Independant Auditor's Report




To the Mayor, City Council, City Controller, and Citizens:

We have audited the accompanying general purpose financial statements of the City of Houston, Texas (the City) as of and for the year ended June 30, 1998, as listed in the accompanying table of contents. These general purpose financial statements are the responsibility of the City's management. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. We did not audit the financial statements of the Municipal Employees’ Pension System and the Police Officers’ Pension System, blended component units of the City, which, in aggregate, reflect 66% of total assets and 65% of total additions and revenues of the Fiduciary Fund Type. In addition, we did not audit the financial statements of the Cultural Arts Council of Houston, Houston Housing Finance Corporation, and the Houston Parks Board, discretely presented component units of the City, which in aggregate reflect 60% of total assets and 51% of total revenues and other financing sources of discretely presented component units. 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 Municipal Employees’ Pension System and the Police Officers’ Pension System, and the discrete component units listed above is based solely on the reports of the other auditors.

We conducted our audit in accordance with generally accepted auditing standards 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 general purpose financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit and the reports of the other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audit and the reports of the other auditors, the general purpose financial statements referred to above present fairly, in all material respects, the financial position of the City of Houston, Texas, as of June 30, 1998, and the results of its operations and the cash flows of its proprietary fund types for the year then ended in conformity with generally accepted accounting principles.

As discussed in notes 1 and 17 to the general purpose financial statements, the City adopted the provisions of Governmental Accounting Standards Board Statements No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools and No. 32, Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans, respectively.


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