VLAWMO Annual Financial Report 2003

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Independent Auditor's Report on Compliance and on Internal Control Page 2 Segregation of Duties Our audit disclosed that substantially all accounting procedures are performed by a single employee. Ideal conditions call for segregation of duties to establish a system of internal testing of procedures performed. It is a common practice in organizations of this size to have a substantial portion of certain accounting processes performed by a single employee. The Organization has established certain other safeguards to compensate for this situation, such as Board approval of all disbursements, Board review of interim financial data compared to budget, two signatures required on all checks, etc. Any modification of internal controls in these areas must be viewed from a cost/benefit perspective. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the general purpose fmancial 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 the internal control over fmancial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be reportable conditions and, accordingly, would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However, we believe that none of the reportable conditions described above is a material weakness. This report is intended solely for the information and use of the Vadnais Lake Area Water Management Organization and is not intended to be and should not be used by anyone other than those specified parties. March 6, 2004 Wcifs as.,e HLB TAUTGES REDPATH, LTD. Certified Public Accountants