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VADNAIS LAKE AREA WATER MANAGEMENT ORGANIZATION <br />VADNAIS HEIGHTS, MINNESOTA <br />SCHEDULE OF FINDINGS AND RESPONSES - CONTINUED <br />DECEMBER 31, 2009 <br />F Description <br />2009-3 Material Audit Adjustments <br />Condition: During our audit, adjustments were needed to correct beginning balances, record <br />accounts 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 <br />necessary accounting entries. <br />Effect: This indicates that it would be likely that a misstatement may occur and not be <br />detected by the Organization's system of internal control. The audit firm cannot <br />serve as a compensating control over this deficiency. <br />Recommendation: We recommend that management review each journal entry, obtain an understanding <br />of why the entry was necessary and modify current procedures to ensure that future <br />corrections are not 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 />Criteria: <br />Cause: <br />Effect: <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 <br />Board members were still listed as authorized signors. <br />Internal controls should be in place to ensure that former employees and Board <br />members do not have access to the Organization's bank accounts. <br />Former Board members were not formally removed as authorized signors. <br />The effectiveness of the internal control system relies on enforcement by <br />management. The effect of deficiencies in internal controls can result in undetected <br />errors or misappropriation of assets of the Organization. <br />Recommendation: We recommend that the Organization remove the former Board members <br />immediately upon their term expiring and also to periodically confirm authorized <br />signors at the Organizations depository to ensure that only current employees and <br />Board members have authorization as signors. <br />Management Response: The Organization's Board and management are working with the bank to update the <br />signature cards and remove unauthorized signors. The updates will be complete by <br />the spring of 2010. <br />-49- <br />