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M CITY OF Sl. ANTHONY, MINNESOTA SCHEDULE OF FINDINGS AND QUESTIONED COSTS For The Year Ended December 31, 2006 2006-8 Inadequate Documentation of the Components of Internal Control Criteria: SAS 112 specifies that inadequate documentation of the components of internal control is considered a significant deficiency in the design of internal controls. Condition: Although the City has many adequate controls in place, they are not in writing. Therefore, under the definition of SAS 112, a finding exists. Cause: There may be an assumption that because the City's accounting system is not complex and accounting personnel have direct and easy access to the Finance Director when questions arise, there is no need for an internal control/accounting manual. Effect: An implied or verbal policy is subject to greater variation of its meaning and the likelihood of misinterpretation increases when a policy is not written. Recommendation.: We recommend the City establish a written internal control manual. Written procedures, instructions, and assignments of duties will prevent or reduce misunderstandings, errors, inefficient or wasted effort, duplicated or omitted procedures, and other situations that can result in inaccurate or untimely accounting records. A well - devised accounting manual can also help to ensure that all similar transactions are treated consistently, that accounting principles used are proper, and that records are produced in the form desired by management. Views of Responsible Officials and Corrective Action Plan: Staff will develop and establish a written internal control manual with procedures, instructions and assignment of duties. This will ensure that all similar transactions are treated consistently, that generally accepted accounting principles are used in all instances, and that all records are produced in the form desired by management.