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HomeMy Public PortalAboutWatertown, MA GL16 FinalMELANSON ACCOUNTANTS • AUDITORS Town Council Town of Watertown 149 Main Street Watertown, Massachusetts 02472 Dear Councilors: HEATH years 10 New England Business Center Dr. • Suite 107 Andover, MA 01810 (978)749-0005 melansonheath.com Additional Offices: Nashua, NH Manchester, NH Greenfield, MA Ellsworth, ME We have audited the financial statements of the Town of Watertown, Massachusetts as of and for the year ended June 30, 2016 and have issued our report thereon dated November 8, 2017. Professional standards require that we advise you of the following matters relating to our audit. Our Responsibility in Relation to the Financial Statement Audit As communicated in our engagement letter, our responsibility, as described by profes- sional standards, is to form and express an opinion about whether the financial state- ments that have been prepared by management with your oversight are presented fairly, in all material respects, in conformity with accounting principles generally accepted in the United States of America. Our audit of the financial statements does not relieve you or management of your respective responsibilities. Our responsibility, as prescribed by professional standards, is to plan and perform our audit to obtain reasonable, rather than absolute, assurance about whether the financial state- ments are free of material misstatement. An audit of financial statements includes consid- eration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control over financial reporting. Accordingly, as part of our audit, we considered the internal control of the Town solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control. We are also responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your responsibilities in overseeing the finan- cial reporting process. However, we are not required to design procedures for the purpose of identifying other matters to communicate to you. We have provided our findings regarding other matters noted during our audit in a separate letter to you dated November 8, 2017. Planned Scope and Timing of the Audit We conducted our audit consistent with the planned scope and timing we previously com- municated to you. Compliance with All Ethics Requirements Regarding Independence The engagement team and others in our Firm have complied with all relevant ethical require- ments regarding independence. Safeguards that have been applied to eliminate threats to independence or reduce them to an acceptable level include annual certification by all Firm staff of independence. Qualitative Aspects of the Entity's Significant Accounting Practices Significant Accounting Policies Management has the responsibility to select and use appropriate accounting policies. A summary of the significant accounting policies adopted by the Town is included in the notes to the financial statements. There have been no initial selection of accounting poli- cies and no changes in significant accounting policies or their application during the year ended June 30, 2016. No matters have come to our attention that would require us, under professional standards, to inform you about (1) the methods used to account for signifi- cant unusual transactions and (2) the effect of significant accounting policies in controver- sial or emerging areas for which there is a lack of authoritative guidance or consensus. Significant Accounting Estimates Accounting estimates are an integral part of the financial statements prepared by man- agement and are based on management's current judgments. Those judgments are nor- mally based on knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ markedly from management's current judgments. The most sensitive accounting estimates affecting the financial statements are: • Estimated lives and depreciation methods for depreciable assets. • Collectability of receivables. • Net OPEB obligation. • Net pension liability. • Estimated liability for potential tax refunds. Management's estimates of the above are based on various criteria. We evaluated the key factors and assumptions used to develop these estimates and determined that it is reasonable in relation to the basic financial statements taken as a whole and in relation to the applicable opinion units. 2 Financial Statement Disclosures Certain financial statement disclosures involve significant judgment and are particularly sensitive because of their significance to financial statement users. We noted no partic- ularly sensitive disclosures affecting the Town's financial statements. Identified or Suspected Fraud We have not identified or obtained information that indicates that fraud may have occurred. Significant Difficulties Encountered during the Audit We encountered no significant difficulties in dealing with management relating to the per- formance of the audit. Uncorrected and Corrected Misstatements As an added service to the Town, we assisted in compiling the government -wide financial statements, including consolidating various funds into governmental activities, converting to the accrual basis of accounting, and recording all long-term assets, long-term liabilities, and net position classifcations. This consolidation and conversion process was based on information from the Town's accounting records. For purposes of this communication, professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that we believe are trivial, and communicate them to the appropriate level of management. Further, pro- fessional standards require us to also communicate the effect of uncorrected misstate- ments related to prior periods on the relevant classes of transactions, account balances or disclosures, and the financial statements as a whole and each applicable opinion unit. We did not identify any uncorrected financial statement misstatements whose effects in the current and prior periods, as determined by management, are immaterial, both indi- vidually and in the aggregate, to the financial statements taken as a whole and each applicable opinion unit. In addition, professional standards require us to communicate to you all material, cor- rected misstatements that were brought to the attention of management as a result of our audit procedures. We did not identify any material misstatements as a result of our audit procedures that were brought to the attention of, and corrected by, management. Disagreements with Management For purposes of this letter, professional standards define a disagreement with manage- ment as a matter, whether or not resolved to our satisfaction, concerning a financial account- ing, reporting, or auditing matter, which could be significant to the Town's financial statements or the auditors' report. No such disagreements arose during the course of the audit. 3 Representations Requested from Management We have requested certain written representations from management, which are included in the letter dated November 8, 2017. Management's Consultations with Other Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters. Management informed us that, and to our knowledge, there were no consultations with other accountants regarding auditing and accounting matters. Other Significant Matters, Findings or Issues In the normal course of our professional association with the Town, we generally discuss a variety of matters, including the application of accounting principles and auditing stand- ards, operating and regulatory conditions affecting the entity, and operational plans and strategies that may affect the risks of material misstatement. None of the matters discussed resulted in a condition to our retention as the Town's auditors. Other Information in Documents Containing Audited Financial Statements Pursuant to professional standards, our responsibility as auditors for other information in documents containing the Town's audited financial statements does not extend beyond the financial information identified in the audit report, and we are not required to perform any procedures to corroborate such other information. However, in accordance with such standards, we have read the information (if applicable) and considered whether such infor- mation, or the manner of its presentation, was materially inconsistent with the presentation in the financial statements. Our responsibility also includes communicating to you any information which we believe is a material misstatement of fact. Nothing came to our attention that caused us to believe that such information, or its manner of presentation, is materially inconsistent with the infor- mation, or manner of its presentation, appearing in the financial statements. This report is intended solely for the information and use of the governing body and man- agement of the Town and is not intended to be and should not be used by anyone other than these specified parties. Sincerely, p...i2,3„4„ ei„._ti\ November 8, 2017 4