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City of St Anthony, Minnesota Communication With Those Charged With Governance June 5, 2008 Page 2 were adopted and the application of existing policies was not changed during 2007. We noted no transactions entered into by the City during the year for which there is a lack of authoritative guidance or consensus. There are no significant transactions that have been recognized in the financial statements in a different period than when the transaction occurred. Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about fume events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the financial statements were management's estimates of depreciation and fair value of investments which are based on estimated useful lives and broker statements. We evaluated the key factors and assumptions used to develop the estimates of depreciation and fair value of investments in determining that they are reasonable in relation to the financial statements taken as a whole. The disclosures in the financial statements are neutral, consistent, and clear. Certain financial statement disclosures are particularly sensitive because of the significance to financial statement users. The City does not have any particularly sensitive disclosures in its financial statements. Difficulties Encountered in Performing the Audit During the course of our audit we were given several versions of workpapers for multiple audit sections. Inaccurate information presented on the original and subsequent versions necessitated additional audit time and procedures. Corrected and Uncorrected Misstatements Professional standards require its to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. The attached schedules summarize uncorrected misstatements of the financial statements. Management has determined that their effects are immaterial, both individually and in the aggregate, to the financial statements taken as a whole. The following material misstatements detected as a result of audit procedures were corrected by management: ad.justnents to capital assets, contracts payable, retainage payable, accounts receivable and special assessments. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit.