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HomeMy Public PortalAboutManagement Letter June 30, 2002 TOWN OF BREWSTER, MASSACHUSETTS MANAGEMENT LETTER JUNE 30, 2002 R. E . BROWN & COMPANY CERTIFIED PUBLIC ACCOUNTANTS P.O. Box 230 - 25 CEMETERY STREET Mendon, Massachusetts 01756 Phone: (508) 478-3941 Fax: (508) 4784779 To the Honorable Board of Selectmen Town of Brewster, Massachusetts We have audited the general-purpose financial statements of the Town of Brewster, Massachusetts for the year ended June 30, 2002 and have issued our report thereon dated November 19 , 2002 . As part of our audit we reviewed and tested the Town of Brewster's internal control structure. This management letter is critical in nature and does not identify the strengths of the financial systems . Internal control structure refers to the method by which the Town safeguards its assets, utilizes the assets for the purposes intended, insures commitments are made in accordance with Federal, State, and local authorizations, records financial transactions accurately and in a timely manner, and complies with Federal, State and local guidelines, statutes, and by-laws . The purpose of this management letter is to comment on observed internal control structure weaknesses noted during the audit field work; as such, our tests would not necessarily disclose all weaknesses in the system. We have reviewed the contents of this report with the appropriate representatives of the Town. We wish to thank the Town of Brewster officials and their staff for their cooperation while conducting the audit. We will be pleased to discuss the contents of this report and will be available to assist in implementing any suggested changes . This report is intended for the information of the audit committee, management and federal awarding agencies and pass-through entities . However, this report is a matter of public record and its distribution is not limited. Respectfully, X E. J3wwa cC evm p any Certified Public Accountants December 10 , 2001 TOWN OF BREWSTER, MASSACHUSETTS MANAGEMENT LETTER JUNE 305 2002 STATUS OF PRIOR YEAR FINDING — RESOLVED AT YEAR END GOLF DEPARTMENT Finding Although our review of golf internal controls produced satisfactory results, we noted the following issues that should be reviewed: • During most of FY02 the daily starter sheets are not reconciled to the cash register tapes. This internal control was implemented in June FY02 . Prior to June 02 a reconciliation was only done if there was a problem reconciling cash receipts in the cash register to the cash register tape. Recommendations • The daily starter sheets and stubs for greens fees, golf carts and pull carts should be reconciled to the cash register tapes on a periodic basis . The starter sheets and ticket stubs should be retained for a reasonable period. Management Response • In the future the Golf Department will keep the stubs for two (2) weeks at a time (unless the auditors want a longer period of time) . - 1 - TOWN OF BREWSTER, MASSACHUSETTS MANAGEMENT LETTER JUNE 309 2002 STATUS OF PRIOR YEAR FINDING - UNRESOLVED ASSESSORS DEPARTMENT RECONCILIATION OF WATER AND ROAD BETTERMENTS Finding The Assessor' s department maintains detail for betterments outstanding. Periodic reconciliations between the Assessor' s detail and the Town Accountant' s general ledger were not performed during FY 2002 . Recommendation We suggest that the offices prepare monthly detail listing of all betterments receivable and reconcile the list to the Town Accountant's general ledger. The departments should establish a static variance before any adjustments are proposed to the Town Accountant' s general ledger. Management Response We will continue our attempt at reconciling assessor detail with the Town Accountant's general ledger. - 2 - TOWN OF BREWSTER, MASSACHUSETTS MANAGEMENT LETTER JUNE 309 2002 STATUS OF PRIOR YEAR FINDING - UNRESOLVED DEPARTMENT OF PUBLIC WORKS TRANSFER STATION Finding During our review of the transfer station, we noted the following: • There is no cash register system at the transfer station. A computerized cash register system should be developed to record and summarize daily cash activity. The system could also incorporate billing for commercial waste based on weight as classification of tonnage. • The personnel handling cash receipts are not bonded. Recommendation • We recommend that a computerized cash register system be installed at the transfer station. All payments should be processed with the cash (or billing) receipt produced and provided to the customer. • All personnel handling cash receipts should be bonded. Management Response • Our Information Technology Director will investigate a Point of Sale program. Certain cash receipts such as landfill stickers and payments from commercial haulers are not handled or processed by the DPW. Landfill stickers are sold through the mail and commercial haulers are billed on a regular and periodic basis . • Management has reviewed its insurance policy regarding employee dishonesty, and believe that personnel are covered based on the amount of receipts collected. - 3 - TOWN OF BREWSTER, MASSACHUSETTS MANAGEMENT LETTER JUNE 30, 2002 STATUS OF PRIOR YEAR FINDING - RESOLVED DEFICIT NET ASSETS AVAILABLE FOR BENEFITS RISK MANANGMENT POOL - GROUP HEALTH INSURANCE CY Finding The Town of Brewster is a member of the Cape Cod Municipal Health Group, which provides group health insurance benefits for its employees and retirees . The Group ' s financial condition as of June 30 , 2001 (unaudited) indicated net assets available for benefits of approximately $2, 984, 528 . PY Finding The Town of Brewster is a member of the Cape Cod Municipal Health Group, which provides group health insurance benefits for its employees and retirees. The Group ' s financial condition as of June 30, 2001 (unaudited) indicated deficit net assets available for benefits of approximately $ 3 , 636,750 . Recommendation Management should continually monitor the status of the net assets available for benefits and determine appropriate corrective action, when necessary. Management Response The Group ' s Steering Committee and Board of Directors have taken positive steps to address the deficit, primarily by raising the premium rates charged to its insured members . As of December 31 , 2001 , the program is in a surplus balance position of approximately $2,226 , 943 . - 4 - TOWN OF BREWSTER, MASSACHUSETTS MANAGEMENT LETTER JUNE 309 2002 WATER DEPARTMENT RECONCILIATION OF USER FEES RECEIVABLE Finding During our review of the water department, we noted the following : • Water user charges receivable — The Water and Accounting departments reconcile accounts receivable balances on a monthly basis . There is currently a constant historical variance between the Town Accountant' s general ledger and the outstanding detail list at the Water Department. We reccommend that this variance be adjusted to simplify future reconciliations . • A cash register or similar point of sale device is not utilized for accepting payments at the water department. The Water Department collects all water user fees and water service fees . • No formal written procedures manual is in place describing the duties of the personnel and the procedures to be followed. Recommendation • The Water department should reconcile the outstanding detail list to the general ledger on a periodic basis . Any variance or change in a historical variance should be identified and corrected. Once the historical variance remains constant the Town Accountant can consider adjusting to the actual detail. • We recommend that a computerized cash register system be installed at the water department. All payments should be processed with the cash (or billing) receipt produced and provided to the customer. • The Department should establish a policies & procedures manual for for the billing and collection process . Management Response - 5 - TOWN OF BREWSTER, MASSACHUSETTS MANAGEMENT LETTER JUNE 309 2002 GASB #34 AND FIXED ASSETS Finding As with most Massachusetts local governments, the Town does not maintain a General Fixed Asset Account Group . In the past, this has resulted in a qualification paragraph in the auditor' s report. GASB #34 is a new accounting standard for governments that the Town will have to implement in FY03 . GASB #34 requires fixed assets to be recorded as part of the general fund, and any other fund that has these assets . Failure to record material fixed assets will result in an Adverse Opinion in the auditor' s report. GASB #34 also requires a new narrative, "Management Discussion and Analysis", that will precede the financial statements . This narrative has several required disclosures and will be a significant annual undertaking for management. The financial statements reporting model is undergoing a complete restructuring. The Town will have to maintain several spreadsheet crossover work papers to convert the Massachusetts Uniform Municipal Accounting System (LIMAS) to financial statements in conformity with GASB #34 . The footnote disclosure requirements to the financial statements are also changing. This will also require significant attention for compliance. Recommendation We recommend that the Town prepare a comprehensive plan for compliance with the financial and reporting requirements of GASB #34 . Management Response An article appropriation of $ 8 , 000 to implement GASB #34 was authorized by voters at a Special Town Meeting recently. - 6 -