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The Management's Discussion and Analysis on pages 3 through 12 is not a required part of the <br />basic financial statements but is supplementary information required by accounting principles generally <br />accepted in the United States of America. We have applied certain limited procedures, which consisted <br />principally of inquiries of management regarding the methods of measurement and presentation of the <br />required supplementary information. However, we did not audit the information and express no opinion <br />on it. <br />Our audit was conducted for the purpose of forming opinions on the financial statements that <br />collectively comprise the City of San Marcos, Texas' basic financial statements. The introductory <br />section, combining and individual fund financial statements and schedules, and statistical section are <br />presented for purposes of additional analysis and are not a required part of the basic financial statements. <br />The combining and individual fund financial statements and schedules have been subjected to the <br />auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly <br />stated in all material respects in relation to the basic financial statements taken as a whole. The <br />introductory and statistical sections have not been subjected to the auditing procedures applied in the <br />audit of the basic financial statements and, accordingly, we express no opinion on them. <br />L L <br />March 7, 2008 <br />2 <br />