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Vadnais Lake Area Water Management Organization <br />March 24, 2010 <br />Page 4 <br />2009-3 Material Audit Adjustments <br />Condition: During our audit, adjustments were needed to correct beginning balances, record accounts <br />payable, record interest revenue and other miscellaneous entries. <br />Criteria: The financial statements are the responsibility of the Organization's management. <br />Cause: The Organization's staff has not prepared a year-end trial balance reflecting all necessary <br />accounting entries. <br />Effect: This indicates that it would be likely that a misstatement may occur and not be detected by the <br />Organization's system of internal control. The audit firm cannot serve as a compensating <br />control over this deficiency. <br />Recommendation: We recommend that management review each journal entry, obtain an understanding of why <br />the entry was necessary and modify current procedures to ensure that future corrections are not <br />needed. <br />Management Response: The Organization's bookkeeper and administrator will work with the auditing staff to <br />incorporate the adjustments into the Organization's accounting software. <br />2009-4 Authorized Bank Signatories <br />Condition: <br />During our audit, we requested confirmations of authorized bank signatories from the <br />Organizations depository. We discovered that a number of the Organization's former Board <br />members were still listed as authorized signors. <br />Criteria: Internal controls should be in place to ensure that former employees and Board members do <br />not have access to the Organization's bank accounts. <br />Cause: Former Board members were not formally removed as authorized signors. <br />Effect: The effectiveness of the internal control system relies on enforcement by management. The <br />effect of deficiencies in internal controls can result in undetected errors or misappropriation of <br />assets of the Organization. <br />Recommendation: We recommend that the Organization remove the former Board members immediately upon <br />their term expiring and also to periodically confirm authorized signors at the Organizations <br />depository to ensure that only current employees and Board members have authorization as <br />signors. <br />Management Response: The Organization's Board and management are working with the bank to update the signature <br />cards and remove unauthorized signors. The updates will be complete by the spring of 2010. <br />952.8.35.9090 • Fax 952.835 3261 <br />www.aemcpaa.com <br />