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HomeMy Public PortalAboutBrewster 2010 - Auditor's Report as Required by OMB Circular A-133 and GAS Draft Version as of January 25, 2011DRAFT TOWN OF BREWSTER, MASSACHUSETTS AUDITORS’ REPORT AS REQUIRED BY OMB CIRCULAR A-133 AND GOVERNMENT AUDITING STANDARDS AND RELATED INFORMATION FOR THE YEAR ENDED JUNE 30, 2010 DRAFTTOWN OF BREWSTER, MASSACHUSETTS AUDITORS’ REPORT AS REQUIRED BY OMB CIRCULAR A-133 AND GOVERNMENT AUDITING STANDARDS AND RELATED INFORMATION FOR THE YEAR ENDED JUNE 30, 2010 INDEX PAGE 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 1 – 2 Schedule of Expenditures of Federal Awards 3 Notes to Schedule of Expenditures of Federal Awards 4 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 5 – 6 Schedule of Current Year Findings and Questioned Costs 7 – 10 Summary Schedule of Prior Audit Findings 11 DRAFT R. E. BROWN & COMPANY CERTIFIED PUBLIC ACCOUNTANTS 25 CEMETERY STREET – P.O. Box 230 Mendon, Massachusetts 01756 Phone: (508) 478-3941 Fax: (508) 478-1779 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 Honorable Board of Selectmen Town of Brewster, Massachusetts Compliance We have audited Town of Brewster, Massachusetts’ compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of the Town of Brewster, Massachusetts’ major federal award programs for the year ended June 30, 2010. The Town of Brewster, Massachusetts’ major federal programs are identified in the summary of auditor’s 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 of Brewster, Massachusetts’ management. Our responsibility is to express an opinion on the Town of Brewster, Massachusetts’ 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. 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 of Brewster, Massachusetts’ 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 of Brewster, Massachusetts’ compliance with those requirements. In our opinion, the Town of Brewster, Massachusetts complied, in all material respects, with the compliance 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, 2010. However, the results of our auditing procedures disclosed instances of noncompliance with those requirements, which are required to be reported in accordance with OMB Circular A- 133 and which are described in the accompanying schedule of findings and questioned costs as items, 2010-1 and 2010-2. DRAFTInternal Control Over Compliance Management of the Town of Brewster, Massachusetts 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 of Brewster, Massachusetts’ internal control over compliance with the requirements that could have a direct and material effect on a major federal program to determine the auditing procedures for the purpose of expressing our opinion on compliance, 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 of Brewster, Massachusetts’ 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 normal 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 deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility the material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected or 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. The Town of Brewster Massachusetts’ responses to the findings indentified in our audit are described in the accompanying schedule of findings and questioned costs. We did not audit the Town of Brewster, Massachusetts’ responses and, accordingly, we express no opinion on the responses. This report is intended solely for the information and use of management, the Board of Selectmen, 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. Schedule of Expenditures of Federal Awards We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Town of Brewster, Massachusetts , as of and for the year ended June 30, 2010, and have issued our report thereon dated December 21, 2010 . Our audit was performed for the purpose of forming our opinions on the financial statements that collectively comprise the Town of Brewster, Massachusetts’ 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. R. E. Brown & Company December 21, 2010 - 2 - DRAFTSEE ACCOMPANYING NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS - 3 - TOWN OF BREWSTER, MASSACHUSETTS SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2010 GRANTOR/ PASS-THROUGH FEDERAL ENTITY PROGRAM GRANTOR/PASS-THOUGH GRANTOR/PROGRAM OR CFDA IDENTIFYING FEDERAL CLUSTER TITLE NUMBER NUMBER EXPENDITURES U.S. DEPARTMENT OF EDUCATION PASS-THROUGH PROGRAMS FROM: COMMONWEALTH OF MASSACHUSETTS - DEPARTMENT OF EDUCATION ARRA - IDEA STIMULUS GRANT 84.391 760-197-0-0041-K 40,355 TOTAL U.S DEPARTMENT OF EDUCATION 40,355 U.S. DEPARTMENT OF AGRICULTURE PASS-THROUGH PROGRAMS FROM: COMMONWEALTH OF MASSACHUSETTS - DEPARTMENT OF EDUCATION - BUREAU OF NUTRITION SCHOOL BREAKFAST 10.553 01-141 8,248 NATIONAL SCHOOL LUNCH PROGRAM 10.555 01-141 57,060 TOTAL U.S. DEPARTMENT OF AGRICULTURE 65,308 U.S. DEPARTMENT OF COMMERCE DIRECT PROGRAM - NATIONAL OCEANIC & ATMOSPHERIC ADMINISTRATION ARRA - HABITAT CONSERVATION 11.463 NA09NMF4630301 309,884 TOTAL U.S. DEPARTMENT OF HOMELAND SECURITY 309,884 U.S. ENVIRONMENTAL PROTECTION AGENCY PASS-THROUGH PROGRAM FROMS: MASSACHUSETTS DEPARTMENT OF ENVIRONMENTAL PROTECTION PERFORMANCE PARTNERSHIP GRANT 66.605 PROJECT #2008-01/319 224,580 ARRA - WATER QUALITY MANAGEMENT PLANNING 66.454 PROJECT #2009-03/604 50,061 TOTAL U.S. ENVIRONMENTAL PROTECTION AGENCY 274,641 TOTAL EXPENDITURES OF FEDERAL AWARDS 690,188$ DRAFTTOWN OF BREWSTER, MASSACHUSETTS NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2010 I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Accounting policies and financial reporting practices permitted for municipalities in Massachusetts are prescribed by the Uniform Municipal Accounting System (UMAS) promulgated by the Commonwealth of Massachusetts Department of Revenue. The significant accounting policies followed by the Town are as follows: A. Basis of Presentation The accompanying Schedule of Expenditures of Federal Awards includes the Federal grant transactions of the Town. The receipts and proceeds from Federal grants are recorded on the modified accrual basis whereby revenue is recognized when it becomes available and measurable. Disbursements of Federal grant funds are recorded on the accrual basis. II. SCOPE OF AUDIT The Town of Brewster, Massachusetts (the Town) is a governmental agency established by the laws of the Commonwealth of Massachusetts. All operations related to the Town's Federal grant programs, (the Department of Agriculture, Department of Education, Department of Environmental Protection, and Department of Transportation), are included in the scope of the OMB Circular A-133 Audit Requirements for audits of state and local governments (the Single Audit). The U.S. Department of Commerce – National Oceanic and Atmospheric Administration has been designated as the Town's oversight agency for the Single Audit. III. PERIOD AUDITED Single audit testing procedures were performed for Town Federal grant transactions during the year ended June 30, 2010. IV. SCHOOL LUNCH PROGRAM The Town accounts for local, state and federal expenditures of the National School Lunch program in one combined fund. Program expenditures in the accompanying Schedule of Expenditures of Federal Awards represent federal reimbursements for meals provided during fiscal 2010. Non-cash contributions of commodities under the Food Distribution program are received under a State distribution formula and are valued at federally published wholesale prices for purposes of this schedule. V. SUBRECIPIENTS The Town of Brewster, Massachusetts passed no federal awards through to sub-recipients during the period under audit. - 4 - DRAFTR. E. BROWN & COMPANY CERTIFIED PUBLIC ACCOUNTANTS 25 CEMETERY STREET – P.O. Box 230 Mendon, Massachusetts 01756 Phone: (508) 478-3941 Fax: (508) 478-1779 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 Honorable Board of Selectmen Town of Brewster, Massachusetts We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Town of Brewster, Massachusetts, as of and for the year ended June 30, 2010, which collectively comprise the Town of Brewster, Massachusetts’ basic financial statements and have issued our report thereon dated December 21, 2010. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Internal Control Over Financial Reporting In planning and performing our audit, we considered the Town of Brewster, Massachusetts’ internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Town of Brewster, Massachusetts’ internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Town of Brewster, Massachusetts’ 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 control, such that there is a reasonable possibility that a material misstatement of the Town of Brewster, Massachusetts’ financial statements will not be prevented, or detected or corrected on a timely basis. Our consideration of internal control over financial reporting 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 financial reporting that might be deficiencies, 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. - 5 - DRAFTCompliance and Other Matters As part of obtaining reasonable assurance about whether the Town of Brewster, Massachusetts’ financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance 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 instances of noncompliance or other matters that are required to be reported under Government Auditing Standards and which are described in the accompanying schedule of findings and questioned costs as items 2010-1 and 2010-2. We noted certain matters that we reported to management of the Town of Brewster, Massachusetts in a separate letter dated December 21, 2010. The Town of Brewster Massachusetts’ responses to the findings indentified in our audit are described in the accompanying schedule of findings and questioned costs. We did not audit the Town of Brewster, Massachusetts’ responses and, accordingly, we express no opinion on the responses. This report is intended solely for the information and use of management, the Board of Selectmen, 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. R. E. Brown & Company December 21, 2010 - 6 - DRAFTTOWN OF BREWSTER, MASSACHUSETTS SCHEDULE OF CURRENT YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2010 A. SUMMARY OF AUDITOR’S RESULTS 1. The auditor’s report expresses an unqualified opinion on the basic financial statements of the Town of Brewster, Massachusetts. 2. No significant deficiencies relating to the audit of the basic financial statements are reported in the report on the basic financial statements. 3. No instances of noncompliance material to the basic financial statements of the Town of Brewster, Massachusetts were disclosed during the audit. 4. No significant deficiencies relating to the audit of major federal award programs are reported in the report on compliance with requirements applicable to each major program and on internal control over compliance in accordance with OMB Circular A-133. 5. The auditor’s report on compliance for the major federal award programs for the Town of Brewster, Massachusetts expresses an unqualified opinion on all major federal programs. 6. Audit findings relating to the major federal award programs for the Town of Brewster, Massachusetts are described in Note C on the following pages. 7. The programs tested as major programs included: Name CFDA No. ARRA - Habitat Conservation Grant 11.463 Performance Partnership Grant 66.605 8. The threshold used for distinguishing between Type A and B programs was $300,000. 9. The Town of Brewster, Massachusetts did not qualify as a low-risk auditee. B. FINDINGS – BASIC FINANCIAL STATEMENT AUDIT – NONE. - 7 - DRAFTC. FINDINGS AND QUESTIONED COSTS – MAJOR FEDERAL AWARD PROGRAMS AUDIT Environmental Protection Agency Finding 2010-1: Performance Partnership Grant – CFDA No. 66.605 – Grant period: Year Ended June 30, 2010 Condition: In two instances, the Town received reimbursements from the Massachusetts Department of Environmental Protection (DEP) [as the pass-through agency] in excess of actual expenditures recorded in the accounting system for this grant. The following table analyzes how the requests for reimbursement exceeded actual expenditures recorded to the grant: Invoice Amount Town's Match Federal Allocation Applied for in Reimbursement Request Federal Reimbursements in excess of Federal Cost Allocation 18,957.98$ 18,957.98$ -$ 11,374.79$ (11,374.79)$ 160,550.00 160,550.00 - 96,330.00 (96,330.00) 120,412.50 7,050.00 113,362.50 72,247.50 41,115.00 35,778.98 - 35,778.98 21,466.91 14,312.07 Subtotal - Request #1 335,699.46$ 186,557.98$ 149,141.48$ 201,419.20$ (52,277.72)$ Invoice Amount Town's Match Federal Allocation Applied for in Reimbursement Request Amount of Federal Reimbursements in excess of Federal Cost Allocation 97,338.89$ 36,212.00$ 61,126.89$ 61,126.89$ -$ 41,566.35 41,566.35 - - - 20,829.00 20,829.00 - - - 27,192.14 27,192.14 - 27,192.14 (27,192.14) Subtotal - Request #3 186,926.38$ 125,799.49$ 61,126.89$ 88,319.03$ (27,192.14)$ Total Requests 522,625.84$ 312,357.47$ 210,268.37$ 289,738.23$ (79,469.86)$ Request for Reimbursement #3 - Submitted 7/14/2010 Request for Reimbursement #1 - submitted January 14, 2010 Criteria: A cost is allowable for Federal reimbursement only to the extent of benefits received by Federal awards and its conformance with the general policies and principles stated in OMB Circular A-87, Attachment A. Effect: Federal pass-through grant reimbursements were in excess of actual program expenditures recorded in the Town’s accounting system. The Town of Brewster received federal reimbursements for costs which were also reimbursed from a non-federal source (Massachusetts Highway Department: Chapter 90 Funds). Questioned Costs: $79,469.86 - 8 - DRAFTFINDINGS AND QUESTIONED COSTS – MAJOR FEDERAL AWARD PROGRAMS AUDIT Environmental Protection Agency Finding 2010-1: Performance Partnership Grant – CFDA No. 66.605 – Grant period: Year Ended June 30, 2010 – (continued) Cause: Management did not adequately review or monitor its requests for reimbursement to ensure accuracy and that only those costs which were reimbursable under the program were not already reimbursed under another funding source. Recommendation: We recommend that management closely review and monitor the preparation of all requests for reimbursement to ensure accuracy and that only those costs attributable to the federal reimbursement are reported on the request. Management’s Response: Management will comply with the Auditors Recommendations. - 9 - DRAFTC. FINDINGS AND QUESTIONED COSTS – MAJOR FEDERAL AWARD PROGRAMS AUDIT Environmental Protection Agency Finding 2010-2: Performance Partnership Grant – CFDA No. 66.605 – Grant period: Year Ended June 30, 2010 Condition: One of the three requests for reimbursement was submitted prior to paying for costs with Town funds. Criteria: Treasury regulations at 31 CFR part 205 requires that when entities are funded on a reimbursement basis, program costs must be paid for by entity funds before reimbursement is requested from the federal government through the pass-through agency. Effect: Advances of funds may result in interest being earned. Interest earned may be in excess of Treasury limits which would need to be returned to Treasury. Questioned Costs: None Cause: Management did not adequately review or monitor its requests for reimbursement to ensure that costs were paid with Town funds prior to submitting the request for reimbursement. Recommendation: We recommend that management closely review and monitor the preparation of all requests for reimbursement to ensure accuracy and that costs for which reimbursement is requested have been paid with Town funds prior to submitting the request. Management’s Response: Management will comply with the Auditors Recommendations. - 10 - DRAFTTOWN OF BREWSTER, MASSACHUSETTS SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS YEAR ENDED JUNE 30, 2010 The Town of Brewster, Massachusetts was not subject to the requirements of OMB Circular A-133 for the year ended June 30, 2009 as it did not expend at least $500,000 in federal awards. Consequently, there were no uncorrected prior year findings that affect the current audit. - 11 -