HomeMy Public PortalAboutBrewster 2017 Communication of Internal Controls Related Matters
TOWN OF BREWSTER, MASSACHUSETTS
COMMUNICATION OF INTERNAL CONTROL
RELATED MATTERS
JUNE 30, 2017
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
To the Honorable Board of Selectmen
Town of Brewster, Massachusetts
In planning and performing our audit of the basic financial statements of the Town of Brewster,
Massachusetts, as of and for the fiscal year ended June 30, 2017, in accordance with auditing
standards generally accepted in the United States of America, we considered the Town’s internal
control over financial reporting (internal control) as a basis for designing our audit procedures
for the purpose of expressing an opinion on the financial statements, but not for the purpose 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.
Our consideration of internal control was for the limited purpose described in the preceding
paragraph and was not designed to identify all deficiencies in internal control that might be
significant deficiencies or material weaknesses and therefore, there can be no assurance that all
deficiencies, significant deficiencies, or material weakness have been identified. However, as
discussed below, we identified deficiencies in internal controls that we consider to be a material
weakness and a significant deficiency.
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 in a timely basis. We consider the following deficiencies in the Town’s
internal controls noted on pages 2- 3 to be a material weakness and a significant deficiency.
This communication is intended solely for the information and use of management, the Board of
Selectmen, and the Commonwealth of Massachusetts and is not intended to be and should not be
used by anyone other than the specified parties.
Respectfully,
Certified Public Accountants
March 7, 2018
TOWN OF BREWSTER, MASSACHUSETTS
COMMUNICATION OF INTERNAL CONTROL RELATED MATTERS
JUNE 30, 2017
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MATERIAL WEAKNESS IN INTERNAL CONTROLS
INTERDEPARTMENTAL RECONCILIATION OF WATER ACCOUNTS RECEIVABLE
Finding
The water accounts receivable balance and monthly activity maintained by the Water Department
was not reconciled to the general ledger on a monthly and timely basis. As a result of the above
deficiency, there was a significant water receivable variance between the Water Department and
the Town Accountants general ledger balances at year-end. At year end, journal entry adjustments
were made to the general ledger to agree with Water Department balances.
We have concluded that this control deficiency represents a material weakness in internal controls.
Recommendation
The reconciliation of accounts receivable is a very important internal control. The Water
Department’s receivable report balances and activity must be reconciled to the Town Accountant’s
general ledger receivable balance on a monthly basis and in a timely manner.
Managements Response
The Town concurs with the auditors finding. In prior years, the general ledger didn’t reconcile with
the outstanding aging reports at year end; therefore a journal entry was made. The Town
Accounting office has been working directly with the Water Department to reconcile accounts
receivable on a monthly basis. We will continue to work collaboratively on timing of commitments
and aging reports.
TOWN OF BREWSTER, MASSACHUSETTS
COMMUNICATION OF INTERNAL CONTROL RELATED MATTERS
JUNE 30, 2017
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SIGNIFICANT DEFICIENCY IN INTERNAL CONTROLS
RECONCILIATION OF REVENUE AND EXPENSES SUBSIDIARIES
Finding
The revenue and expense subsidiaries for the various funds were not reconciled to the general
ledger revenue and expense control balances on a monthly and timely basis. As a result of the
above deficiency, there were variances between the various subsidiary ledgers and the related
general ledger control accounts. At year end, several significant journal entry adjustments were
made to reclassify the variances in the various funds and the general fund. Upon analysis, we have
proposed several adjustments to these year-end journal entries.
We have concluded that this control deficiency represents a significant deficiency in internal
controls.
Recommendation
The reconciliation of the revenue and expense subsidiaries to the general ledger control accounts is
a very important internal control. The revenue and expense subsidiaries must be reconciled to the
related revenue and expenditure control balances on a monthly basis and in a timely manner.
Managements Response
The Town concurs with the auditor’s finding. We have begun to reconcile the subsidiary accounts
to the general ledger accounts as of January 2018 and will continue to do so on a monthly basis
going forward. This process has already identified several broken links within the chart of accounts
which are being updated to be in accordance with Uniform Massachusetts Accounting Standards.
TOWN OF BREWSTER, MASSACHUSETTS
COMMUNICATION OF INTERNAL CONTROL RELATED MATTERS
JUNE 30, 2017
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Statement on Audit Standards #115 - Definitions:
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 significant deficiency - is a deficiency, or a combination of deficiencies, in internal control that is
less severe than a material weakness, yet important enough to merit attention by those charged with
governance (Must be communicated in writing).
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 in a timely basis (Must be communicated in writing).