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CITY OF GEM LAKE <br />SCHEDULE OF FINDINGS AND RESPONSES <br />YEAR ENDED DECEMBER 31, 2010 <br />Internal Control Over Financial Reporting <br />2010-1: Limited Se re ation of Duties <br />Condition. Due to the small size of the City's staff, there is by definition a lack of segregation of the <br />accounting functions that is necessary to ensure adequate internal accounting control. While we realize <br />this scenario is common for small entities., we are required to report this issue and tv advise that. a. <br />concentration of duties and responsibilities in a limited number of individuals is. not desirable from an <br />internal control perspective. <br />Criteria: Generally, a system of internal control contemplates separation of duties such that :no <br />individual has responsibility to execute a transaction, have physical access to the related assets, and <br />have responsibility or authority to record the transaction. <br />Effect: The City is unable to maintain segregation of incompatible duties. <br />Cause: The condition is due. to a limited number of personnel involved. in receipt and disbursement <br />processes. <br />Recommendation: Controls should be reviewed periodically and consideration given to improving the <br />segregation of duties. In making this review, it. is important to consider the benefit. derived as weighed <br />against the cost of the improvements. <br />Management Response: <br />Management has decided., due to the: small size of. the. City's staff, that the additional casts of <br />implementing the necessary controls. outweigh the benefits that would be derived. <br />(34) <br />