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Vadnais Lake Area Water Management Organization <br />March 19, 2008 <br />Page 4 <br />A material weakness is a significant deficiency, or combination of significant deficiencies, that result in more than a remote <br />likelihood that a material misstatement of the financial statements will not be prevented or detected by the entity's internal control. <br />We do believe that the following finding constitutes material weakness. <br />Material Audit Adjustments <br />Condition: During our audit adjustments were needed to adjust beginning balances, correct entries, reclassify <br />escrow deposit payable activity and adjust deferred revenue. <br />Criteria: The financial statements are the responsibility of the Organization's management. <br />Cause: The Organization's staff has not prepared a year-end trial balance reflecting all necessary <br />accounting entries. <br />Effect: This indicates that it would be likely that a misstatement may occur and not be detected by the <br />Organization's system of internal control. The audit firm can not serve as a compensating control <br />over this deficiency. <br />Recommendation: We recommend that management review each journal entry, obtain an understanding of why the <br />entry was necessary and modify current procedures to ensure that future corrections are not <br />needed. <br />Compliance <br />As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we performed <br />tests of compliance with certain provisions of Minnesota statutes. However, the objective of our tests was not to provide an <br />opinion on compliance with such provisions. We noted no instances of noncompliance with Minnesota statutes. <br />Planned Scope and Timing of the Audit <br />We performed the audit according to the planned scope and timing previously communicated to you. <br />Qualitative Aspects of Accounting Practices <br />Management is responsible for the selection and use of appropriate accounting policies. In accordance with the terms of our <br />engagement letter, we will advise management about the appropriateness of accounting policies and their application. The <br />significant accounting policies used by the Organization are described in Note 1 to the financial statements. No new accounting <br />policies were adopted and the application of existing policies was not changed during the year ended December 31, 2007. We <br />noted no transactions entered into by the governmental unit during the year for which there is a lack of authoritative guidance or <br />consensus. There are no significant transactions that have been recognized in the financial statements in a different period than <br />when the transaction occurred. <br />The disclosures in the financial statements are neutral, consistent, and clear. Certain financial statement disclosures are particularly <br />sensitive because of their significance to financial statement users. <br />952.835.9090 • Fax 952.835.3261 <br />www.aemcpas.com <br />