SWCSR FINANCIAL REPORT 12-31-2007

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Board of Directors Sherburne-Wright County Cable Communications Commission II Page 2 Internal Control over the Financial Reporting Process Management is responsible for establishing and maintaining internal controls, including monitoring, and for the fair presentation in the financial statements. At times, management may choose to outsource certain accounting functions (in this case, financial statement preparation) due to cost or training considerations. Such accounting functions and service providers must be governed by the control policies and procedures of the Commission. Management is as responsible for outsourced functions performed by a service provider as it is for its own personnel. Management is also responsible for management decisions and functions; for designating an individual with suitable skill, knowledge,or experience to oversee any outsourced services; and for evaluating the adequacy and results of those services and accepting responsibility for them. As part of the audit,management requested us to prepare a draft of your financial statements, including the related notes to financial statements. Management reviewed, approved, and accepted responsibility for those financial statements prior to their issuance. We understand that this material weakness is already known to management and represents a conscious decision by management and the Board to accept that degree of risk because of cost or other considerations. We acknowledge the fact that management is responsible for making decisions concerning costs and the related benefits. * * * * * * Also, during our audit,we became aware of other matters that are opportunities for strengthening internal controls and operating efciency. Our comments and suggestions regarding those matters are summarized below. Dual Signatures on Checks The Commission's Restated Joint and Cooperative Agreement requires that checks written on behalf of the Commission be signed by the Treasurer and the Chairman of the Board. We noted that it is generally not feasible for both individuals to sign each check, and as a result most of the Commission's checks are signed only by the Treasurer. We suggest that the Commission amend its Restated Joint and Cooperative Agreement to remove the requirement for dual signatures on checks, and instead implement a mitigating internal control procedure such as approval of disbursements by the Board, or Board review of monthly financial statements. Member Votes We noted that Section VI of the Restated Joint and Cooperative Agreement indicates that each Director is entitled to vote in direct proportion to the percent of annual franchise fee revenue and other support payments of that participating municipality (i.e. Member) relative to the total annual franchise fee revenue and other support payments of all participating municipalities, but in no case less than one vote. We suggest that the Commission consider amending the Restated Joint and Cooperative Agreement to simply allow one vote per Member regardless of the amount of annual franchise fee revenue and other support payments. Purchases and Contracts We noted that Section VIII of the Restated Joint and Cooperative Agreement requires the Commission to follow Minnesota procurement procedures for statutory cities when making purchases of entering into new contracts. We suggest that the Commission consider amending the Restated Joint and Cooperative Agreement to remove this requirement, as the procurement procedures for statutory cities may not be an efficient internal control for relatively small organizations such as the Commission.