HomeMy Public PortalAbout05-31-2012 Management Letter TOWN OF WATERTOWN, MASSACHUSETTS
Management Letter
For the Year Ended June 30, 2011
TABLE OF CONTENTS
PAGE
INTRODUCTORY LETTER 1
STATUS OF PRIOR YEAR RECOMMENDATIONS:
1. Improve Compensated Absences Accounting 3
2. Establish Receivable Write-Off Policy 3
3. Improve Accounting and Monitor Activity over the Police
Detail Agency Fund 4
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.melamonheath.com
To the Town Manager and Town Council
Town of Watertown
Watertown, Massachusetts
In planning and performing our audit of the financial statements of the Town of
Watertown, Massachusetts as of and for the year ended June 30, 2011, in accord-
ance with auditing standards generally accepted in the United States of America,
we considered the Town of Watertown's internal accounting control over financial
reporting (internal control) as a basis for designing our auditing procedures for the
purpose of expressing our opinion on the financial statements, but not for the pur-
pose of expressing an opinion on the effectiveness of the Town's internal control.
Accordingly, we do not express an opinion on the effectiveness of the Town's
internal control.
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
control, 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.
Our consideration of internal control was for the limited purpose described in the
first paragraph and was not designed to identify all deficiencies in internal control
that might be deficiencies, significant deficiencies, or material weaknesses. In addi-
tion, because of the inherent limitation in internal control, including the possibility of
management's override of controls, misstatements due to error or fraud may occur
and not be detected by such controls. We did not identify any deficiencies in internal
control that we consider to be material weaknesses.
Additional Offices:
Greenfield,MA• Ellsworth,ME• Nashua,NH• Manchester,NH
During our audit we became aware of several other matters that we believe repre-
sent opportunities for strengthening internal controls and operating efficiency. The
recommendations that accompany this letter summarize our comments and sugges-
tions concerning those matters.
This communication is intended solely for the information and use of management,
Town Manager and Town Council, others within the organization, and is not intended
to be and should not be used by anyone other than these specified parties.
After you have had an opportunity to consider our comments and recommendations,
we would be pleased to discuss them with you.
Andover, Massachusetts
March 28, 2012
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STATUS OF PRIOR YEAR RECOMMENDATIONS:
1. Improve Compensated Absences Accountinq,
Prior Year Issue:
In prior years, we recommended that the Town centralize and automate the
accounting for employee compensated absences.
Current Year Status:
The Town and School Department continue to maintain compensated
absence records on separate systems that are not integrated with the Town's
payroll systems. For the fiscal 2011 audit, the Town was not able to produce
the June 30, 2011 compensated absence reports as of the completion of our
audit fieldwork in March 2012. As a result the fiscal 2011 financial statements
reflect estimated amounts for compensated absence liabilities based on prior
year compiled amounts. This issue has contributed to delays in completing
the annual audit.
Further Action Needed:
We continue to recommend that the Town and School Department integrate
the accounting for employee compensated absences in the MUNIS System
in order to increase efficiency, provide improved controls, and create a better
audit trail. This will improve accountability over the compensated absence
liability and will help accelerate the year-end audit process.
2. Establish Receivable Write-Off Policv
Prior Year Issue:
In prior years, we recommended that the Town develop a formal write-off
policy for all departmental receivables. This would result in more standard-
ized practices throughout the Town.
Current Year Status:
This recommendation has not been implemented.
Further Action Needed:
We continue to recommend that the Town implement a policy for the write-off
of uncollectible ice rink, police detail, and other miscellaneous receivables.
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3. Improve Accountinq and Monitor Activitv over the Police Detail
Aqencv Fund
Prior Year Issue:
In the prior year, we recommended the Town establish a police detail receiv-
able account in the general ledger and reconcile it to the Police Department
records. The cash basis deficit fund balance should be added to the collect-
able receivable amounts to determine whether a true fund deficit exists. If a
true deficit exists, an analysis should be performed to identify the cause and
determine a corrective action plan.
Current Year Status:
No receivable account was established in the general ledger.
Further Action Needed:
We continue to recommend that a receivable account be established in the
general ledger and that it be reconciled to the Police Department.
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