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97 HAROLD V. SIMPSON Be CERTIFIED PUBUC ACCOUNTANTS HAROLD V. SIMPSON, CPA 512 EAST RIVERSIDE DRIVE-SUITE 100 DONALD E. LAINE, CPA AUSTIN, TEXAS 78704 MEMBERS w. PATRICK McLEAN, CPA TELEPHONE (512) 447-1700 OF MARVIN COFFMAN, CPA AMERICAN INSTITUTE GARY W. DAVIS, CPA OF CERTIFIED PUBLIC ACCOUNTANTS ALiCEANN M. BERRY, CPA KATHLEEN MONAHAN, CPA AND CURTIS BULGERIN, CPA SUSAN Z. PECKHAM, CPA PRIVATE COMPANIES IOHN R. CANTWELL, CPA SARA A. RAMSEY, CPA PRACTICE SECTION 'AN E. CARPENTER, CPA G. CASS SANSOM, CPA LYDIA L. CATES, CPA MELINDA GAY SMITH, CPA - 3TEPHANIE R. LEVY, CPA JUDY F. SOSLAU, CPA January 16, 1984 TEXAS SOCIETY LORI K. McKEY, CPA ANNE M. TREADWAY, CPA OF CERTIFIED PUBLIC ACCOUNTANTS Honorable Mayor and City Council City of San Marcos, Texas Members of the Council: We have examined the financial statements of the City of San Marcos, Texas, for the year ended September 30, 1983, and have issued our report thereon dated January 16, 1984. As a part of our examination, we made a study and ev al ua t ion of the City's system of internal accounting control to the ex tent we considered necessary to ev al ua te the system as required by generally accepted auditing standards. Under these standards, the purposes of such evaluation are to establish a basis for reliance on the system of internal accounting control in determining the nature, timing, and extent of other auditing procedures are necessary for expressing an opinion on the financial statements and to assist the auditor in planning and performing his examination of the financial statements. The objective of internal accounting control is to provide reasonable, but not absol ute, assurance as to the safeguarding of assets against loss from unauthorized use or disposition, and the reliability of financial records for preparing financial statements and maintaining accountability for assets. The concept of reasonable assurance recognizes that the cost of a system of internal accounting control sho uld not exceed the benefits derived and also recogni zes that the evaluation of these factors necessarily requires estimates and judgments by management. There are inherent limitations that should be recognized in considering the potential effectiveness of any system of internal accounting control. In the performance of most control procedures errors can result from misunderstanding of instructions, mistakes of judgment, carelessness, or other personal factors. Control procedures whose effectiveness