HomeMy Public PortalAbout05-31-2012 Independent Audit report TOWN OF WATERTOWN, MASSACHUSETTS
Independent Auditors' Reports Pursuant
to Governmental Auditing Standards
and The Single Audit Act Amendments of 1996
For the Year Ended June 30, 2011
TABLE OF CONTENTS
PAGE
REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING AND ON COMPLIANCE AND OTHER
MATTERS BASED ON AN AUDIT OF FINANCIAL
STATEMENTS PERFORMED IN ACCORDANCE WITH
GOVERNMENT AUDITING STANDARDS 1
REPORT ON COMPLIANCE WITH REQUIREMENTS THAT
COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH
MAJOR PROGRAM AND ON INTERNAL CONTROL OVER
COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 3
Schedule of Expenditures of Federal Awards 6
Schedule of Findings and Questioned Costs 7
MELANSON HEATH & COMPANY, PC
CERTIFIED PUBLIC ACCOUNTANTS
MANAGEMENT ADVISORS
10 New England Business Center Drive • Suite 107
Andover, MA 01810-1096
(978) 749-0005 • Fax(978) 749-0006
www.melarLsonheath.com
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND
ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF
FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE
WITH GOVERNMENT AUDITING STANDARDS
To the Town Manager and Town Council
Town of Watertown, Massachusetts
We have audited the financial statements of the governmental activities, the
business-type activities, the aggregate discretely presented component units, each
major fund, and the aggregate remaining fund information of the Town of Watertown,
Massachusetts, as of and for the year ended June 30, 2011, which collectively com-
prise the Town's basic financial statements and have issued our report thereon
dated March 28, 2012. We conducted our audit in accordance with auditing stand-
ards generally accepted in the United States of America and the standards applica-
ble to financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States.
Internal Control Over Financial Rer)ortinq,
In planning and performing our audit, we considered the Town's internal control over
financial reporting as a basis for designing our auditing procedures for the purpose
of expressing our opinions on the financial statements, but not for the purpose of
expressing an opinion on the effectiveness of the Town's internal control over finan-
cial reporting. Accordingly, we do not express an opinion on the effectiveness of the
Town's internal control over financial reporting.
A deficiency in internal control exists when the design or operation of a control
does not allow management or employees, in the normal course of performing their
assigned functions, to prevent or detect and correct misstatements on a timely basis.
A material weakness is a deficiency, or combination of deficiencies, in internal con-
trol, such that there is a reasonable possibility that a material misstatement of the
entity's financial statements will not be prevented, or detected and corrected on a
timely basis.
Additional Offices:
Greenfield,MA• Ellsworth,ME• Nashua,NH• Manchester,NH
Our consideration of the internal control over financial reporting was for the limited
purpose described in the first paragraph of the section and was not designed to
identify all deficiencies in internal control over financial reporting that might be defi-
ciencies, significant deficiencies or material weaknesses. We did not identify any
deficiencies in internal control over financial reporting that we consider to be material
weaknesses, as defined above.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Town's financial
statements are free of material misstatement, we performed tests of its compliance
with certain provisions of laws, regulations, contracts, and grant agreements, non-
compliance with which could have a direct and material effect on the determination
of financial statement amounts. However, providing an opinion on compliance with
those provisions was not an objective of our audit, and accordingly, we do not
express such an opinion. The results of our tests disclosed no instances of noncom-
pliance or other matters that are required to be reported under Government Auditing
Standards.
We noted certain matters that we reported to management of the Town in a separate
letter dated March 28, 2012.
This report is intended solely for the information and use of management, the Town
Council, others within the entity, and federal awarding agencies and pass-through
entities and is not intended to be and should not be used by anyone other than these
specified parties.
Andover, Massachusetts
March 28, 2012
2
MELANSON HEATH & COMPANY, PC
CERTIFIED PUBLIC ACCOUNTANTS
MANAGEMENT ADVISORS
10 New England Business Center Drive • Suite 107
Andover, MA 01810-1096
(978) 749-0005 • Fax(978) 749-0006
www.melansonheath.com
REPORT ON COMPLIANCE WITH REQUIREMENTS
THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON
EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER
COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133
To the Town Manager and Town Council
Town of Watertown, Massachusetts
Compliance
We have audited the Town of Watertown, Massachusetts' compliance with the types
of compliance requirements described in the OMB CircularA-133 Compliance
Supplement that could have a direct and material effect on each of its major federal
programs for the year ended June 30, 2011. The Town's major federal programs
are identified in the summary of auditors' results section of the accompanying
schedule of findings and questioned costs. Compliance with the requirements of
laws, regulations, contracts, and grants applicable to each of its major federal
programs is the responsibility of the Town's management. Our responsibility is to
express an opinion on the Town's compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards
generally accepted in the United States of America; the standards applicable to
financial audits contained in Government Auditing Standards issued by the
Comptroller General of the United States; and OMB Circular A-133, Audits of States,
Local Governments, and Non-Profit Organizations. Those standards and OMB
Circular A-133 require that we plan and perform the audit to obtain reasonable
assurance about whether noncompliance with the types of compliance requirements
referred to above that could have a direct and material effect on a major federal
program occurred. An audit includes examining, on a test basis, evidence about the
Town's compliance with those requirements and performing such other procedures
as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion. Our audit does not provide a legal
determination of the Town's compliance with those requirements.
3 Additional Offices:
Greenfield,MA• Ellsworth,ME• Nashua,NH• Manchester,NH
As described in item 11-1 in the accompanying schedule of findings and questioned
costs, the Town did not comply with requirements regarding time and effort certifica-
tion that could have a direct and material effect on its Title I ARRA, Special Educa-
tion, and School Lunch programs. Compliance with such requirements is necessary,
in our opinion, for the Town to comply with the requirements applicable to that
program.
In our opinion, except for the noncompliance described in the preceding paragraph,
the Town complied, in all material respects, with the requirements referred to above
that could have a direct and material effect on each of its major federal programs for
the year ended June 30, 2011.
Internal Control Over Compliance
Management of the Town is responsible for establishing and maintaining effective
internal control over compliance with the requirements of laws, regulations,
contracts, and grants applicable to federal programs. In planning and performing
our audit, we considered the Town's internal control over compliance with the
requirements that could have a direct and material effect on a major federal program
to determine our auditing procedures for the purpose of expressing our opinion on
compliance and to test and report on internal control over compliance in accordance
with OMB Circular A-133, but not for the purpose of expressing an opinion on the
effectiveness of internal control over compliance. Accordingly, we do not express an
opinion on the effectiveness of the Town's internal control over compliance.
A deficiency in internal control over compliance exists when the design or operation
of a control over compliance does not allow management or employees, in the nor-
mal course of performing their assigned functions, to prevent, or detect and correct,
noncompliance with a type of compliance requirement of a federal program on a
timely basis. A material weakness in internal control over compliance is a defi-
ciency, or combination of deficiencies, in internal control over compliance, such that
there is a reasonable possibility that material noncompliance with a type of compli-
ance requirement of a federal program will not be prevented, or detected and
corrected, on a timely basis.
Our consideration of internal control over compliance was for the limited purpose
described in the first paragraph of this section and was not designed to identify all
deficiencies in internal control over compliance that might be deficiencies, significant
deficiencies or material weaknesses. We did not identify any deficiencies in internal
control over compliance that we consider to be material weaknesses, as defined
above.
Schedule of Expenditures of Federal Awards
We have audited the financial statements of the governmental activities, the business-
type activities, the aggregate discretely presented component units, each major fund,
4
and the aggregate remaining fund information of the Town as of and for the year
ended June 30, 2011, and have issued our report thereon dated March 28, 2012.
Our audit was performed for the purpose of forming our opinions on the financial
statements that collectively comprise the Town's basic financial statements. The
accompanying schedule of expenditures of federal awards is presented for purposes
of additional analysis as required by OMB Circular A-133 and is not a required part of
the basic financial statements. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our opinion, is
fairly stated, in all material respects, in relation to the basic financial statements taken
as a whole.
The Town's responses to the findings identified in our audit are described in the
accompanying schedule of findings and questioned costs. We did not audit the
Town's responses and, accordingly, we express no opinion on the responses.
This report is intended solely for the information and use of management, the Town
Council, others within the entity, and federal awarding agencies and pass-through
entities and is not intended to be and should not be used by anyone other than these
specified parties.
Andover, Massachusetts
March 28, 2012
5
TOWN OF WATERTOWN, MASSACHUSETTS
Schedule of Expenditures of Federal Awards
For the Year Ended June 30, 2011
Federal Grantor/ Federal
Pass-Through Grantor/ Catalogue
Program Name Number Expenditures
U.S. Department of Aoriculture
Passed Through the Massachusetts Department of Elementary
and Secondary Education
School Breakfast Program 10.553 $ 41,970
School Lunch Program 10.555 265,125
Total U.S. Department of Agriculture 307,095
U.S. Department of Housing and Urban Development
Passed Through Massachusetts Department of Housing
and Community Development
CDBG-Small Cities 14.228 417
Economic Study Grant 14.251 24,650
Total U.S. Department of Housing and Urban Development 25,067
U.S. Department of Education
Direct
Teaching American History 84.215 6,504
PEP Grant 84.215 129,983
Passed Through the Massachusetts Department of Elementary
and Secondary Education
Title 1 84.010 360,466
AA LEP Support 84.010 21,256
Special Education-Title VIB 84.027 778,304
Occupational Education-Vocational Skills 84.048 28,274
Governors Alliance Against Drugs 84.186 4,990
Title II-Teacher Quality 84.318 86,686
LEP Support 84.365 55,528
Title I-ARRA 84.389 108,422
IDEA-ARRA 84.392 351,752
State Fiscal Stabilization Fund 84.394 15,443
Educational Jobs 84.410 122,796
WTOWN Healthy Youth Program 84.184A 231,849
Passed Through Massachusetts Department of Early Education and Care
Early Childhood 84.173 47,054
Curriculum, Instructions, and Assessment Alignment 84.173 17,721
Early Literacy Gap 84.173 9,955
Early Childhood- IDEA-ARRA 84.392 12,833
Passed Through Massachusetts Executive Office of Public Safety
and Security
State Fiscal Stabilization Fund-Government Services-ARRA 84.397A 237,706
Total U.S. Department of Education 2,627,522
Total Federal Expenditures $ 2,959,684
See Auditors'report on Schedule of Federal Awards.
This schedule is prepared on the modified accrual basis of accounting.
State identifying numbers were not available for the pass-through grants listed above.
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TOWN OF WATERTOWN, MASSACHUSETTS
Schedule of Findings and Questioned Costs
For the Year Ended June 30, 2011
SECTION I - SUMMARY OF AUDITORS' RESULTS
Financial Statements
Type of auditors' report issued: Unqualified
Internal control over financial reporting:
• Material weakness(es) identified? yes ✓ no
• Significant deficiency(ies) identified? yes ✓ none reported
Noncompliance material to financial state-
ments noted? yes ✓ no
Federal Awards
Internal control over major programs:
• Material weakness(es) identified? yes ✓ no
• Significant deficiency(ies) identified? yes ✓ none reported
Type of auditors' report issued on compliance for
major programs:
School Breakfast and Lunch Program Qualified
Title I Cluster Qualified (ARRA program only)
Special Education Cluster Qualified
Any audit findings disclosed that are required
to be reported in accordance with section
510(a) of Circular A-133? ✓ yes no
Identification of major programs:
CFDA Number(s) Name of Federal Proaram or Cluster
10.553/10.555 School Breakfast and Lunch Program
84.010/84.389 Title I Cluster
84.027/84.173/84.392/84.394 Special Education Cluster
Dollar threshold used to distinguish
between type A and type B programs: $ 300,000
Auditee qualified as low-risk auditee? yes ✓ no
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SECTION II - FINANCIAL STATEMENT FINDINGS
None.
SECTION III - FEDERAL AWARDS FINDINGS AND QUESTIONED COSTS
Questioned
Findinq# Program Findinq/Noncompliance Cost
11-1 Title I-ARRA Maintain Emr)lovee's Time and Effort Records $ 101,871
84.389
Criteria:
Special OMB Circular A-87, Attach. B, Paragraph 8.h.3 $0
Education requires all employees paid in full from federal
Cluster grant funds to furnish semi-annual certifications
84.027/84.392 that they have been engaged solely in activities
supported by the grant. These certifications must
School be signed by the employee or supervisor with $0
Breakfast and knowledge of the work performed. In addition,
Lunch OMB Circular 1-87, Attach. B, Paragraph 8.h.4
Programs requires employees partially charged to federal
10.553/10.555 grants to document the portion of time worked on
the grant and the portion of time worked in areas
not related to the grant. Circular A-98 also
requires that the time and effort distribution
records must(1) be done after the fact(not
estimated or budgeted), (2) account for the total
activities for which the employee is paid, (3) be
prepared at least monthly and coincide with one
or more pay periods, and (4) be signed by the
employee.
Condition:
During our audit, we tested a sample of 3 Title I-
ARRA, 3 Special Education, 3 IDEA ARRA, and
12 School Lunch payroll disbursements in order
to determine if adequate time and effort records
were maintained.
As a result of our testing, it was determined that
neither semi-annual nor monthly time and effort
documentation was maintained for the 3 Title I-
ARRA employees.
It was also determined that of the 12 School
Lunch employees tested, that 1 employee
maintained a Time and Effort certification record,
but the record was done on an annual and not
semi-annual basis.
(continued)
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(continued)
Questioned
Finding# Program Finding/Noncompliance Cost
Additionally, of the 3 Special Education and
3 IDEA ARRA employees tested, it was deter-
mined that 2 Special Education and 2 IDEA
ARRA employees maintained Time and Effort
Certification records but the records were done
on an annual and not semi-annual basis.
Effect:
Time and effort documentation did not meet
federal requirements.
Recommendation:
We recommend that semi-annual certifications be
maintained for all employees being paid fully by
grant funds.
Town's response:
The Town is developing, implementing and will
enforce a procedure whereby all employees
whose salaries are funded (either full or partial)
through federal grants will be properly
documented.
SECTION IV - SCHEDULE OF PRIOR YEAR FINDINGS
Findinq# Program Findinq/Noncompliance
10-1 Title I Maintain EmNovee's Time and Effort Records
84.010/84.389
This finding was resolved in the current year for Title 1-84.010
program, however, was unresolved for the Title I-ARRA 84.389,
and is repeated as finding 11-1.
Special This finding was resolved in the current year for the Early
Education Child hood-84.173 program, however, was unresolved for
Cluster Special Education 84.027 and IDEA ARRA 84.392 and is
84.027/84.173/ repeated as finding 11-1.
84.392
Physical This finding was resolved in the current year.
Education
Program
84.215
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