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VADNAIS LAKE AREA WATER MANAGEMENT ORGANIZATION <br />VADNAIS HEIGHTS, MINNESOTA <br />SCHEDULE OF FINDINGS AND RESPONSES <br />DECEMBER 31, 2009 <br />Finding Description <br />2009-1 Limited Segregation of Duties - Cash Disbursements and Cash Receipts <br />Condition: <br />Criteria: <br />Cause: <br />During our audit we reviewed procedures over cash disbursements and cash receipts <br />and found the Organization to have limited segregation of duties related to these <br />procedures. <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 />As a result of the limited number of staff, the Organization is not able to completely <br />segregate all accounting functions. For both transaction cycles, one person is <br />performing two or more of the major functions described above. <br />Effect: The existence of this limited segregation of duties increases the risk of fraud and <br />errors. <br />Recommendation: While we recognize the current staff is not large enough to eliminate this deficiency, <br />we recommend the following compensating controls be implemented by the <br />Organization. For cash disbursements, we suggest that the Administrator be removed <br />as an authorized signatory. For cash receipts, we suggest that someone other than the <br />Administrator either prepare the deposit slip or take it to the bank. <br />Management Response: Efforts have been made to increase the internal control available by segregating <br />duties. A part-time bookkeeper reconciles bank statements, prepares checks and <br />monthly financial reports. The program coordinator or water resource technician <br />opens and initials bank statements. The administrator reviews payments and reports, <br />makes deposits and can be one of two required signatures on checks. Monthly <br />expenditures within budget are authorized by the Technical Commission at their <br />monthly meeting. The Board officers are check signers and the Board must approve <br />any changes to budgeted expenses. <br />For now, the Organization accepts the degree of risk associated with any further <br />segregation of duties. <br />-46- <br />