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Report on Internal Control Based onan Audit <strong>of</strong> Basic Financial StatementsDRAFTFOR DISCUSSIONPURPOSES ONLYTo the Board <strong>of</strong> Selectmen<strong>Town</strong> <strong>of</strong> <strong>Warner</strong>, New HampshireIn planning and performing our audit <strong>of</strong> the financial statements <strong>of</strong> thegovernmental activities, each major fund, and the aggregate remainingfund information <strong>of</strong> the <strong>Town</strong> <strong>of</strong> <strong>Warner</strong>, New Hampshire (the <strong>Town</strong>) as<strong>of</strong> and for the year ended December 31, 2010, in accordance with auditingstandards generally accepted in the United States <strong>of</strong> America, weconsidered the <strong>Town</strong>’s internal control over financial reporting (internalcontrol) as a basis for designing our auditing procedures for the purpose<strong>of</strong> expressing our opinions on the financial statements, but not forthe purpose <strong>of</strong> expressing an opinion on the effectiveness <strong>of</strong> the <strong>Town</strong>’sinternal control. Accordingly, we do not express an opinion on theeffectiveness <strong>of</strong> the <strong>Town</strong>’s internal control.Our consideration <strong>of</strong> internal control was for the limited purpose describedin the preceding paragraph and was not designated to identifyall deficiencies in internal control that might be significant deficienciesor material weaknesses and therefore, there can be no assurance thatall deficiencies, significant deficiencies, or material weaknesses havebeen identified. However, as discussed below, we identified certain deficienciesin internal control that we consider to be a material weakness.A deficiency in internal control exists when the design or operation <strong>of</strong> acontrol does not allow management or employees, in the normal course<strong>of</strong> performing their assigned functions, to prevent, or detect and correctmisstatements on a timely basis. A material weakness is a deficiency,or a combination <strong>of</strong> deficiencies, in internal control, such that there is areasonable possibility that a material misstatement <strong>of</strong> the <strong>Town</strong>’s financialstatements will not be prevented, or detected and corrected ona timely basis. We consider the following deficiencies in the <strong>Town</strong>’sinternal control to be a material weakness:ObservationSEGREGATION OF DUTIESThe <strong>Town</strong> has a general ledger accounting system, which has the capabilitiesto account for the activity <strong>of</strong> more than one fund. However, as21
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