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Home My Public Portal AboutWatertown, MA SA11 Final 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. 6 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 7 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) 8 (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 9