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CITY OF GEM LAKE <br />SCHEDULE OF FINDINGS AND RESPONSES <br />YEAR ENDED DECEMBER 31, 2011 <br />2011-2: Limited Segregation 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 to 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 costs of <br />implementing the necessary controls outweigh the benefits that would be derived. <br />(37) <br />