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HomeMy WebLinkAboutLansing Board of Water and Light Report to Management and Governing Body BOARD OF WATER AND LIGHT - CITY OF LANSING, MICHIGAN Lansing, Michigan COMMUNICATION TO THOSE CHARGED WITH GOVERNANCE AND MANAGEMENT As of and for the Year Ended June 30, 2018 BOARD OF WATER AND LIGHT - CITY OF LANSING, MICHIGAN TABLE OF CONTENTS Page No. Required Communication of Internal Control Related Matters Identified in the Audit to Those Charged with Governance 1 Other Communications with Those Charged with Governance Two Way Communication Regarding Your Audit 2-3 Required Communications by the Auditor with Those Charged with Governance 4-7 Management Representations REQUIRED COMMUNICATION OF INTERNAL CONTROL RELATED MATTERS IDENTIFIED IN THE AUDIT TO THOSE CHARGED WITH GOVERNANCE MP BAKER TI LLY To the Honorable Mayor, Members of the City Council, and Commissioners of the Board of Water and Light City of Lansing, Michigan In planning and performing our audit of the financial statements of the Board of Water and Light—City of Lansing, Michigan and Pension Trust funds (collectively referred to as the BWL) as of and for the year ended June 30, 2018, in accordance with auditing standards generally accepted in the United States of America, we considered its internal control over financial reporting (internal control) as a basis for designing our auditing procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of its internal control. Accordingly, we do not express an opinion on the effectiveness of its internal control. Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and, therefore, material weaknesses or significant deficiencies may exist that were not identified. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected, on a timely basis. We did not identify any deficiencies in internal control that we consider to be material weaknesses. This communication is intended solely for the information and use of management, those charged with governance, and others within the organization and is not intended to be, and should not be, used by anyone other than these specified parties. U� Madison, Wisconsin September 11, 2018 a dePede, memee Page 1 BAKER TILLY INTERNATIONAL OTHER COMMUNICATIONS WITH THOSE CHARGED WITH GOVERNANCE TWO WAY COMMUNICATION REGARDING YOUR AUDIT As part of our audit of your financial statements, we are providing communications to you throughout the audit process. Auditing requirements provide for two-way communication and are important in assisting the auditor and you with more information relevant to the audit. As this past audit is concluded, we use what we have learned to begin the planning process for next year's audit. It is important that you understand the following points about the scope and timing of our next audit: a. We address the significant risks of material misstatement, whether due to fraud or error, through our detailed audit procedures. b. We will obtain an understanding of the five components of internal control sufficient to assess the risk of material misstatement of the financial statements whether due to error or fraud, and to design the nature, timing, and extent of further audit procedures. We will obtain a sufficient understanding by performing risk assessment procedures to evaluate the design of controls relevant to an audit of financial statements and to determine whether they have been implemented. We will use such knowledge to: > Identify types of potential misstatements. > Consider factors that affect the risks of material misstatement. > Design tests of controls, when applicable, and substantive procedures. We will not express an opinion on the effectiveness of internal control over financial reporting or compliance with laws, regulations, and provisions of contracts or grant programs. c. The concept of materiality recognizes that some matters, either individually or in the aggregate, are important for fair presentation of financial statements in conformity with generally accepted accounting principles while other matters are not important. In performing the audit, we are concerned with matters that, either individually or in the aggregate, could be material to the financial statements. Our responsibility is to plan and perform the audit to obtain reasonable assurance that material misstatements, whether caused by errors or fraud, are detected. d. Your financial statements contain components, as defined by auditing standards generally accepted in the United States of America, which we also audit. Page 2 TWO WAY COMMUNICATION REGARDING YOUR AUDIT (cont.) We are very interested in your views regarding certain matters. Those matters are listed here: a. We typically will communicate with your top level of management unless you tell us otherwise. b. We understand that the Board of Commissioners has the responsibility to oversee the strategic direction of your organization, as well as the overall accountability of the entity. Management has the responsibility for achieving the objectives of the entity. c. We need to know your views about your organization's objectives and strategies, and the related business risks that may result in material misstatements. d. Which matters do you consider warrant particular attention during the audit, and are there any areas where you request additional procedures to be undertaken? e. Have you had any significant communications with regulators or grantor agencies? f. Are there other matters that you believe are relevant to the audit of the financial statements? Also, is there anything that we need to know about the attitudes, awareness, and actions of the BWL concerning: a. The BWL's internal control and its importance in the entity, including how those charged with governance oversee the effectiveness of internal control? b. The detection or the possibility of fraud? We also need to know if you have taken actions in response to developments in financial reporting, laws, accounting standards, governance practices, or other related matters, or in response to previous communications with us. With regard to the timing of our audit, here is some general information. If necessary, we may do preliminary financial audit work during the months of May or June. Our final financial fieldwork is scheduled during the summer to best coincide with your readiness and report deadlines. After fieldwork, we wrap up our financial audit procedures at our office and may issue drafts of our report for your review. Final copies of our report and other communications are issued after approval by your staff. This is typically 3-4 weeks after final fieldwork, but may vary depending on a number of factors. Keep in mind that while this communication may assist us with planning the scope and timing of the audit, it does not change the auditor's sole responsibility to determine the overall audit strategy and the audit plan, including the nature, timing, and extent of procedures necessary to obtain sufficient appropriate audit evidence. We realize that you may have questions on what this all means, or wish to provide other feedback. We welcome the opportunity to hear from you. Page 3 REQUIRED COMMUNICATIONS BY THE AUDITOR TO THOSE CHARGED WITH GOVERNANCE MP BAKER TI LLY To the Honorable Mayor, Members of the City Council, and Commissioners of the Board of Water and Light City of Lansing, Michigan Thank you for using Baker Tilly Virchow Krause, LLP as your auditor. We have completed our audit of the financial statements of the Board of Water and Light—City of Lansing, Michigan and Pension Trust Funds (collectively referred to as the BWL)for the year ended June 30, 2018, and have issued our report thereon dated September 11, 2018. This letter presents communications required by our professional standards. OUR RESPONSIBILITY UNDER AUDITING STANDARDS GENERALLYACCEPTED IN THE UNITED STATES OFAMERICA The objective of a financial statement audit is the expression of an opinion on the financial statements. We conducted the audit in accordance with auditing standards generally accepted in the United States of America. These standards require that we plan and perform our audit to obtain reasonable, rather than absolute, assurance about whether the financial statements prepared by management with your oversight are free of material misstatement, whether caused by error or fraud. Our audit included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit does not relieve management or the board of their responsibilities. As part of the audit we obtained an understanding of the entity and its environment, including internal control, sufficient to assess the risks of material misstatement of the financial statements and to design the nature, timing and extent of further audit procedures. The audit was not designed to provide assurance on internal control or to identify deficiencies in internal control. OTHER INFORMATION IN DOCUMENTS CONTAINING AUDITED FINANCIAL STATEMENTS Our responsibility does not extend beyond the audited financial statements identified in this report. We do not have any obligation to and have not performed any procedures to corroborate other information contained in client prepared documents, such as official statements related to debt issues. PLANNED SCOPE AND TIMING OF THE AUDIT We performed the audit according to the planned scope and timing previously communicated to you in our letter about planning matters dated September 13, 2017. a dePede, memee Page 4 BAKER TILLY INTERNATIONAL QUALITATIVE ASPECTS OF THE ENTITY'S SIGNIFICANT ACCOUNTING PRACTICES Accounting Policies Management is responsible for the selection and use of appropriate accounting policies. In accordance with the terms of our engagement letter, we will advise management about the appropriateness of accounting policies and their application. The significant accounting policies used by the BWL are described in Note 1 to the financial statements. As described in Note 1 to the financial statements, the BWL adopted Governmental Accounting Standards Board Statement No. 75,Accounting and Financial Reporting for Post-Employment Benefits Other than Pensions in 2018. We noted no transactions entered into by the BWL during the year that were both significant and unusual, and of which, under professional standards, we are required to inform you, or transactions for which there is a lack of authoritative guidance or consensus. 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 estimates of the other post-employment benefit(OPEB)cost and employee pension benefits are based on actuarial reports completed by Benassist Actuaries and Consultants. We evaluated the key factors and assumptions used by the actuaries in determining that they are reasonable in relation to the financial statements taken as a whole. > Management's estimate of the allowance for doubtful accounts is based on historical sales, historical loss levels, and an analysis for the collectivity of individual accounts. 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 unbilled revenues is based on units of consumption used by customers but not yet billed through the normal billing process. We evaluated the key factors and assumptions used to develop this estimate in determining that it is reasonable in relation to the financial statements taken as a whole. > Management's estimate of self-insurance claims incurred but not reported (IBNR) is based on historical claims and an estimated lag provided by Brown and Brown. We evaluated the key factors and assumptions used to develop this estimate in determining it is reasonable in relation to the financial statements taken as a whole. > Management's estimate of the environmental liabilities is based on cash flow projections of estimated costs to remediate the sites. We evaluated the key factors and assumptions used to develop the liability in determining it is reasonable in relation to the financial statements taken as a whole. > Management's estimate of the net pension asset and related deferrals are based on actuarial reports completed by Benassist Actuaries and Consultants. We evaluated the key factors and assumptions used by the actuaries in determining that they are reasonable in relation to the financial statements taken as a whole. > Management's estimate of the volume of coal in inventory is based on a volumetric survey performed by Mikon Corporation. We evaluated the key factors and assumptions used by Mikon in determining that they are reasonable in relation to the financial statements taken as a whole. Page 5 QUALITATIVE ASPECTS OF THE ENTITY'S SIGNIFICANT ACCOUNTING PRACTICES(cunt. Financial Statement Disclosures The disclosures in the notes to the financial statements are neutral, consistent, and clear. DIFFICULTIES ENCOUNTERED IN PERFORMING THE AUDIT We encountered no significant difficulties in dealing with management in performing our audit. CORRECTED AND UNCORRECTED MISSTATEMENTS Professional standards require us 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. There were no such misstatements identified. DISAGREEMENTS WITH MANAGEMENT For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or auditing matter that could be significant to the financial statements or the auditors' report. We are pleased to report that no such disagreements arose during the course of our audit. CONSULTATIONS WITH OTHER INDEPENDENT ACCOUNTANTS In some cases, management may decide to consult with other accountants about auditing and accounting matters. If a consultation involves application of an accounting principle to the governmental unit's financial statements or a determination of the type of auditors' opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. MANAGEMENT REPRESENTATIONS We have requested certain representations from management that are included in the management representation letter. This letter follows this required communication. INDEPENDENCE We are not aware of any relationships between Baker Tilly Virchow Krause, LLP and the BWL that, in our professional judgment, may reasonably be thought to bear on our independence. Relating to our audit of the financial statements of the BWL for the year ended June 30, 2018, Baker Tilly Virchow Krause, LLP hereby confirms that we are, in our professional judgment, independent with respect to the BWL in accordance with the Code of Professional Conduct issued by the American Institute of Certified Public Accountants. We provided no services to the BWL other than audit services provided in connection with the audit of the current year's financial statements and nonaudit services which in our judgment do not impair our independence. > Financial statement preparation assistance None of these nonaudit services constitute an audit under generally accepted auditing standards, including Government Auditing Standards. Page 6 OTHER AUDIT FINDINGS OR ISSUES We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the BWL's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. OTHER MATTERS We applied certain limited procedures to the required supplementary information (RSI)that supplements the basic financial statements. Our procedures consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We did not audit the RSI and do not express an opinion or provide any assurance on the RSI. With respect to the additional information accompanying the financial statements, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the additional information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. RESTRICTION ON USE This information is intended solely for the use of the Board and management and is not intended to be, and should not be, used by anyone other than these specified parties. We welcome the opportunity to discuss the information included in this letter and any other matters. Thank you for allowing us to serve you. Madison, Wisconsin September 11, 2018 Page 7 MANAGEMENT REPRESENTATIONS Hometown People. Hometown Power. September 11, 2018 Baker Tilly Virchow Krause, LLP Ten Terrace Court P.O. Box 7398 Madison,WI 53707 7398 Dear Baker Tilly Virchow Krause, LLP: We are providing this letter in connection with your audit of the financial statements of the Lansing Board of Water and Light; including the Lansing Board of Water and Light Defined Benefit Plan,the Lansing Board of Water and Light Defined Contribution Plan, and the Lansing Board of Water and Light Retiree Benefit Plan (collectively the Lansing Board of Water and Light), as of June 30, 2018 and 2017 and for the years then ended for the purpose of expressing an opinion as to whether the financial statements present fairly, in all material respects, the respective financial position of the business type activities, and the fiduciary funds of the Lansing Board of Water and Light and the respective changes in financial position and cash flows, where applicable, in conformity with accounting principles generally accepted in the United States of America.We confirm that we are responsible for the fair presentation of the previously mentioned financial statements in conformity with accounting principles generally accepted in the United States of America.We are also responsible for adopting sound accounting policies, establishing and maintaining internal control over financial reporting, and preventing and detecting fraud. Certain representations in this letter are described as being limited to matters that are material. Items are considered material, regardless of size, if they involve an omission or misstatement of accounting information that, in the light of surrounding circumstances, makes it probable that the judgment of a reasonable person relying on the information would be changed or influenced by the omission or misstatement.An omission or misstatement that is monetarily small in amount could be considered material as a result of qualitative factors. We confirm, to the best of our knowledge and belief, the following representations made to you during your audit. Financial Statements 1. We have fulfilled our responsibilities, as set out in the terms of the audit engagement letter. 2. The financial statements referred to above are fairly presented in conformity with accounting principles generally accepted in the United States of America.We have engaged you to advise us in fulfilling that responsibility.The financial statements include all properly classified funds of the primary government required by accounting principles generally accepted in the United States of America to be included in the financial reporting entity. 3. We acknowledge our responsibility for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. 4. We acknowledge our responsibility for the design, implementation, and maintenance of internal control to prevent and detect fraud. 1201 S.Washington Ave. PO Box 13007 ` Lansing,MI 1 48910-1650 t,517-,702-6000 f www,lbwl.mm Hometown People. Hometown Power 5. Significant assumptions we used in making accounting estimates, if any, are reasonable. 6. Related party relationships and transactions, including revenues, expenditures/expenses, loans, transfers, leasing arrangements, and guarantees, and amounts receivable from or payable to related parties have been appropriately accounted for and disclosed in accordance with the requirements of accounting principles generally accepted in the United States of America. 7. All events subsequent to the date of the financial statements and for which accounting principles generally accepted in the United States of America require adjustment or disclosure have been adjusted or disclosed. No other events, including instances of noncompliance, have occurred subsequent to the balance sheet date and through the date of this letter that would require adjustment to or disclosure in the aforementioned financial statements. 8. All material transactions have been recorded in the accounting records and are reflected in the financial statements. 9. The effects of all known actual or possible litigation, claims, and assessments have been accounted for and disclosed in accordance with accounting principles generally accepted in the United States of America. 10. Guarantees, whether written or oral, under which the entity is contingently liable, if any, have been properly recorded or disclosed. Information Provided 11. We have provided you with: a. Access to all information, of which we are aware, that is relevant to the preparation and fair presentation of the financial statements,such as financial records and related data,documentation, and other matters. b. Additional information that you have requested from us for the purpose of the audit. c. Unrestricted access to persons within the entity from whom you determined it necessary to obtain audit evidence. d. Minutes of the meetings of the Board of Commissioners and the Pension Fund Trustees or summaries of actions of recent meetings for which minutes have not yet been prepared. e. Plan instruments,trust agreements, insurance contracts,or investment contracts and amendments to such documents entered into during the year, including amendments to comply with applicable laws. 12. We have disclosed to you results of our assessment of the risk that the financial statements may be materially misstated as a result of fraud. 13. We have no knowledge of any fraud or suspected fraud that affects the entity and involves: a. Management, b. Employees who have significant roles in internal control, or 1201 S.Washington Ave. . PO Box 13007 1 Lansing,MI 1 48910-1650 1517-702-6000 'wwwIbwl.c Hometown People. Hometown Power c. Others where the fraud could have a material effect on the financial statements. 14. We have no knowledge of any allegations of fraud or suspected fraud affecting the entity received in communications from employees,former employees, regulators, or others. 15. We have no knowledge of known instances of noncompliance or suspected noncompliance with provisions of laws, regulations, contracts, or grant agreements, or abuse, whose effects should be considered when preparing financial statements. 16. We have disclosed to you all known related parties and all the related party relationships and transactions of which we are aware. Other 17. There have been no communications from regulatory agencies concerning noncompliance with, or deficiencies in,financial reporting practices. 18. We have a process to track the status of audit findings and recommendations. 19. We have provided our views on reported findings, conclusions, and recommendations, as well as our planned corrective actions,for our report. 20. The entity has no plans or intentions that may materially affect the carrying value or classification of assets, liabilities, or equity. 21. We are responsible for compliance with federal, state, and local laws, regulations, and provisions of contracts and grant agreements applicable to us, including tax or debt limits, debt contracts, and IRS arbitrage regulations; and we have identified and disclosed to you all federal, state, and local laws, regulations and provisions of contracts and grant agreements that we believe have a direct and material effect on the determination of financial statement amounts or other financial data significant to the audit objectives, including legal and contractual provisions for reporting specific activities in separate funds. 22. There are no: a. Violations or possible violations of budget ordinances, federal, state, and local laws or regulations (including those pertaining to adopting, approving and amending budgets), provisions of contracts and grant agreements, tax or debt limits, and any related debt covenants whose effects should be considered for disclosure in the financial statements or as a basis for recording a loss contingency, or for reporting on noncompliance,except those already disclosed in the financial statement, if any. b. Other liabilities or gain or loss contingencies that are required to be accrued or disclosed by accounting principles generally accepted in the United States of America. c. Rates being charged to customers other than the rates as authorized by the applicable authoritative body. d. Violations of restrictions placed on revenues as a result of bond resolution covenants such as revenue distribution or debt service funding. 1201 S.Washington Ave:! PO Box 13007 Lansing,Ml 1 48910-1650 -51.7-702-6000 1 www.lbwl.com i Hometown'People. Hometown Power. e. Other matters(e.g., breach of fiduciary responsibilities, nonexempt transactions, loans or leases in default, or events that may jeopardize the tax status) that legal counsel has advised us must be disclosed. 23. In regards to the nonattest services performed by you listed below, we have 1) accepted all management responsibility; 2)designated an individual with suitable skill, knowledge, or experience to oversee the services;3)evaluated the adequacy and results of the services performed,and 4)accepted responsibility for the results of the services. a. Financial statement preparation None of these nonattest services constitute an audit under generally accepted auditing standards, including Government Auditing Standards. 24. The Lansing Board of Water and Light has satisfactory title to all owned assets, and there are no liens or encumbrances on such assets nor has any asset been pledged as collateral. 25. The Lansing Board of Water and Light has complied with all aspects of contractual agreements that would have a material effect on the financial statement in the event of noncompliance.Arrangements with financial institutions involving compensating balances or other arrangements involving restrictions on cash balances, line of credit, or similar arrangements have been properly disclosed. 26. The financial statements properly classify all funds and activities.All cash and bank accounts and all other properties and assets of the entity of which we are aware are included in the financial statements. All borrowings and financial obligations of the entity of which we are aware are included in the financial statements as appropriate.We have fully disclosed to you all borrowing arrangements of which we are aware. 27. Components of net position (net investment in capital assets; restricted; and unrestricted)are properly classified and, if applicable, approved. 28. The Lansing Board of Water and Light has no derivative financial instruments such as contracts that could be assigned to someone else or net settled, interest rate swaps, collars or caps. 29. Provisions for uncollectible receivables, if any, have been properly identified and recorded. Receivables recorded in the financial statements represent bona fide claims against debtors for sales or other charges arising on or before the balance sheet dates and are not subject to discount except for normal cash discounts. Receivables classified as current do not include any material amounts which are collectible after one year. All receivables have been appropriately reduced to their estimated net realizable value. 30. Deposits and investment securities are properly classified as to risk, and investments are properly valued. Collateralization agreements with financial institutions, if any, have been properly disclosed. 31. Provision, when material, has been made to reduce excess or obsolete inventories to their estimated net realizable value. 32. Capital assets, including infrastructure and intangible assets, are properly capitalized, reported, and, if applicable, depreciated/amortized.Any known impairments have been recorded and disclosed. 1201 S.Washington Ave. ; PO Box 13007 1 Lansing,MI 1 48910-1650 517-702-6000 1 www,lbwl.com ki i , V Hometown People. Hometown Power: 33. We believe that the estimate made for the pollution remediation liability is in accordance with GASB 49 and reflects all known available facts at the time it was recorded. 34. Tax exempt bonds issued have retained their tax exempt status. 35. The operations and rate setting process meet the condition for application of accounting for regulated operations as outlined in GASB No. 62.All regulatory items included in the financial statements have been approved and are being accounted for in accordance with specific action taken by the regulatory body and as such the expectation of future recovery or refund is reasonable. 36. We have appropriately disclosed the Lansing Board of Water and Light's policy regarding whether to first apply restricted or unrestricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position are available and have determined that net position were properly recognized under the policy. 37. We acknowledge our responsibility for the required supplementary information (RSI). The RSI is measured and presented within prescribed guidelines and the methods of measurement and presentation have not changed from those used in the prior period. We have disclosed to you any significant assumptions and interpretations underlying the measurement and presentation of the RSI. 38. With respect to the supplementary information, (SI): a. We acknowledge our responsibility for presenting the SI in accordance with accounting principles generally accepted in the United States of America, and we believe the SI, including its form and content, is fairly presented in accordance with accounting principles generally accepted in the United States of America. The methods of measurement and presentation of the SI have not changed from those used in the prior period, and we have disclosed to you any significant assumptions or interpretations underlying the measurement and presentation of the supplementary information. b. If the SI is not presented with the audited financial statements, we will make the audited financial statements readily available to the intended users of the supplementary information no later than the date we issue the supplementary information and the auditor's report thereon. 39. We assume responsibility for, and agree with,the findings of specialists in evaluating the self-insurance reserves, net OPEB liability and related deferrals,and net pension asset and related deferrals and have adequately considered the qualifications of the specialists in determining the amounts and disclosures used in the financial statements and underlying accounting records. We did not give or cause any instructions to be given to specialists with respect to the values or amounts derived in an attempt to bias their work, and we are not otherwise aware of any matters that have had impact on the independence or objectivity of the specialists. 40. We agree with the restatement presented in the current year's financial statements related to the implementation of GASB Statement No. 75, Accounting and Financial Reporting for Post-Employment Benefits Other than Pensions. The following representations relate specifically to the employee benefit plans: 41. We have properly recorded or disclosed in the financial statements any amendments to the plan instruments, if any. 1-201 S.Washington Ave. PO Box 13007 1 Lansing,MI 1 48910-1650 1 517-702-6000 1 wwwilbwl.corn f� Hometown People. Hometown Power. 42. The defined benefit plan obtained its latest determination letter on November 4, 2011, in which the Internal Revenue Service stated that the plan,as then designed,was in compliance with the appropriate requirements of the Internal Revenue Code(IRC).We believe the plan is currently designed and being operated in compliance with the applicable requirement of the IRC. 43. The defined contribution plan obtained its latest determination letter on March 31, 2014, in which the Internal Revenue Service stated that the plan,as then designed,was in compliance with the appropriate requirements of the IRC.We believe the plan is currently designed and being operated in compliance with the applicable requirement of the IRC. 44. The retiree benefit plan received a letter from the Internal Revenue Service dated February 8, 2000 confirming its status as exempt from tax under the IRC.We believe the exemption letter remains valid. 45. We have no intentions to terminate any of the plans. 46. Related to the defined benefit plan: a. There were no omissions from the participants'data provided to the plan's actuary for the purpose of determining the total pension liability and other actuarially determined amounts in the financial statements. b. The plan administrator agrees with the actuarial methods and assumptions used by the actuary for funding purposes and for determining the plan's net pension asset and has no knowledge or belief that such methods or assumptions are inappropriate in the circumstances.We did not give any, nor cause any, instructions to be given to the plan's actuary with respect to values or amounts derived, and we are not aware of any matters that have impacted the independence or objectivity of the plan's actuary. 47. Related to the retiree medical plan: a. There were no omissions from the participants'data provided to the plan's actuary for the purpose of determining the annual employer contribution and other actuarially determined amounts in the financial statements. b. The plan administrator agrees with the actuarial methods and assumptions used by the actuary for funding purposes and for determining the plan's actuarial accrued liability and total OPEB liability (under GASB Statement No.74)and has no knowledge or belief that such methods or assumptions are inappropriate in the circumstances.We did not give any, nor cause any, instructions to be given to the plan's actuary with respect to values or amounts derived,and we are not aware of any matters that have impacted the independence or objectivity of the plan's actuary. 48. The following have been properly recorded or disclosed in the financial statements: a. The actuarial methods or assumptions used in calculating amounts recorded or disclosed in the financial statements. b. No other changes occurred in the actuarial methods or assumptions used in calculating amounts recorded or disclosed in the financial statements. 1201 S.Washington Ave. a PO Box 13007 1 Lansing,MI 1 48910-1650 1 517-702-6000 1 www.lbwl.tom Hometown People. Hometown Power. 49. The plans (and the trusts established under the plans) are qualified under the appropriate section of the Internal Revenue Code and intend to continue as qualified plans(and trusts).The plan sponsor has operated the plans and trusts in a manner that did not jeopardize this tax status. 50. All required filings with the appropriate agencies have been made. Sincerely, Lansing Board of Water and Light Signed: Heather Shawa, CFO Signed: Scott T lor, CPA, Finance Manager Signed: i 1* O'L L i P rg , GerTeraf Accoun ' a ger 1201 S.Washington Ave. PO Box 13007 , Lansing,MI 48910-1650 51'7-702-6000 www.lbwl.com