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CITY OF GEM LAKE <br />SCHEDULE OF FINDINGS AND RESPONSES <br />YEAR ENDED DECEMBER 31, 2011 <br />2011-1 Oversight of the Financial Reporting Process <br />Condition: The City does not have a system of internal controls that would enable management to <br />conclude the financial statements and related disclosures are complete and presented in accordance <br />with U.S. generally accepted accounting principles (GAAP). As such, management requested us to <br />prepare a draft of the financial statements, including the related footnote disclosures. <br />Criteria: The City should have controls in place to conclude the financial statements and related <br />disclosures are complete and presented in accordance with GAAP. <br />Effect: The City is unable to conclude on the accuracy of the financial statements. <br />Cause: The City relies on the audit firm to prepare the annual financial statements and related footnote <br />disclosures. However, they have reviewed and approved the annual financial statements and related <br />footnote disclosures. <br />Recommendation: We recommend that the City continue to evaluate its internal control processes to <br />determine if additional internal control procedures should be implemented to ensure that the financial <br />statements are complete and presented in accordance with U.S. GAAP. <br />Management Response: <br />Management has decided, due to the small size of the City's staff, that the additional costs of <br />implementing the necessary controls outweigh the benefits that would be derived. <br />(36) <br />