STATE OF CONNECTICUT

State of Connecticut seal
AUDITORS OF PUBLIC ACCOUNTS
KEVIN P. JOHNSTON 210 CAPITOL AVENUE
HARTFORD, CONNECTICUT 06106-1559
ROBERT G. JAEKLE

INDEPENDENT AUDITORS' REPORT

Governor M. Jodi Rell
Members of the General Assembly

We have audited the accompanying combined civil list financial statements of the State of Connecticut as of and for the year ended June 30, 2010, as listed in the beginning of this report. These combined civil list financial statements are the responsibility of the State's management. Our responsibility is to express an opinion on these combined civil list financial statements based on our audit. We did not audit the financial statements of the Special Transportation Fund which represent 10 percent and 21 percent, respectively, of the assets and receipts of the Special Revenue Funds; we did not audit the financial statements of the Transportation Special Tax Obligations Fund, which represent 93 percent and 95 percent, respectively, of the assets and receipts of the Debt Service Funds; and we did not audit the financial statements of the Clean Water Fund-Federal Account, the Drinking Water Fund-Federal Account, which represent 87 percent and 27 percent, respectively, of the assets and receipts of the Enterprise Funds. Those financial statements were audited by other auditors whose reports thereon have been furnished to us, and our opinion, insofar as it relates to the amounts included for the aforementioned funds and accounts, is based solely on the reports of other auditors. All of the aforementioned audits were conducted in accordance with auditing standards generally accepted in the United States of America. In addition, the audits of the Special Transportation Fund, Transportation Special Tax Obligations Fund, Clean Water Fund-Federal Account and Drinking Water Fund-Federal Account were conducted in accordance with standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined civil list financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall combined civil list financial statement presentation. We believe that our audit and the reports of other auditors provide a reasonable basis for our opinion.

As discussed in the note presented on the inside cover of this report, the State of Connecticut has prepared these financial statements using accounting practices prescribed by the State Comptroller, which practices differ from accounting principles generally accepted in the United States of America. The effects on the financial statements of the variances between these regulatory accounting practices and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material.

The financial statements referred to above present only the civil list funds of the State of Connecticut and are not intended to present fairly the financial position and results of operations of the State of Connecticut in conformity with accounting principles generally accepted in the United States of America. Management has not presented government-wide financial statements to display the financial position and changes in financial position of its governmental activities, business-type activities, and discretely prepared component units. Management also has not provided notes to the financial statements, a management discussion and analysis, and information on depreciation expense, disclosure of all types of debt and infrastructure assets on the financial statements. All of which has been determined as necessary by accounting principles generally accepted in the United States of America. In our opinion, because of the effects of the matters discussed in the preceding paragraphs, the financial statements referred to above do not present fairly, in conformity with accounting principles generally accepted in the United States of America, the financial position of the State of Connecticut, as of June 30, 2010, or the changes in financial position, or where applicable its cash transactions for the year then ended.

In our opinion, based on our audit and the reports of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the combined civil list funds as of June 30, 2010, and the cash transactions of such funds for the year then ended, in conformity with the basis of accounting described in the note presented on the inside cover of this report.

In accordance with Government Auditing Standards, we have also issued our report dated December 30,2010, on our consideration of the State of Connecticut's internal control over budgetary-basis financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.

Our audit was performed for the purpose of forming an opinion on the combined civil list financial statements of the State of Connecticut taken as a whole. The combining and individual fund and account group financial statements and schedules, listed in the table of contents of the Annual Report of the State Comptroller, are presented for purposes of additional analysis and are not a required part of the combined civil list financial statements. Such information has been subjected to the auditing procedures applied in the audit of the combined civil list financial statements and, in our opinion, is fairly presented, in all material respects, in relation to the combined civil list financial statements taken as a whole.

We did not audit the data included in the sundry section of the Annual Report of the State Comptroller, and accordingly, express no opinion thereon.

Kevin P. Johnston Robert G. Jaekle
Auditor of Public Accounts Auditor of Public Accounts

December 30,2010
State Capitol
Hartford, Connecticut

STATE OF CONNECTICUT

State of Connecticut seal
AUDITORS OF PUBLIC ACCOUNTS
KEVIN P. JOHNSTON 210 CAPITOL AVENUE
HARTFORD, CONNECTICUT 06106-1559
ROBERT G. JAEKLE

INDEPENDENT AUDITORS' REPORT
ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND
 OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN
ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

Governor M. Jodi Rell
Members of the General Assembly

We have audited the combined civil list financial statements of the State of Connecticut, as of and for the year ended June 30, 2010 and have issued our report thereon dated December 30,2010. As stated in our report on the basic financial statements, we did not audit the financial statements of certain agencies and funds. Those financial statements were audited by other auditors whose reports, including their reports on internal control over financial reporting and on compliance have been furnished to us, and our report on the basic financial statements and this report, insofar as it relates to the amounts included for those agencies, funds, and component units and their internal control over financial reporting and compliance, is based on the reports of the other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. In addition, the audits of the Special Transportation Fund, Transportation Special Tax Obligations Fund, Clean Water Fund-Federal Account and Drinking Water Fund-Federal Account were conducted in accordance with standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States.

Internal Control Over Financial Reporting:

In planning and performing our audit, we considered the State of Connecticut's internal control over budgetary-basis financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the combined civil list financial statements, but not for the purpose of expressing an opinion on the effectiveness of the State of Connecticut's internal control over budgetary basis financial reporting. Accordingly we do not express an opinion on the effectiveness of the State of Connecticut's internal control over budgetary-basis financial reporting.

Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. However, as discussed below, we identified a deficiency in internal control over financial reporting that we consider to be a significant deficiency.

A control deficiency 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 misstatements on a timely basis. A significant deficiency is a control deficiency, or a combination of control deficiencies, that adversely affects the entity's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the entity's financial statements that is more than inconsequential will not be prevented or detected by the entity's internal control. We consider the failure of the State Comptroller to produce· its budgetary-basis financial statements in compliance with generally accepted accounting principles to be a significant deficiency in internal control over financial reporting.

A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the entity's internal control.

Our consideration of the internal control over budgetary-basis financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all significant deficiencies that are also considered material weaknesses. However, we consider the failure to produce budgetary-basis financial statements in compliance with generally accepted accounting principles to be a material weakness.

We have noted other matters involving the internal control over budgetary-basis financial reporting that we have reported, or will report, to the State's management in our Auditors' Report, State Comptroller - State Financial Operations, for the Fiscal Year Ended June 30, 2010, and in separately issued departmental audit reports covering the fiscal year ended June 30, 2010. The State's management responses to the findings identified in our audits are not audited by us, and accordingly, we express no opinion on them.

Compliance and Other Matters:

As part of obtaining reasonable assurance about whether the State of Connecticut's budgetary-basis financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

We have noted certain immaterial instances of noncompliance or other matters that we have reported, or will report, to the State's management in separately issued departmental audit reports covering the fiscal year ended June 30, 2010.

This report is intended solely for the information and use of the Governor, the State Comptroller, the Appropriations Committee of the General Assembly, and the Legislative Committee on Program Review and Investigations and is not intended to be and should not be used by anyone other than these specified parties. However, this report is a matter of public record and its distribution is not limited.

Kevin P. Johnston Robert G. Jaekle
Auditor of Public Accounts Auditor of Public Accounts

December 30, 2010