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INDEPENDENT AUDITOR'S REPORT
<br /> Public Utilities Commission
<br /> Elk River Municipal Utilities
<br /> Elk River,Minnesota
<br /> Report on the Financial Statements
<br /> We have audited the accompanying financial statements of the Elk River Municipal Utilities(the Utilities)of the City of Elk River,
<br /> Minnesota(the City),as of and for the year ended December 31,2015,and the related notes to the financial statements,as listed in the
<br /> table of contents.
<br /> Management's Responsibility for the Financial Statements
<br /> Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting
<br /> principles generally accepted in the United States of America;this includes the design,implementation,and maintenance of
<br /> internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement,
<br /> whether due to fraud or error.
<br /> Auditor's Responsibility
<br /> Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance
<br /> with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform
<br /> the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
<br /> An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The
<br /> procedures selected depend on the auditor's judgment,including the assessment of the risks of material misstatement of the financial
<br /> statements,whether due to fraud or error. In making those risk assessments,the auditor considers internal control relevant to the
<br /> Utilities preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the
<br /> circumstances,but not for the purpose of expressing an opinion on the effectiveness of the Utilities internal control. Accordingly,we
<br /> express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
<br /> significant accounting estimates made by management,as well as evaluating the overall presentation of the financial statements.
<br /> We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
<br /> Opinion
<br /> In our opinion,the financial statements referred to above present fairly,in all material respects,the financial position of the Utilities of
<br /> the City as of December 31,2015,and the changes in financial position and cash flows thereof for the year then ended in accordance
<br /> with accounting principles generally accepted in the United States of America.
<br /> Emphasis of Matter
<br /> As discussed in Note 1B,the financial statements present only the Electric and Water enterprise funds and do not purport to,and do
<br /> not present fairly the financial position of the City as of December 31,2015,the changes in its financial position,or,where applicable,
<br /> its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.
<br /> Our opinion is not modified with respect to this matter.
<br /> Other Matters
<br /> Change in Accounting Standards
<br /> As described in Note 6 to the financial statements,the Utilities adopted the provisions of Governmental Accounting Standard
<br /> Board(GASB)Statement No.68,Accounting and Financial Reporting for Pensions-an Amendment of GASB Statement No.27 and
<br /> Statement No.71,Pension Transition for Contributions Made Subsequent to the Measurement Date-an Amendment of GASB
<br /> Statement No.68,for the year ended December 31,2015.Adoption of the provisions of these statements results in significant change
<br /> to the classifications of the components of the financial statements.
<br /> Required Supplementary Information
<br /> Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis
<br /> Page 13 and the Schedule of Employer's Shares of the Net Pension Liability,the Schedule of Employer's Contributions and the
<br /> Schedule of Funding Progress for Other Post Employment Benefit Plan starting on page 48 be presented to supplement the basic
<br /> financial statements.Such information,although not a part of the financial statements,is required by the Government Accounting
<br /> Standards Board,who considers it to be an essential part of financial reporting for placing the financial statements in an appropriate
<br /> operational,economic,or historical context.We have applied certain limited procedures to the required supplementary information in
<br /> accordance with auditing standards generally accepted in the United States of America,which consisted of inquiries of management
<br /> about the methods of preparing the information and comparing the information for consistency with management's responses to our
<br /> inquiries,the basic financial statements,and other knowledge we obtained during our audit of the basic financial statements.We do
<br /> not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient
<br /> evidence to express an opinion or provide any assurance.
<br /> Other Information
<br /> Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Utilities'
<br /> financial statements as a whole.The introductory section and supplemental information listed in the table of contents are presented for
<br /> the purpose of additional analysis and are not a required part of the financial statements of the Utilities.The supplemental information,
<br /> except for the portion marked"unaudited"on which we express no opinion,has been subjected to the auditing procedures applied in
<br /> the audits of the financial statements and,in our opinion,is fairly stated in all material respects in relation to the financial statements
<br /> taken as a whole.The introductory section and the supplemental information marked"unaudited"have not been subjected to the
<br /> auditing procedures applied in the audit of the financial statements and,accordingly,we do not express an opinion or provide any
<br /> assurance on them.
<br /> ABDO,EICK&MEYERS,LLP
<br /> Minneapolis,Minnesota
<br /> Match 31,2016
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