TA BL E O F C O N TE N T S. St.B ernard Parish G overnm ent D epartm ento f Public W orks W ater and Sew er D ivision and the D istricts

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2 TA BL E O F C O N TE N T S St.B ernard Parish G overnm ent D epartm ento f Public W orks W ater and Sew er D ivision and the D istricts D ecem ber 31,1999 Introductory Section Title Page Table of C ontents FinancialSection IndependentA uditor's R eport Com bined FinancialStatem ents C om bined B alance Sheet C om bined Statem entof R evenuesand Expenses C om bined Statem entof C hangesin Fund Equity C om bined Statem entof C ash Flow s N otes to C om bined FinancialStatem ents Supplem entary Inform ation Section Proprietary Funds-Enterprise Funds C om bining B alance Sheet C om bining Statem entof R evenuesand Expenses

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5 IN D E PE N D E N T A U D IT O R 'S R E PO R T To the St.Bernard Parish Council, Chalm ette,louisiana. W e have audited the accom panying com bined financialstatem entsof the St.B ernard Parish GovernmentI)cpartmentof Public W orksw aterand SewerDivision and the Districts(theDivision), com ponentunits of the St.B ernard Parish G overnm ent,state of Louisiana,as of and forthe year ended D ecem be.r 31,1999,aslisted in the table of contents.these com bined financialstatem ents are the responsibility of m anagem entof the St.B ern ard Parish G overnm entd epartm entof Public W orks W ater and Sew erd ivision and the D istricts. O ur responsibility is to express an opinion on these com bined financialstatem entsbased on our audit. W e conducted our auditin accordance w ith generally accepted auditing standards and the standardsapplicable to financialauditscontained in G overnm enta uditing Standards,issued by the C om ptrollerg eneraloftheu nited States.Those standards require thatw eplan andperform the audit to obtain reasonable assurance aboutw hether the com bined financialstatem ents are free of m aterial m isstatem ent. A n auditincludes exam ining,on a testbasis,evidence supporting the am ounts and disclosuresin the com bined financialstatem ents. A n auditalso includesassessing the accounting principles used and significantestim ates m ade by m anagem ent,as w ellas evaluating the overall com bined financialstatem entpresentation.w e believe thatour auditprovidesa reasonable basisfor ouropinion. In our opinion,the com bined financial statem ents referred to above present fairly,in all m aterialrespects,the financialposition of the St.B ernard Parish G overn m entd epartm entof Public W orksw aterand Sew erd ivision and the D istrictsasof D ecem ber 31,1999,and the results of their operations and cash flow s for the year then ended,in conform ity w ith generally accepted accounting principles. In accordance w ith G overnm enta uditing Standards,w e have also issued our reportdated M ay 26,2000 on ourconsideration of the St.B ernard Parish G overn m entd epartm entof Public W orks W aterand Sew erd ivision and D istricts'intern alcontrolover financialreporting and ourtestof their com pliance w itlh certain provisions of law s,regulations,contracts,and grants W est7funnelbird,suite 430 P O Box 2168 HoLm~a,LA Phone(504) Fax(504) Certified Public AccountantsIConsultants A Limitec~Liability Company I~O Box New O rleans,l~ HeritagePlaza,Suite 800 Phone(504) Fax(504) W estsecond Street ~O Box 1205 Thibodau~,LA Phone(504)

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9 C O M BIN ED STA TEM EN_T Q F_RE V EN U E~ A _N D St.B ernard Parish G overnm ent D epartm entof Public W orks W ater and Sew er D ivision and the D istricts For the year ended D ecem ber 31,1999 Operating Revenues(Note 1) U ser fees O ther operating revenues T otaloperating revenues Operating Expenses(Note 1) Personalservices and related benefits U tilities C ontractualservices,supplies,and m aterials Professionalservices Insurance and claim sexpense Depreciation and amortization (Notes1and 4) O ther Totaloperating expenses O perating Incom e Nonoperating Revenues(Expenses) Salestax (Note 1) A d valorem tax for debtretirem ent Interestearnings: R estricted assets Currentassets Interestexpense and bank fees D eductions from ad valorem taxes fordebtretirem ent N etincom e Totalrtonoperating revenues(expenses) See notes to com bined financialstatem ents

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11 St.B ernard Parish G overnm ent D epartm entof Public W orks W ater and Sew er D ivision and the D istricts Forthe yearended D ecem ber31,1999 C ash Flow sfrom O perating A ctivities Operating incom e Adjustmentsto reconcile operating income to netcash provided by operating activities: D epreciation and am ortization Increase in assets: Custom erreceivables U nbilled charges Inwm tory Prepaid expenses Increase in liabilities: A ceonnls payable and accruals Totaladjustments N etcash provided by operating activities C ash Flow s U sed In N oncapitalfinancing A ctivities O perating transferfrom St.B ernard Parish G eneralfund Paym enton St.13em ard Parish Self Insurance Fund loan N etcash used in noncapitalfinancing activities C ash Flow sfrom C apitalfinancing A ctivities A d valorem taxes-debtretirem ent Salestax U nam orlized debtexpense Purchase of capitalassets Principalpaid on bonds Salestax bondsproceeds Interestpaid N etcash provided by capitalfinancing activities C ash Flow sfrom lnvesling A ctivities Intereston cash m anagem entactivities N etincrease illc ash and C ash E quivalents Cash and C ash Equivalents Beginning ofyear(note 2) End ofyear(n ote2) See notesto com bined financialstatem ents. 7

12 E xhibite N O T E S T O C O M BIN ED FIN A N C IA L ST A T E M EN T S St.B ernard Parish G overnm ent D epartm ento f Public W orks W ater and Sew er D ivision and the D istricts D ecem ber 31,1999 N ote 1 - SU M M A R Y O F SIG N IFIC A N T A C C O U N T IN G PO L IC IE S The St.B ernard Parish W ater and Sew er C om m ission w as created by an intergovem m ental agreem entdated N ovem ber 13,1985,asratified,confirm ed and approved by Louisiana Revised Statute 33:7802 w hich becam e effective July 2,1986. The statute declared the Com m ission to be a body politic and politicalsubdivision of the State of Louisiana.Italso gave the Com m ission the pow erto tax,incur debt,and issue bonds. The pow ersof the C om m ission w ere exercised w ithin the boundaries of St. B ernard Parish. The Commission'sm ajoroperation wasto provide waterand sewerageservicesfortheparish of St. B ern ard. The Com m ission w as com posed of seven m em bers representing the participating entities and assum ed control of operations and began providing services effective w ith the close of business on D ecem ber 31,1985. Prior to thattim e,such w ater and sew erage serv ices had been provided by five separate entities:st.b ernard W ater D istrictn o.1,st.bernard W aterd istrictn o.2,st.b ernard Sew erd istrictn o.1,st, B ernard Sew erd istrictn o.2. and St.B ern ard Sew er D istrictn o.1-2. O n D ecem ber 31, 1985,St.B ernard Sew erd istrictn o.1-2,a contractu alentity thathad perform ed sew erage operationsfor St.B ernard Sew erd istricts N o.1and N o.2,w asdissolved.the otherw ater and sew erage districtshad separate boardsw hich served prim arily as tax levying entities. O n N ovem ber 1, 1996, the St. B ernard Parish W ater and Sew er C om m ission w as consolidated and merged into the St.Bernard Parish Govern ment(the Parish Government) and is now know n as the St.B ernard Parish G overnm entd epartm entof Public W orks W aterand SewerDivision (the Division),The Commission wasabolished and the parish council assum ed all rights, revenues, resources, authority and obligations of the C onunission. The w aterand sew erdistricts stillexistasseparate politicalsubdivisions; how ever,the parish councilis the governing authority. Each districtretained its rights, revenues,resources,jurisdiction,authority,indebtednessand any otherobligationsit possessed prior to N ovem ber 1, 1996,including the authority to continue to levy ad valorem taxes.

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15 E xhibite (Continued Note1 - SUM M ARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) d) BasisofAccounting The accounting and financialreporting treatm entapplied to a fund is determ ined b3 itsm easurem entfocus.the Enterprise Fund isaccounted foron a flow ofeconom k lesources m easurem ent focus and a determ ination of net incom e and capita m ainlenance. W ith this m easurem entfocus,allassets and allliabilitiesassociate~ w ith lhe operation of these fim dsare included on the com bined balance sheet.the D ivision's accounts are reported on the accrualbasisof accounting. R evenues arc lecognized w hen earned and expenses are recognized atthe tim e liabilities arc incurred. The D ivision applies allg A SB pronouncem entsasw ellasthe FinancialA ccountin~ StandardsB oard pronouncem ents issued on or before N ovem ber 30,1989 unles, those pronouncem entsconflictw ith or contradictg A SB pronouncem ents. The Enterprise Fund usesthe follow ing practices in recording certain revenues ant expenses: 1) Revenues Custom ers are billed m onthly and the accom panying com bined financia statem ents provide for the accrualof chargesbilled butnotcollected,asw el as forunbilled charges through the date of the com bined balance sheet. Ad valorem taxesand the related state revenue sharing (which isbased or population and homesteadsin the parish)are recorded in the yearthe taxes are assessed. A d valorem taxes are assessed on a calendar year basis becom e due on N ovem ber 15 of each year,and becom e delinquent or D ecem ber 31.The taxesare generally collected in D ecem berof the curren year and January through M arch of the follow ing year. O n N ovem ber 3, 1998,the citizens of St.B ernard Parish,by a specia election,approved a ~ % sales tax,com m encing January 1, Thc proceedsfor thistax are dedicated for im provem ents to the sew er and w atel system of the D ivision, including authority to fund the tax into bonds provided that at least 25% of the annual revenues of the sales m ustb~ expended to correctinflow and infiltration in sew erage collection lines,ortc repair dam age caused thereby,unless required fordebtservice on bondsoj otherw ise approved by atleasttw o-thirds of the C ouncil. 11

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17 E xhibite (Continued) Note1 - SUM M ARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) d) Basisof Accounting (Continued) 2) Expenses(Continued) Substantially all other expenses are recognized at the tim e the liability is incurred. e) AccountsReceivable The D ivision hasestablished an allow ance for doubtfulaccounts forw rite-off of delinquentaccounts. The allow ance is based on m anagem ent'sbestestim ate of uncollectible am ounts.the allow ance fordoubtfulaccounts atd ecem ber31,1999 is $44,846. f) Use of Estim ates The preparation of financial statem ents in conform ity w ith generally accepted accounting principlesrequiresm anagem entto m ake estim atesand assum ptions that affectthe reported am ounts of assets and liabilities and disclosure of contingent assetsand liabilities atthe date of the financialstatem entsand the reported am ounts of revenues and expensesduring the reporting period. A ctualresults could differ from those estim ates. g) Cash and Cash Equivalents C ash includes am ounts in petty cash,dem and deposits,interest-bearing dem and deposits, and m oney m arket accounts. Cash equivalents include am ounts in certificatesof deposit.u nder state law,the D ivision m ay depositfundsin dem and deposits,interest-bearing dem and deposits,m oney m arketaccounts,or tim e deposits w ith state banks organized under Louisiana law and nationalbanks having their principalofficesin Louisiana. h) Inventory The D ivision m aintainsan inventory of parts and expendable suppliesthatis valued atthe low er of costor m arket. ]'he inventory is recognized asan expense w hen consum ed. 13

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19 E xhibite (Continued) M ARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Fund E quity 1) Contributed Capital The D ivision's grants received that are restricted for the acquisition or construction of capitalassetsare recorded ascontributed capital.d onated lines are also recorded ascontributed capital.contributed capitalis am ortized based on the depreciation recognized on thatportion of the assetsacquired from such contributions. 2) Reserves The D ivision's reserves represent those portions of fund equity legally segregated for a specific future use. G A SB Pronouncem ents GovernmentalAccounting StandardsBoard (GASB)StatementNo.20 "Accounting and FinancialR eporting for Proprietary Fundsand O ther G overnm entalentities that use Proprietary Fund A ccounting,"provides thatproprietary Fundsm ay apply all G A SI3 pronouncem ents,as w ell as the follow ing pronouncem ents issued on or before N ovem ber30,1989,unlessthose pronouncem entsconflictw ith orcontradict G A SI3 pronouncem ents;statem ents and Interpretations of the FinancialA ccounting Standard Board (FASB),Accounting Principles Board (APB) Opinions,and Accounting Research Bulletins(ARB's)oftheCommitteeon Accounting Procedure. The D ivision haselected to apply only FA SB,A PB and A RB m aterialsissued on or before N ovem ber30,1989. C om pensated A bsences Em ployeesearn tw o to five w eeksof paid vacation each year, up to 90 daysw illbe paid in cash atretirem entor term ination if proper notice is given.if propernotice is notgiven,up to 10 days m ay be subtracted from their accum ulated vacation and the rem ainder ispaid in cash. Em ployeesearn 12 days of sick leave each year, w hich m ay accum ulate to an unlim ited num berof daysbutdoesnotvest.a td ecem ber31, 1999,the accrued vacation w as$226,645.

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21 E xhibite (Continued) Note 2 - DEPOSITS (Continued) A td ecem ber 31, 1999,cash in excess of the FD IC insurance w ere collateralized by securitiesheld by unaffiliated banksfor the accountof the depositors.the G overnm ental Accounting StandardsBoard (GASB),which promulgatesthe standardsforaccounting and financial reporting for state and local governm ents, considers these securities uncollateralized.even though the pledged securitiesare considered uncollateralized under the provisions of G A SB Statem ent 3,Louisiana Revised Statute 39:1229 im poses a statutory requirem enton the custodialbank to advertise and sellthe pledged securities w iftin 10 days of being notified by the depositorthatthe fiscalagenthasfailed to pay deposited fundsupon dem and. Forpurposes of the Statem entof Cash Flow s,cash and cash equivalents consistof the follow ing accounts: B eginning End of of Y ear Y ear Cash and cash equivalents N onrestricted R estricted $ 500,816 4,756,394 $ 909, ,795 Totalcash and cash equivalents Supplem entalcash flow sinform ation Interestpaid during the year N oncash capitalfinancing activity donated lines $5 2,2fi 57 ~2!Q_.$ _ ~523,29 ~ $325,499 N ote 3 - PR O PE R T Y T A X E S Property taxes are levied each N ovem ber 1 on the assessed value listed as of the prior January 1 for allrealproperty,m erchandise and m ovable properly located in the Parish. A ssessed values are established by the St.B ern ard Parish A ssessor's O ffice and the State Tax Com m ission at percentages of actual value as specified by Louisiana law. A reevaluation of allproperty isrequired to be com pleted no less than every fouryears.the lastreevaluation w ascom pleted for the listof January 1,1996.Taxesare due and payable N ovem ber15 of each year and becom e delinquentd ecem ber 31w ith interestbeing charged on paym entsafterjanuary 1.Taxescan be paid through the tax sale date,w hich is the last W ednesday in June.Propertiesforwhich taxeshave notbeen paid are sold. 17

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23 ~ xbjbite (Continued) Note4 - CHANGE IN PROPERTY,PLANT,AND EQUIPM ENT (Continued) The com position of property,plant,and equipm entatd ecem ber 31,1999 by entity,is as follow s" D ivision W ater D istrictn o.l W ater D istrictn o.2 Sew erd istrictn o.1 Sew er D istrictn o.2 $37,628,769 20,774,020 2,128,277 9,775, Totalproperty,plant,and equipm ent., ~ 7 _ ~875,155 Depreciation expense totaled $2,465,462 forthe yearended D ecem ber31,1999 N ote 5 - D E FIN ED BEN E FIT PEN SIO N PLA N Em ployees of the D ivision are m em bersof the ParochialEm ployeesretirem entsystem of Louisiana(System),a multiple-employer(costsharing),public-employee retirementsystem (PERS).The System iscomposed of two distinctplans,plan A and Plan B,with separate asset,;and benefitprovisions.a llem ployeesof the D ivision are m em bersof Plan A.For the yearended D ecem ber 31,1999,the totalpayrollfor em ployeescovered by the System underplan A w as$2,179,443. Plan D escription -The W aterand Sew erd ivision contributes to Plan A of the Parochial Employees'RetirementSystem of Louisiana (the System),cost-sharing multiple-employer defined benefitpublic employee retirementsystem (PERS),which is controlled and adm inistered by a separate Board of Trustees. The System providesretirem ent,deferred and disability benefits,survivor'sbenefitsand costof living adjustmentsto plan members and beneficiaries.a ct205 of the 1952 Louisiana Legislative Session established the plan. The System is governed by Louisiana R evised Statutes 11:1901 through 11:2015, specifically,and othergenerallaw sof the State of Louisiana.The System issuesa publicly available financialreportthatincludes financialstatem ents and required supplem entary inform ation for the System. That report m ay be obtained by w riting to Parochial Em ployees'r etirem entsystem of Louisiana,P.O.B ox 14619,B aton R ouge,louisiana

24 E xhibite (Continued) Note 5 - DEFINED BENEFIT PENSION PLAN (Continued) Funding Policy -Plan m em bersarc required to contribute 9.5% of their annual-covered salait and the W ater and Sew er D ivision is required to contribute at an actuarially determ ined rate. The current rate is 7.75% of annual payroll. The contribution requirem ents of plan m em bers and the W ater and Sew erd ivision are established and m ay be am ended by state statute.the W aterand Sew er D ivision'scontributions to the System forthe yearsended D ecem ber31,1999,1998 and 1997 w ere $172,484,$163,509 and $161,364,respectively,equalto the required contributionsforeach year. N ote 6 - PO STR ETIR EM EN T H EA LTH CA R E A N D LIFE IN SU RA N C E BEN EFITS in addition to the pension benefits described in N ote 5, the D ivision provides post retirem enthealth care benefits,in accordance w ith the D ivision'spersonnelpolicy,to all emp}oyeeswho retire either:1)on orafterataining age 60 with atleast10 yearsof serv ice, or2)on orafterattaining age 55wilh atleast25 yearsof service,or3)on orafterattaining any age w ith atleast30 years of service. A s of the year end,18 retireeshave m etthose eligibility requirem ents. These benefits for retirees and sim ilar benefits for active em ployees are provided through an insurance com pany w hose m onthly prem ium sare paid by the D ivision. R etireesand active em ployees,how ever,are responsible for dependent coverage costs.the D ivision reim bursesthe first$20,000 of validated claim sform edical and hospitalization costs incurred by pre-m edicare retirees and their dependents. Expendituresfor postretirem enthealth care benefits are recognized as retireesreportclaim s and include a provision forestim ated claim s incurred butnotreported to the D ivision. D uring the year,expensesof approxim ately $62,200 w ere recognized forpostrctirem ent health care. N ote 7 - O PE R A TIN G LEA SES The D ivision receiveslease incom e underthe follow ing agreem ents: Y early Lease Lease Incom e Period B e~innin~ D ate O otion Right-of-w ay agreem ent $2, years Septem ber1,1995 Additional10 yeartelxn Tow erlease #1 5,000 5 years A ugust9, additional5 yeartem a Tow er/ease #2 6,000 5 years June 26, additional5 yearterm Tow er lease #3 12,000 5 years A ugust22, additional5 yearterm Tow erlease #4 13,200 5 years N ovem ber19,1998 4additional3yearterm Tow erlease #5 12,500 5 years July 28, additional3 yeartem a Tow er lease #6 9,600 5 years D ecem ber 23, additional3 yearterm 2O

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26 E xhibite (Continued) Note8 - LONG-TERM LIABILITIES (Continued) Public im provem entbonds,generalobligation bonds,salestax bonds,and revenue bonds com prised of the follow ing individualissues: a) PublicIm provem entand GeneralObligation Bonds Public im provem entand generalobligation bondsare secured by the fullfaith and creditof the variousd istrictsand are financed through the levy and collection ofad valorem taxes. The bondsw ere issued to constructim provem entsand extensionsto the sew erage system. Public im provem entand generalobligation bonds are com prised of the follow ing individualissues: 1) $675,000 GeneralObligation Refunding Bondsof the SewerDistrictNo.1issue of Septem ber1,1991,due in annualinstallm entsof $60,000 to $90,000 bearing interestrates of 6.1% to 6.5% through M arch 1,2003. A m ountoutstanding - $320,000. 2) $240,000Publiclmprovem entbondsofthesewerdistrictno.2issueofjune1, 1971,due in annualinstallm entsof $1,000,bearing an interestrate of 6.00% through Febru ary 1,2001.Am ountoutstanding -$2,000. 3) $3,295,000 GeneralObligation Refunding Bondsof the SewerDistrictNo.2 issue of Septem ber1,1991,due in annualinstallm entsof $170,000 to $340,000 hearing interest rates of 6.2% to 6.65% through M arch 1,2005. A m ount outstanding -$1,695,000. b) SalesTax Bonds On D ecem ber1,1999,salestax Bondsw ere issued for$9,950,000,the interest rate on the bonds is 5.35% and the bondsm ature on D ecem ber 1,2019 w ith debt service paym entsdue in annualprincipalinstallm entsranging from $275,000 to $805,000.The balance outstanding atd ecem ber31,1999 is$9,950,000. The bondsw ere issued forthe purpose of financing im provem entsto the sew erand w atersystem s of the I)ivision.The bonds are specialand lim ited obligations of the Parish for the D ivision,secured by and payable from a pledge and dedication of a ~ % sales tax levied by the Parish forthe D ivision. 22

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34 Note9 - RESERVED RETAINED EARN INGS (Continued) R eserve For System Im provem ents R eserve For C onstruction 1999 Sales T ax B onds A ssets C ash and cash equivalents R eceivables 1,977,731 9,249, Totalassets _2~417,535 9,249,105 L iabilities Currentportion of bondspayable A ccru ed interest payable O ther payable Long-term 1999 sales tax bonds Totalliabilities R eserved R etained F arnings T otalr eserved R etained Earnings 219, $=5,904 3~_66 $9.029,300 30

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36 E xhibite (Continued) N ote 11 - C U ST O M ER D E PO SIT S The D ivision has used fundsfrom Custom er M eter D epositcash accountto pay operating expensesand capitalim provem ents.a td ecem ber31,1999,the custom erm eterdeposits cash accounthad a balance of $329,013 and the custom erm eterdepositsliability was $1,222,570. N ote 12 - C O M PE N SA T IO N PA ID T O C O U N C IL M E M BE R S The D ivision did notpay any com pensation to the m em bers of the St.B ernard Parish C ouncil. N ote 13 - C O N T IN G E N C IE S The D ivision isinvolved in variousclaim s foralleged negligence. The exposure to the Division is estim ated to be approxim ately $13,737. The estim ated claim s liability is com puted based on inform ation received from the insurance com pany.the claim sliability atd ecem ber31,1999 ispresented atcurrentvalue and hasnotbeen discounted. The W ater and Sew erd ivision iscurrently involved in a class action law suit.in A prilof 2000,the St.B ernard Parish D istrictc om "tcertified the claim ants'requestto deem the suit asa class aclion suit.parish G overnm entisin the processof appealing this decision.a fter all appeals have been exhausted the Parish w ill re-evaluate any effects of the suit. Currently,the defense obligationsare w ithin the initialreserve allocation of $250,000, w hich equatesto the self-insurance retention. N ote 14 - SE L F IN SU R A N C E/R ISK M A N A G E M EN T The D ivision isexposed to variousrisksof lossrelated to generalliability,auto liability, w orkers'com pensation,unem ploym entcom pensation,propel~y and group health benefits. Varioussuitsand claim sarising from personalinjury and property damage,some for substantial am ounts, are pending against the D ivision, its insurers and others. In accordance w ith Statem entof FinancialA ccounting Standards N o. 5,the D ivision has provided for,in itsfinancialstatem ents,estim ated lossesfrom the aforem entioned pending suilsand claim s based on the estim ated ultim ate costof settling the claim s,considering the effectsof inflation,recentclaim settlem enttrends and other socialand econom ic factors, including the effectof specific incrementalclaim adjustmentexpenses,salvage and subrogation.the D ivision believesthe ultim ate settlem entcosts w illnotm aterially exceed the am ounts provided for the claim s. 32

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45 St:3:I_EDJ~ IJ~ _ Q~ D_.E B I~SEI~ I~ REQUJR~ N_T.S St.B ernard Parlsh G overnm ent D epartm entof Public W orks VCaier and Sew er D ivision and the D istricts Decem ber31,1999 W aterand Sew erdivision W aterand SewerD ivision 1999 SalesTax Bonds 1991and 1994 Revenue Bonds Princ~O Interest Total Principal Interest Total $ 275,000 $ 532,325 $ 807,325 $ 760,000 $ 349,510 $ 1,109, , , , , ,360 1,104, , , , , ,608 1,106, , , , , ,165 1,111, , , , , ,025 1,108, , , , , ,975 1,110, , , ,605 1,010,000 95,430 1,105, , , , ,000 41, , , , , ,000 34, , , , , ,000 26, , , , , ,000 18, , , , , ,000 9, , , , , , , , , , , , , , , , , , , , ,000 83, , ,000 43, ,068 airements $ 9.959~q00 $ ~ 2~310 $ 16~512~J9_ ~ 000 $ 1~ 741,273 ~ 8,481,273 40

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48 A td ecem ber31, and Sew erd ivision had

49 SPE C IA L R E PO R T O F C E R T IFIE D PU B L I

50 R E PO R T O N C O M PL IA N C E A N D O N IN T E R N A l. C O N TR O L O V E R FIN A N C IA L R E PO R T IN G B A SE D O N A N A U D IT O F TH E C O M BIN ED FIN A N CIA L STA TE M EN T S PER FO R M ED IN A C C O R D A N C E W ITH G O V E R N M EN T A U D IT IN G STA N D A R D S To the St.B ernard Parish Council, Chalm ctte,louisiana. W e have audited the com bined financialstatem ents of the St.B ernard Parish G overnm ent Departmentof Public W orksw aterand SewerDivision and the Districts(the Division),asof and for the year ended D ecem ber 31,1999,and have issued our reportthereon dated M ay 26,2000. W e conducted our audit in accordance w ith generally accepted auditing standards and the standards applicable to fin ancialauditscontained in G overnm enta uditing Standards,issued by the Com ptroller G eneralof the U nited States. C om pliance A spartof obtaining reasonable assurance aboutw hether the D ivision's com bined financial statem ents are free of m aterialm isstatem ent,w e perform ed tests of its com pliance w ith certain provisions of law s,regulations,contracts and grants,noncom pliance w ith w hich could have a direct and m aterialeffecton the determ ination of financialstatem entam ounts. H ow ever,providing an opinion on compliance with those provisionswasnotan objective of ourauditand,accordingly,we do notexpresssuch an opinion.the resultsof ourtestsdisclosed no instances of noncom pliance thatare required to be reported under G overnm enta uditing Standards 1340W est~unnelbird,suite 430 P O.Box 2168 Houma.kA Phone(504) Fax(504) Certified Public AccountantsIConsultants A Limited LiabilityConlpany P O Box New O rleans,la Heritage Plaza,Sulte 800 Phone(504) Fax (504) S04W estsecond Street P O.Box 1205 Thibodaux,LA Phone(504)

51 InternalC ontrolo ver FinancialR eporting In planning and perform ing our audit,w e considered the D ivision's internalcontrolover com bined financial reporting in order to determ ine our auditing procedures for the purpose of expressing our opinion on the D ivision'scom bined financialstatem entsand notto provide assurance on the internalcontrolover financialreporting. H ow ever,w e noted certain m atters involving the internalcontrolover financialreporting and itsoperation thatw e considerto be reportable conditions. R eportable conditions involve m atters com ing to our attention relating to significantdeficiencies in thedesign oroperation oftheinternalcontroloverfinancialreporting that,in ourjudgement,could adversely affect the D ivision's ability to record, process, sum m arize, and report financial data consistentw ith the assertionsof m anagem entin the com bined financialstatem ents. A reportable condition isdescribed in the accom panying schedule of findingsand questioned costs asitem A m aterialw eaknessis a condition in w hich the design or operation of one orm ore of the internalcontrolcom ponents doesnotreduce to a relatively low levelthe risk thatm isstatem entsin anaountsthatw ould be m aterialin relation to the com bined financialstatem entsbeing audited m ay occur and notbe detected w ithin a tim ely period by em ployees in the norm alcourse of perform ing theirassigned fim ctions.o ur consideration of the internalcontrolover financialreporting w ould not necessarily disclose allm atters in the internalcontrolthatm ightbe reportable conditions and, accordingly,w ould notnecessarily disclose allreportable conditions thatare also considered to be m aterialw eaknesses.h ow ever,w e believe the reportable condition described above isnota m aterial w eakness.w e also noted otherm attersinvolving the internalcontrolow ~r financialreporting thatw e have reported to m anagem entof the D ivision in a separate letterdated M ay 26,2000. Thisreportisintended solely forthe inform ation of the A dm inistration of St.Bernard Parish G overnm ent,the St.B ernard Parish C ouncil,the State of Louisiana and the Legislative A uditor forthe State of Louisiana and is notintended to be and should notbe used by anyone other than those specified part ies. N ew O rleans,la., M ay 26,2000. C ertified Public A ccountants 45

52 Section I a) Section I

53 Sectio Sectio

54 R E PO R T S B Y M A N A G E M E N T

55 Sectio Sectio

56 Section Ill

57

58 Section III

59 B o u rg e o is B e n n e tt To the St.Bernard Parish Council, C halm ette,louisiana. W e have audited the com bined financial statem ents of the St. B ernard Parish Governm ent,departmentof PublicW orksw aterand SewerDivision and the Districts,(the Division),a componentunitof th e St.Bem ard Parish Governm ent,state of Louisiana,asof an d forth e yearended D ecem ber3 I,1999,and have issued ourreportth ereon dated M ay 26, 2000.In planning and perform ing our auditw e considered the D ivision's internalcontrolin orderto determ ine our auditing procedur esforthe purpose of expressing an opinion on the com bined financialstatem ents an d notto provide as sur ance on intern alcontrol. Repoz~able conditionsnoted during our consideration of th e intem alcontrolhave been reported on in a separ ately issued report entitled "Independent A uditors' R eport on Com plian ce an d on Intern alcontrolo ver FinancialR eporting Based on an A uditof the Com bined Finan cial Statem ents Perform ed In A ccordance W ith G overn m enta uditing Standards." This m em oran dum sum m arizes various oth er m atters w hich have com e to our atention.w hile notinvolving reportable conditions,th ese m aters do presentopportunities forstrengthening th e intern alcontroland im proving th e operatin g efi ciency of th e D ivision. W e have already discussed these com m ents an d suggestions w ith various adm inistrative personnel. W e w illbe pleased to discuss these com m ents an d suggestions w ith you in furtherdetailatyourconvenience,perform any additionalstudy of these m aters, or assistyou in im plem enting th e recom m endations. N ew O rleans,la., M ay 26,2000. ~ " A countan ts w est~unnelbird,su0e 430 P,O Box2168 Houma,LA Phor~e(304) Fax(504)87% 1949 I Certified Public I EO.Box60600 AcountantslConsultanlsINewOrleans,LA ALimitedLiabilityCompanyHeritagePlaza,Suite0 Phone(504) Fax(504) WestSecol~d5t*et Thibodau~Ah Phone(504) RO.Box120S

60 To the St.Bernard Parish Council Page 2 Fixed A ssetr ecords 1) Therecording of fixed assetsisincompletedueto th efollowing ~ The spreadsheetapplication th atis currently being used does notprovide detailed inform ation related to th e as sets. ~ Th e calculated depreciation on certain as sets is com puted incorrectly ~ Th e depreciation on contributed capitaland donated lines are notbeing recorded. W e recom m end th atthe Parish purchas e a fixed assetcom puterprogram to track the assets. The Parish should also take a physicalinventory countof m ovable item s. A ccounts Payable 2) The accounts payable balance an d certain expense item sare notproperly accounted fordue to th e follow ing: ~ There w as an inconsistency of coding fixed assetacquisitionsto repairs and m aintenance,professionalservices,an d capitaloutlay. ~ There w as no reta inage payable accrued atyear-end ~ Invoices should be posted as of th e date of service or date of receiptof product,notth e intern alapprovaldate. W e recom m end th at th e Parish establish a system to consistently record expenses.