State of Connecticut

STATE OF CONNECTICUT

State of Connecticut seal
AUDITORS OF PUBLIC ACCOUNTS
JOHN C. GERAGOSIAN 210 CAPITOL AVENUE
HARTFORD, CONNECTICUT 06106-1559
ROBERT M.WARD

INDEPENDENT AUDITORS' REPORT

Governor Dannel P. Malloy
Members of the General Assembly

Report on the Financial Statements
We have audited the accompanying financial statements of the State of Connecticut as of and for the year ended June 30, 2014, as listed in the Table of Contents of the Annual Report of the State Comptroller.

Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with the financial reporting provisions of Sections 3-115, 3-115b and Sections 3-114b through 3-114r of the Connecticut General Statutes, as described in the note on the inside cover of the Annual Report of the State Comptroller, in order to meet the financial and budgetary reporting requirements of the State of Connecticut. Management is also responsible 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.

Auditor's Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the Special Transportation Fund which represent 13 percent and 13 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 89 percent and 94 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, and the Drinking Water Fund-Federal Account, which represent 87 percent and 22 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.

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, all of the aforementioned audits were conducted in accordance with 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 financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our adverse and unqualified audit opinions.

Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles
To meet the financial and budgetary reporting requirements of the State of Connecticut, the financial statements presented in the Annual Report of the State Comptroller are prepared by the State Comptroller using accounting practices described in the note presented on the inside cover of the Annual Report of the State Comptroller. These practices follow the financial reporting provisions of Sections 3-115, 3-115b and Sections 3-114b through 3-114r of the Connecticut General Statutes, which is a basis of accounting other than accounting principles generally accepted in the United States of America. The effects on the financial statements of the variances between the statutory basis of accounting described in the note on the inside cover of the Annual Report of the State Comptroller and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material. In addition, 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 has also not provided the required notes to the financial statements, a management discussion and analysis, and information on depreciation expense and 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.

Adverse Opinion on U.S. Generally Accepted Accounting Principles
In our opinion, because of the significance of the matters discussed in the Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles paragraph, the financial statements referred to above do not present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of the State of Connecticut, as of June 30, 2014, or the revenues, expenses, and changes in net position and, when applicable, cash flows thereof for the year then ended.

Opinion on Statutory Basis of Accounting
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 statutory basis financial position of all funds accounted for by the Office of the State Comptroller of the State of Connecticut as of June 30, 2014, and the revenues, expenses, and changes in net position and, when applicable, cash flows thereof for the year then ended in accordance with the statutory basis of accounting described in the note on the inside cover of the Annual Report of the State Comptroller.

Emphasis of Matter
As discussed in the note on the inside cover of the Annual Report of the State Comptroller, during the fiscal year ended June 30, 2014, the State of Connecticut changed from a modified cash basis of accounting to a statutory basis of accounting for the General Fund, the Special Transportation Fund and the Budgeted Special Revenue funds. This change, which was provided for in Section 3-115b of the Connecticut General Statutes, as amended by Public Act 11-48, requires the State Comptroller to recognize in the financial statements certain expenditure accruals for those funds that receive budgeted appropriations from the Connecticut General Assembly.

Other Matters
The sundry section of the Annual Report of the State Comptroller has not been subjected to the auditing procedures applied in the audit of the combined civil list financial statements, and accordingly, we do not express an opinion or provide any assurance on it.

Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we will also issue our report dated December 31, 2014, on our consideration of the State of Connecticut's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. 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.

John C. Geragosian Robert M. Ward
Auditor of Public Accounts Auditor of Public Accounts

December 31, 2014
State Capitol
Hartford, Connecticut

STATE OF CONNECTICUT

State of Connecticut seal
AUDITORS OF PUBLIC ACCOUNTS
JOHN C. GERAGOSIAN 210 CAPITOL AVENUE
HARTFORD, CONNECTICUT 06106-1559
ROBERT M.WARD


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 Dannel P. Malloy
Members of the General Assembly

We have audited 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, the financial statements of the State of Connecticut as presented in the Annual Report of the State Comptroller, as of and for the year ended June 30, 2014 and have issued our report thereon dated December 31, 2014. Our report includes an adverse opinion. Our report includes a reference to other auditors. Other auditors audited the financial statements of the Special Transportation Fund, the Transportation Special Tax Obligations Fund, the Clean Water Fund-Federal Account, and the Drinking Water Fund-Federal Account, as described in our report on the State of Connecticut's financial statements presented in the Annual Report of the State Comptroller. This report does not include the results of the other auditors' testing of internal control over financial reporting or compliance and other matters that are reported on separately by those auditors.

Internal Control Over Financial Reporting:

Management of the State of Connecticut is responsible for establishing and maintaining effective internal control over financial reporting. In planning and performing our audit, we considered the State of Connecticut's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the State of Connecticut's internal control over financial reporting. Accordingly we do not express an opinion on the effectiveness of the State of Connecticut's internal control.

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, detect or correct misstatements on a timely basis. A material weakness is a deficiency, or a 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 consider the failure of the State Comptroller to produce its financial statements in compliance with generally accepted accounting principles to be a material weakness in internal control over 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 and therefore, there can be no assurance that all deficiencies, significant deficiencies, or material weaknesses have been identified.

We have noted other matters involving the internal control over financial reporting that we have reported, or will report, to the State's management in our Auditors' Report on Internal Control over Financial Reporting and on Compliance and Other Matters, for the Fiscal Year Ended June 30, 2014 - State of Connecticut Comprehensive Annual Financial Report, and in separately issued departmental audit reports covering the fiscal year ended June 30, 2014. 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 financial statements as presented in the Annual Report of the State Comptroller 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, 2014. 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.

Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the State of Connecticut's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the State of Connecticut's internal control and compliance. 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.

John C. Geragosian Robert M. Ward
Auditor of Public Accounts Auditor of Public Accounts

December 31, 2014
State Capitol
Hartford, Connecticut