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VADNAIS LAKE AREA WATER MANAGEMENT ORGANIZATION <br />VADNAIS HEIGHTS, MINNESOTA <br />SCHEDULE OF FINDINGS AND RESPONSES <br />DECEMBER 31, 2007 <br />Finding Description <br />2007-1 Limited Segregation of Duties - Cash Disbursements and Cash Receipts <br />Condition: During our audit we reviewed procedures over cash disbursements and cash receipts <br />and found VLAWMO to have limited segregation of duties related to these <br />procedures. <br />Criteria: <br />Cause: <br />There are four general categories of duties: authorization, custody, record keeping <br />and reconciliation. In an ideal system, different employees perform each of these four <br />major functions. In other words, no one person has control of two or more of these <br />responsibilities. <br />During the first part of 2007, VLAWMO only had one employee involved with the <br />accounting processes and procedures. For the second half of 2007, there were two <br />employees and a contracted bookkeeper involved in the accounting processes and <br />procedures to help with the limited segregation of duties. <br />Effect: The existence of this limited segregation of duties increases the risk of fraud. <br />Recommendation: <br />There was great improvement in segregating the accounting duties during the year. <br />We recommend that VLAWMO add the following compensating control. Have <br />another individual, separate from the Administrator (possibly a board member or the <br />bookkeeper) receive and review the unopened bank statements. The review would <br />consist of scanning for unusual activity, agreeing all disbursements to board <br />approved listings and documenting that the review was done. <br />-20- <br />