We contracted with the independent public accounting firm of KPMG, LLP (KPMG) to audit the combined balance sheets of the Southwestern Federal Power System (SWFPS) as of September 30, 2010 and 2009, and the related combined statements of revenues and expenses, changes in net Federal investment and cash flows for the years then ended. KPMG concluded that the combined financial statements present fairly, in all material respects, the respective financial position of SWFPS as of September 30, 2010 and 2009, and the results of its operations and its cash flow for the years then ended, in conformity with United States generally accepted accounting principles. The auditors also considered SWFPS's internal controls over financial reporting and tested for compliance with certain provisions of laws, regulations, contracts and grant agreements that could have a direct and material effect on the determination of financial statement amounts. The audit identified four internal control deficiencies over accounting for utility plant and five internal control deficiencies over Accounting Policies and Procedures, each of which were considered to be significant. When combined together, these conditions were considered a material weakness. In response to the findings, management agreed with the recommendations and will take necessary corrective action.