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HLB Tautges Redpath, Ltd. Certified Public Accountants and Consultants June 3, 1998 Honorable Mayor and Members of the City Council City of Lino Lakes 1189 Main St Lino Lakes, MN 55014 This letter outlines our proposal to increase the scope of the 1997 audit pursuant to Section VII of the audit contract: If any circumstances disclosed by the audit and examination call for a more detailed investigation that would be necessary under ordinary circumstances, such circumstances will be called to the attention of the City authorities before proceeding further with such investigation. If authorized to proceed further with an investigation of this area, compensation for these additional services shall be at the regular rates designated in this agreement. The City has experienced internal control and contract compliance irregularities which have been the subject of correspondence from our office to the City dated April 27, 1998, May 6, 1998, May 11, 1998 and May 26, 1998. The facts and circumstances require extended procedures in order for our firm to conclude that the 1997 financial statements of the City are free of material misstatements based on audit procedures performed. Extended procedures include, but are not limited to, the following: • Analysis of the 1987 Sanitary Sewer and Water Main Extension and Service Agreement and amendments thereto • Meetings with City representatives regarding calculating and recording of liability relative to the Agreement contract • Expanded confirmation procedures • Expanded written representations from City Officials regarding disclosures relative to contract compliance • Financial statement modifications 4810 White Bear Parkway, White Bear Lake, Minnesota 55110, USA Telephone: 612 426 7000 Fax: 612 426 5004 HLB iai,tges Redpath, Ltd is a member of 1121 International. A world -wide organization of accounting firms and business advisees_