develop those estimates in determining that it is reasonable in relation to the fmancial statements taken <br />as a whole. <br /> <br />Significant Audit Adjustments <br /> <br />For purposes of this letter, professional standards define a significant audit adjustment as a proposed correction of the general <br />purpose financial statements that, in our judgment, may not have been detected except through our auditing procedures. We <br />proposed no material audit adjustments. <br /> <br />612.835.9090 * Fax 612.835.3261 <br /> <br /> <br />