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CliftonLarsonAllen LLP fir► CLAconnect.com Clifton LarsonAllen Honorable Mayor and Members of the City Council City of Pequot Lakes 4638 County Road 11 Pequot Lakes, MN 56472 We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Pequot Lakes (City) as of and for the year ended December 31, 2014, and have issued our report thereon dated April 6, 2015. We have previously communicated to you information about our responsibilities under auditing standards generally accepted in the United States of America and Government Auditing Standards, as well as certain information related to the planned scope and timing of our audit. Professional standards also require that we communicate to you the following information related to our audit. Significant audit findings Qualitative aspects of accounting practices Accounting policies Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by City of Pequot Lakes are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during 2014. We noted no transactions entered into by the City during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates 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 future 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 estimate of the useful lives of depreciable assets is based on guidance issued by the Minnesota Office of the State Auditor and historical practices. We evaluated the key factors and assumptions used to develop the depreciation in determining that it is reasonable in relation to the financial statements taken as a whole. • Management's estimate of accrued compensated absences is based on earned vacation, sick leave, and comp time. The current portion of the estimate is based on City policy and historical trends. • Management's estimate of the allowance for doubtful accounts is based on collectability of receivable balances. We evaluated the key factors and assumptions used to develop the allowance in determining that it is reasonable in relation to the financial statements taken as a whole. • Management's estimate of other postemployment benefits payable is based upon an actuarial calculation. NEX I A An independent lrenEer of Num International INTERNATIONAL