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CITY OF GEM LAKE <br />Schedule of Findings and Responses <br />Year Ended December 31, 2020 <br />A. FINDINGS — MATERIAL WEAKNESS IN INTERNAL CONTROL OVER FINANCIAL <br />REPORTING <br />.2020-001 INADEQUATE SEGREGATION.oF DUTIES <br />Criteria -- Internal control over financial reporting; <br />ConditiQn — The City of Gem lake, Minnesota (the City)*bas limited segregation of duties in <br />a number of areas; including, but not limited- to,. controls over cash receipts, cash <br />disbut§ements, utility -billing, and payroll. <br />Contest— This -is aturrenfyear and:prior year finding; <br />Cause— The limited*.segregation of duties is..primariily:caused: by the limited size of the City's <br />office staff. <br />Effect, One important element of internal accounting controls is an adequate segregation of <br />duties suWthat no one individual have responsibility to execute a transaction, have physical <br />access.to #ie related assets, and have responsibility or authority to record. the transaction: A <br />lack. of segregation -of duties subjects:the City to a higher. risk that.errors or fraud could occur <br />and:not be detected in a timely manner in the normal course of business: <br />Recommendation — We'recommend that the City continue its efforts to segregate duties as <br />best ii can'within the Iimits cif what the City considers to. be cost-�beneficial. <br />Management Response — There is no disagreement -with the audit finding. The City reviews <br />and makes improvements. to its internal. control structure.on.an. ongoing. basis to maximize the <br />segregation of duties in all areas within the limits of -the staff available. However, the City <br />-does -riot consider itcost-beneficial at this time to increase the size of its finance department <br />staffin orderto further segregate accounting functions. <br />-32- <br />