Audit 18639

2022-001. Inadequate Segregation of Duties Condition: The Pierce Pepin Cooperative Services and Affiliates has a limited number of office personnel and, accordingly, does not have adequate separation of duties. An effective internal control structure provides an adequate segregation of duties so that no one individual handles a transaction from its inception to its completion. Criteria: A fundamental concept in a good system of internal controls is the segregation of incompatible duties. Cause: Due to the relatively small size of the Pierce Pepin Cooperative Services and Affiliates? staff, the Pierce Pepin Cooperative Services and Affiliates is not able to attain ideal segregation of duties of separating the assignment of different people to authorize transactions, record transactions, and maintain custody of assets. Effect: This control deficiency could result in a misstatement to the consolidated financial statements that would not be prevented or detected. Recommendation: Although it may not be economically feasible for the Pierce Pepin Cooperative Services and Affiliates to attain an ideal segregation of duties environment, the Pierce Pepin Cooperative Services and Affiliates can periodically observe and evaluate its current structure so as to make improvements when considered necessary. Views of Responsible Officials and Planned Corrective Actions: The Pierce Pepin Cooperative Services and Affiliates has determined the benefit of adequately segregating duties is less than the cost. Based on the assessment, the Pierce Pepin Cooperative Services and Affiliates is accepting the risk posed by the deficiency while also evaluating mitigating controls that will help reduce the risk of material misstatement of the consolidated financial statements. Management attempts to mitigate the associated risks by doing the following: 1. Identifies areas where the lack of segregation of duties exists and where there are higher risks of errors or fraud occurring. 2. Implements limited segregation to the extent possible to reduce risks without impairing efficiency. 3. Uses the knowledge that management and the Board of Directors have of operations by having them review certain accounting records and reports. 4. Monitors the effectiveness of the above actions and makes changes as considered appropriate.

2022-002. Preparation of Consolidated Financial Statements and Related Footnotes Criteria: Internal controls over financial reporting include those related to the actual preparation and review of the audited consolidated financial statements. In order to prepare a complete set of consolidated financial statements in conformity with GAAP, the preparer must have the necessary expertise. Condition: The Company does not have an internal control system designed to provide for the preparation of the consolidated financial statements being audited. Company personnel do prepare periodic consolidated financial statements and other financial information for internal use that meets the needs of management and council. However, the Company does not have the internal resources to prepare full-disclosure consolidated financial statements required by GAAP for external reporting. As auditors, we were requested to draft the consolidated financial statements and accompanying footnotes. Cause: The Company does not have the resources to compile their own consolidated financial statements. Effect: This control deficiency could result in a misstatement to the consolidated financial statements that would not be prevented or detected. Recommendation: This control deficiency is not unusual in a small Company. However, it is the responsibility of management and the board of directors to decide whether to accept the degree of risk associated with this condition based on the cost of correction and other considerations. Views of Responsible Officials and Planned Corrective Actions: The Company?s management is aware of this significant deficiency. Management reviews and approves the draft annual audited consolidated financial statements and distributes them to the users. For entities of this size, it generally is not practical to obtain the internal expertise needed to handle all aspects of the external financial reporting. Management recognizes this and feels it is effectively handling its reporting responsibilities with the procedures described above.

2022-001. Inadequate Segregation of Duties Condition: The Pierce Pepin Cooperative Services and Affiliates has a limited number of office personnel and, accordingly, does not have adequate separation of duties. An effective internal control structure provides an adequate segregation of duties so that no one individual handles a transaction from its inception to its completion. Criteria: A fundamental concept in a good system of internal controls is the segregation of incompatible duties. Cause: Due to the relatively small size of the Pierce Pepin Cooperative Services and Affiliates? staff, the Pierce Pepin Cooperative Services and Affiliates is not able to attain ideal segregation of duties of separating the assignment of different people to authorize transactions, record transactions, and maintain custody of assets. Effect: This control deficiency could result in a misstatement to the consolidated financial statements that would not be prevented or detected. Recommendation: Although it may not be economically feasible for the Pierce Pepin Cooperative Services and Affiliates to attain an ideal segregation of duties environment, the Pierce Pepin Cooperative Services and Affiliates can periodically observe and evaluate its current structure so as to make improvements when considered necessary. Views of Responsible Officials and Planned Corrective Actions: The Pierce Pepin Cooperative Services and Affiliates has determined the benefit of adequately segregating duties is less than the cost. Based on the assessment, the Pierce Pepin Cooperative Services and Affiliates is accepting the risk posed by the deficiency while also evaluating mitigating controls that will help reduce the risk of material misstatement of the consolidated financial statements. Management attempts to mitigate the associated risks by doing the following: 1. Identifies areas where the lack of segregation of duties exists and where there are higher risks of errors or fraud occurring. 2. Implements limited segregation to the extent possible to reduce risks without impairing efficiency. 3. Uses the knowledge that management and the Board of Directors have of operations by having them review certain accounting records and reports. 4. Monitors the effectiveness of the above actions and makes changes as considered appropriate.

2022-002. Preparation of Consolidated Financial Statements and Related Footnotes Criteria: Internal controls over financial reporting include those related to the actual preparation and review of the audited consolidated financial statements. In order to prepare a complete set of consolidated financial statements in conformity with GAAP, the preparer must have the necessary expertise. Condition: The Company does not have an internal control system designed to provide for the preparation of the consolidated financial statements being audited. Company personnel do prepare periodic consolidated financial statements and other financial information for internal use that meets the needs of management and council. However, the Company does not have the internal resources to prepare full-disclosure consolidated financial statements required by GAAP for external reporting. As auditors, we were requested to draft the consolidated financial statements and accompanying footnotes. Cause: The Company does not have the resources to compile their own consolidated financial statements. Effect: This control deficiency could result in a misstatement to the consolidated financial statements that would not be prevented or detected. Recommendation: This control deficiency is not unusual in a small Company. However, it is the responsibility of management and the board of directors to decide whether to accept the degree of risk associated with this condition based on the cost of correction and other considerations. Views of Responsible Officials and Planned Corrective Actions: The Company?s management is aware of this significant deficiency. Management reviews and approves the draft annual audited consolidated financial statements and distributes them to the users. For entities of this size, it generally is not practical to obtain the internal expertise needed to handle all aspects of the external financial reporting. Management recognizes this and feels it is effectively handling its reporting responsibilities with the procedures described above.