6.0. SR 05-11-1998 - Laserfiche WebLink

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Municipal Utilities Elk River March 3, 1998 Page Two Disagreements with Manae;ement For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting or auditing matter that could be significant to the general purpose financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Issues Discussed Prior to Retention of Independent Auditors We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the Utilities' auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Difficulties Encountered in Performin~ the Audit We encountered no significant difficulties in dealing with management in performing our audit. Reportable Conditions In planning and performing our audit of the combined financial statements of the Elk River Municipal Utilities for the year ended December 31, 1997, we considered its internal control in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on internal control. We noted no matters involving internal control and its operation that we consider to be reportable conditions under standards established by the American Institute of Certified Public Accountants. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of internal control that, in our judgment, could adversely affect the Utilities' ability to record, process, summarize and report financial data consistent with the assertions of management in the financial statements. A material weakness is a reportable condition in which the design or operation of one or more of internal control components does not reduce to a relatively low level the risk that errors or irregularities in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of internal control would not necessarily disclose all matters in internal control that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses as defined above. Our previous management letter discussed a reportable condition due to a lack of segregation of accounting duties. With the addition of staff over the past few years, we feel the accounting functions are now adequately separated. Other Matters The following are areas that came to our attention during the audit that We feel should be reviewed: The results of the Electric and Water Enterprise Funds are as follows: Electric Fund 1997 1996 $7 281 411 $6 642 320 5 647 061 5 608 662 1 634 350 1 033 658 535 395 437 247 Charges for services Operating expenses excluding depreciation Operating income before depreciation Depreciation expense Operating income $1 098 955 $ 596 411