The Audit Committee of the Board of Trustees
Independence One Mutual Funds
In planning and performing our audit of the financial statements of
Independence One Mutual Funds for the year ended April 30, 2000, we
considered its internal control, including control activities for
safeguarding securities, in order to determine our auditing procedures for
the purpose of expressing our opinion on the financial statements and to
comply with the requirements of Form N-SAR, not to provide assurance on
internal control.
The management of Independence One Mutual Funds is responsible for
establishing and maintaining internal control. In fulfilling this
responsibility, estimates and judgments by management are required to assess
the expected benefits and related costs of controls. Generally, controls
that are relevant to an audit pertain to the entity's objective of preparing
financial statements for external purposes that are fairly presented in
conformity with accounting principles generally accepted in the United States
of America. Those controls include the safeguarding of assets against
unauthorized acquisition, use or disposition.
Because of inherent limitations in internal control, errors or irregularities
may occur and not be detected. Also, projection of any evaluation of
internal control to future periods is subject to the risks that it may become
inadequate because of changes in conditions or that the effectiveness of the
design and operation may deteriorate.
Our consideration of internal control would not necessarily disclose all
matters in internal control that might be material weaknesses under standards
established by the American Institute of Certified Public Accountants. A
material weakness is a condition in which the design or operation of one or
more of the internal control components does not reduce to a relatively low
level the risk that errors or irregularities in amounts that would be
material in relation to the financial statements being audited may occur and
not be detected within a timely period by employees in the normal course of
performing their assigned functions. However, we noted certain matters
involving internal control and its operation that we consider to be material
weaknesses as defined above. These conditions were considered in determining
the nature, timing and extent of the procedures to be performed in our audit
of the financial statements of Independence One Mutual Funds for the year
ended April 30, 2000, and this report does not affect our report thereon
dated June 26, 2000. We noted the following matters involving internal
control and its operation that we consider to be material weaknesses.
During the course of our audit we requested copies of reconciliations for
general ledger accounts as of April 30, 2000. These reconciliations are
reviewed to corroborate the results of our study and evaluation of certain
internal controls designed to detect differences between the fund's financial
reports and supporting ledgers. This study and evaluation is based upon
information contained in the fund accountant's report on internal controls in
accordance with SAS 70. We found that the fund accountant had not performed
adequate reconciliations of the International Equity Fund (the "Fund")
receivable for futures margin, receivable for options sold and payable for
options written and, accordingly, could not supply those reconciliations. A
subsequent reconciliation effort, begun after year-end, was made by the fund
accountant and detected numerous differences in those three accounts of the
Fund. These differences, or reconciling items, were determined to be the
result of various bookkeeping errors, missing source documents
(trade tickets) and miscommunications. These differences occurred during the
entire period under audit and resulted in the occurrence of material errors
that were not detected within a timely period.
The nature of the errors identified and the underlying causes indicate that
there were deficiencies in the design of internal control and failures in the
operation of internal control during the period under audit as such internal
control relates to the Fund. Deficiencies in internal control design for the
Fund included: the absence of appropriate reviews and approvals of
transactions and accounting entries; inadequate procedures for appropriately
assessing and applying accounting principles; and inadequate provision for
ensuring the safeguarding of assets (outside of the custodian's sub-custodial
network). Failures noted in the operation of internal control of the Fund
included: preventing and detecting misstatements of accounting information;
safeguarding assets from misuse or loss; and not performing tasks that are
part of internal control, such as reconciliations.
As a result of the subsequent reconciliation effort, the fund accountant has
sufficiently identified these errors and adjusted the Fund's financial
statements as of April 30, 2000 to reflect the correct balances for the three
accounts described above.
This report is intended solely for the information and use of management, the
Audit Committee of Independence One Mutual Funds, and the Securities and
Exchange Commission and is not intended to be and should not be used by
anyone other than these specified parties.
Boston, Massachusetts
June 26, 2000
The Audit Committee of the Board of Trustees
Independence One Mutual Funds
