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HomeMy WebLinkAboutAuditors Reports - 1987r �g e4 cad Certified Public Accountants TOWN OF MANSFIELD, MASSACHUSETTS Schedule of Federal Financial Assistance and Auditors' Reports Required under the Single Audit Act of 1984 Year Ended June 30, 1987 TOWN OF MANSFIELD, MASSACHUSETTS Schedule of Federal Financial Assistance and Auditors' Reports Required under the Single Audit Act of 1984 Year Ended June 30, 1987 Table of Contents Independent Auditors' Report on Schedule of Federal Financial Assistance Exhibit I Schedule of Federal Financial Assistance Exhibit II Independent Auditors' Report Based on Compliance at the General Purpose Financial Statement Level Exhibit III Independent Auditors' Report on Compliance with Laws and Regulations Related to Major and Nonmajor Federal Financial Assistance Programs Exhibit IV Combined Independent Auditors' Report on Internal Accounting and Administrative Controls at the General Purpose Financial Statement Level and the Federal Financial Assistance Program Level Exhibit V Comments and Recommendations of a Nonmaterial Nature Exhibit VI Schedule of Findings Exhibit VII Status of Prior Year Findings Exhibit VIII IM Peat Marwick Certified Public Accountants Peat Marwick Main & Co. One Boston Place Telephone 617 723 7700 Boston, MA 02108 Telex 617 443 0082 PMMBOST Exhibit I Telecopier 617 723 6864 INDEPENDENT AUDITORS' REPORT ON SCHEDULE OF FEDERAL FINANCIAL ASSISTANCE The Board of Selectmen Town of Mansfield, Massachusetts: We have audited the general purpose financial statements of the Town of Mansfield, Massachusetts, for the year ended June 30, 1987, and have issued our report thereon dated June 24, 1988. These general purpose financial statements are the responsibility of the Town's management. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and the standards for financial audits contained in the Standards for Audit of Governmental Organizations, Programs, Activities, and Functions; issued by the U.S. General Accounting Office. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement and whether management has complied with laws and regulations and has established and maintained a system of internal controls. An audit in accordance with these standards includes examining, on a test basis, evidence supporting the amounts and disclosures in the general purpose financial statements and compliance with laws and regulations. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Our audit was made for the purpose of forming an opinion on the general purpose financial statements of the Town of Mansfield, Massachusetts, taken as a whole. The supplementary information included in the accompanying schedule of federal financial assistance is presented for purposes of additional analysis and is not a required part of the general purpose financial statements. Such supplementary information has been subjected to the auditing procedures applied in the audit of the general purpose financial statements and, in our opinion, is fairly stated in all material respects in relation to the general purpose financial statements taken as a whole. June 24, 1988 I - 1 Exhibit II TOWN OF MANSFIELD, MASSACHUSETTS Schedule of Federal Financial Assistance June 30, 1987 Federal Federal Grantor/Pass-Through Grantor/ CFDA Program Title Number Expenditures U.S. Department of the Treasury State and Local Government Fiscal Assistance - General Revenue Sharing 21.300 $ 235,785 U.S. Department of Agriculture Pass -through State Department of Education: School Lunch Program 10.555 258,541 U.S. Department of Education Pass -through State Department of Education: ECIA Chapter I 84.010 77,373 Project Assistance VIII 84.027 101,910 Speech/Language Assist II 84.027 11,373 ECIA Chapter 2 84.151 8,057 Early Childhood Allocation Program 84.027 10,541 Computer Assistance Instruction for Special Education Students 84.027 1,113 Total U.S. Department of Education 210,367 U.S. Department of Transportation Airport Development Aid Program: Master plan 20.102 27,800 MIRL 20.102 5,073 Total Federal Aviation Administration 32,873 Environmental Protection Agency Construction Reimbursement - Wastewater 66.418 1,780,870 Total federal financial assistance $ 2.518.436 See notes to schedule of federal financial assistance. Exhibit II (Continued) TOWN OF MANSFIELD, MASSACHUSETTS Note to Schedule of Federal Financial Assistance June 30, 1987 (1) Definition of Reporting Entity The accompanying schedule of federal financial assistance presents the activity of all federal financial assistance programs of the Town of Mansfield, Massachusetts. The Town reporting entity is defined in note 1 to the Town's general purpose financial statements. All federal financial assistance received directly from federal agencies as well as federal financial assistance passed through other government agencies are included on the schedule. (2) Summary of Significant Accounting Policies The accounting and reporting policies of the Town of Mansfield, Massachusetts are set forth below: (a) Basis of Presentation The accompanying schedule of federal financial assistance is presented using the modified accrual basis of accounting, which is described in note 2 to the Town's general purpose financial statements. (b) School Lunch Program Program expenditures for the National School Lunch program represents federal reimbursement for meals provided during the year. (c) Food Distribution Program 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. (3) Relationship to General Purpose Financial Statements Federal financial assistance are reported in the Town's general purpose financial statements as follows: Special Revenue Fund: Revenue Sharing $ 235,785 School Lunch Program Reimbursements 258,541 Other Federal Grants 243,240 Total Special Revenue Fund 737,566 Capital Projects Fund: Wastewater Treatment Works 1,780,870 Total federal financial Assistance $ 518.436 II - 2 Exhibit III )W Peat Marwick Certified Public Accountants Peat Marwick Main & Co. One Boston Place Boston, MA 02108 The Board of Selectmen Town of Mansfield, Massachusetts: Telephone 617 723 7700 Telex 617 443 0082 PMMBOST Telecopier 617 723 6864 We have audited the general purpose financial statements of the Town of Mansfield, Massachusetts, for the year ended June 30, 1987, and have issued our report thereon dated June 24, 1988. These general purpose financial statements are the responsibility of the Town's management. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and the standards for financial audits contained in the Standards for Audit of Governmental Organizations, Programs, Activities, and Functions; issued by the U.S. General Accounting Office. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement and whether management has complied with laws and regulations and has established and maintained a system of internal controls. An audit in accordance with these standards includes examining, on a test basis, evidence supporting the amounts and disclosures in the general purpose financial statements and compliance with laws and regulations. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The management of the Town of Mansfield, Massachusetts, is responsible for the Town's compliance with laws and regulations. In connection with the audit referred to above, we selected and tested transactions and records to determine the Town's compliance with those laws and regulations for which noncompliance could have a material effect on the Town's general purpose financial statements. Member Firmof Exhibit III IM Peat Marwick (Continued) The Board of Selectmen Town of Mansfield, Massachusetts Page Two The results of our tests indicate that for the transactions and records tested the Town of Mansfield, Massachusetts, complied with those laws and regulations for which noncompliance could have a material effect on the Town's general purpose financial statements. With respect to the transactions and records that were not tested by us, nothing came to our attention to indicate that the Town of Mansfield, Massachusetts, had not complied with laws and regulations. \, a VZ-1 k (,4--1 June 24, 1988 Certified Public Accountants Peat Marwick Main & Co. One Boston Place Telephone 617 723 7700 Boston, MA 02108 Telex 617 443 0082 PMMBOST The Board of Selectmen Town of Mansfield, Massachusetts: Exhibit IV Telecopier 617 723 6864 We have audited the general purpose financial statements of the Town of Mansfield, Massachusetts, for the year ended June 30, 1987, and have issued our report thereon dated June 24, 1988. These general purpose financial statements are the responsibility of the Town's management. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and the standards for financial audits contained in the Standards for Audit of Governmental Organizations Programs Activities and Functions; issued by the U.S. General Accounting Office; the Single Audit Act of 1984; and the provisions of OMB Circular A-128, Audits of State and Local Governments. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement and whether management has complied with laws and regulations and has established and maintained a system of internal controls. An audit in accordance with these standards includes examining, on a test basis, evidence supporting the amounts and disclosures in the general purpose financial statements and compliance with laws and regulations. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The management of the Town of Mansfield, Massachusetts, is also responsible for the Town's compliance with laws and regulations. In connection with the audit referred to above, we selected and tested transactions and records from each major federal financial assistance program and certain nonmajor federal financial assistance programs. The purpose of our testing of transactions and records from those federal financial assistance programs was to obtain reasonable assurance that the Town of Mansfield, Massachusetts, had, in all material respects, administered its major programs and executed the tested nonmajor program transactions in compliance with those laws and regulations for which noncompliance could have a material effect on the allowability of program expenditures. Such laws and regulations include those pertaining to federal financial reports and claims for advances and reimbursements. IV- 1 Peat Marwick The Board of Selectmen Town of Mansfield, Massachusetts Page Two Our testing of transactions and records assistance programs disclosed instances regulations. Exhibit IV (Continued) selected from major federal financial of noncompliance with certain laws and All instances of noncompliance that we found, and the programs to which they relate, are identified in the accompanying schedule of findings, the ultimate resolution of which cannot presently be determined. Accordingly, no provision for any liability that may result upon resolution has been made to the federal financial assistance programs to which they relate. In our opinion, the Town of Mansfield, Massachusetts, administered each of its major federal financial assistance programs in compliance, in all material respects, with those laws and regulations for which noncompliance could have a material effect on the allowability of program expenditures for the year ended June 30, 1987. The results of our testing of transactions and records selected from nonmajor federal financial assistance programs indicate that for the transactions and records tested the Town of Mansfield, Massachusetts, complied with the laws and regulations referred to in the third paragraph of our report, except as described in the accompanying schedule of findings. Our testing was more limited than would be necessary to express an opinion on whether the Town of Mansfield, Massachusetts, administered those programs in compliance, in all material respects, with those laws and regulations for which noncompliance could have a material effect on the allowability of program expenditures. With respect to the transactions and records that were not tested by us, nothing came to our attention to indicate that the Town of Mansfield, Massachusetts, had not complied with laws and regulations other than those laws and regulations for which we noted violations in our testing referred to above. June 24, 1988 IV-2 )W Peat Marwick Exhibit V Certified Public Accountants Peat Marwick Main & Co. One Boston Place Telephone 617 723 7700 Telecopier 617 723 6864 Boston, MA 02108 Telex 617 4430082 PMMBOST COMBINED INDEPENDENT AUDITORS' REPORT ON INTERNAL ACCOUNTING AND ADMINISTRATIVE CONTROLS AT THE GENERAL PURPOSE FINANCIAL STATEMENT LEVEL AND THE FEDERAL FINANCIAL ASSISTANCE PROGRAM LEVEL The Board of Selectmen Town of Mansfield, Massachusetts: We have audited the general purpose financial statements of the Town of Mansfield, Massachusetts, for the year ended June 30, 1987, and have issued our report thereon dated June 24, 1988. These general purpose financial statements are the responsibility of the Town's management. Our responsibility is to express an opinion on these general purpose financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and the standards for financial audits contained in the Standards for Audit of Governmental Organizations, Programs, Activities, and Functions, issued by the U.S. General Accounting Office; the Single Audit Act of 1984; and the provisions of OMB Circular A-128, Audits of State and Local Governments. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements and whether management has complied with laws and regulations and has established and maintained a system of internal controls. An audit in accordance with these standards includes examining, on a test basis, evidence supporting the amounts and disclosures in the general purpose financial statements and compliance with laws and regulations. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. For purposes of this report, we have classified the significant internal accounting and administrative controls in the following categories: • Accounting Controls: - Revenue/receipts - Purchasing/disbursements - Payroll V - 1 Memberrinol Klynveld Peal Marwick Goerdeler Peat Marwick The Board of Selectmen Town of Mansfield, Massachusetts Page Two • Administrative Controls: General Requirements: - Political Activity - Davis Bacon Act - Civil Rights - Cash Management - Relocation Assistance and Real Property Acquisition - Federal Financial Reports Specific Requirements: - Types of Services - Eligibility of Costs - Matching Level of Efforts - Reporting - Special Requirements Exhibit V (Continued) Our study and evaluation included all of the applicable control categories listed above. The management of the Town of Mansfield, Massachusetts, is responsible for establishing and maintaining the internal control systems. In fulfilling that responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of control procedures. The objectives of internal control systems are to provide management with reasonable, but not absolute, assurance that, with respect to federal financial assistance programs, resource use is consistent with laws, regulations, and policies; resources are safeguarded against waste, loss, and misuse; and that transactions are executed in accordance with management's authorization; that data are obtained, recorded and maintained properly to permit the preparation of financial statements in accordance with generally accepted accounting principles and the preparation of federal reports in accordance with federal requirements. Because of inherent limitations in any system of internal accounting control, errors or irregularities may nevertheless occur and not be detected. Also, projection of any evaluation of the system to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the degree of compliance with the procedures may deteriorate. During the year ended June 30, 1987, the Town of Mansfield, Massachusetts expended 71% of its total federal financial assistance under major federal financial assistance programs. With respect to internal control systems used in administering major federal financial assistance programs, our study and evaluation included considering the types of errors and irregularities that could occur, determining the internal control procedures that should prevent or detect such errors and irregularities, determining whether necessary procedures are prescribed and are being followed satisfactorily, and evaluating any weaknesses. V - 2 Exhibit V Peat Marwick (Continued) The Board of Selectmen Town of Mansfield, Massachusetts Page Three With respect to the internal control systems used in administering the nonmajor federal financial assistance programs of the Town of Mansfield, Massachusetts, our study and evaluation was limited to a preliminary review of the systems to obtain an understanding of the control environment and the flow of transactions through the accounting system. Accordingly, our audit would not necessarily disclose all material weaknesses in the internal control systems used in administering nonmajor federal financial assistance programs. Our study and evaluation described above, was more limited than would be necessary to express an opinion on the internal control systems of the Town of Mansfield, Massachusetts. Accordingly, we do not express an opinion on the internal control systems of the Town of Mansfield, Massachusetts, taken as a whole, or on any of the control categories identified above. However, our study and evaluation and our audit disclosed the following conditions that we believe result in more than a relatively low risk that errors or irregularities in amounts that would be material to the general purpose financial statements or to a major federal financial assistance programs of the Town of Mansfield, Massachusetts may occur and not be detected within a timely period. There was an overall lack of accounting control in the Town Accountant's department during fiscal year 1987. The financial and managerial problems have arisen from: • an accounting system which was without a Town Accountant or accountant with sufficient knowledge for much of the year; • financial personnel who are not adequately supervised; • failure to perform routine financial control procedures such as reconciliations between subsidiary records and control accounts; and • an overall lack of policies and procedures to document financial activities which routinely occur within the Town. The conditions outlined above indicate the lack of a basic control environment and call into question the integrity of financial information. V - 3 Exhibit V Peat Marwick (continued) The Board of Selectmen Town of Mansfield, Massachusetts Page Four The conditions described in the preceding paragraphs were considered in determining the nature, timing and extent of the audit tests to be applied in (1) our audit of the 1987 general purpose financial statements and (2) our audit and review of the Town's compliance with those laws and regulations for which noncompliance could have a material effect on the allowability of program expenditures. This report does not affect our reports on the general purpose financial statements and on the Town's compliance with laws and regulations dated June 24, 1988. This report is intended solely for the use of management and the Department of Agriculture and should not be used for any other purpose. This restriction is not intended to limit the distribution of this report, which, upon acceptance by the Town of Mansfield, Massachusetts, is a matter of public record. June 24, 1988 V - 4 TOWN OF MANSFIELD, MASSACHUSETTS COMMENTS AND RECOMMENDATIONS OF A NONMATERIAL NATURE CASH MANAGEMENT Bank Reconciliations Exhibit VI One important purpose of the general ledger is to maintain an independent control over the accuracy and completeness of accounting records and to summarize financial activity which can periodically be reconciled to the underlying detail. Due to the liquid nature of cash and the potential for misappropriation, it is especially critical that bank balances be reconciled to the general ledger. During our review, we noted that the Town does not perform reconciliations between cash account and general ledger balances on a monthly basis. In addition, the bank statements contained reconciling items for transactions that had occurred a few months subsequent to year end. To ensure the integrity of the Town's reconciled bank balances be compared basis. Such reconciliation will detect that the proper adjustments can be made. financial records, we recommend that to the general ledger on a monthly any discrepancies between balances, so We, also, recommend that proper bank reconciliation procedures be implemented to ensure that all reconciling items are timely and appropriate. ACCOUNTING RECORDS Control over Journal Entries There are inadequate controls over the processing of journal entries which are posted in the general ledger. This could result in authorized adjustments being lost or unauthorized adjustments being made. Procedures should be developed and implemented to ensure only authorized journal entries are posted in the general ledger. Exhibit VI (Continued) Standard Journal Vouchers Currently, journal vouchers for recurring entries are not standardized. The use of standard format would greatly facilitate the preparation and processing of these entries. We recommend that a standard journal voucher form be developed which would include the following: • Pre-printed entries and descriptions for recurring monthly entries; • Space to reference supporting documentation; • Space to indicate preparer; and • Space to indicate Town Accountant review. The implementation of standard forms and supervisory reviews should improve controls over the accuracy, consistency and timeliness of journal entries. Additionally, such control will help to ensure that all required entries are processed. Reconciliation of All Sub -Ledger Accounts to General Ledger Account Balances Subsidiary ledgers are intended to support general ledger control account balances. Currently, the Town does not reconcile subsidiary ledger balances, such as, tax collectors receivable accounts, to general ledger information. As a result, discrepancies exist between the general ledger and its underlying detail. We recommend reconciliations between subsidiary ledgers and general ledger control accounts be performed on a monthly basis with written evidence such review took place. Differences which arise from the reconciliation process should be resolved and adjusted timely. SEWER FUND In prior years, the Town reported the Sewer Fund as an enterprise activity in its General Purpose Financial Statements. The Town's treatment of Sewer Fund activity has not been entirely consistent with generally accepted accounting principles. Through discussion with Town officials, it is not clear under what authority or requirement the Town adopted enterprise accounting. Town officials have indicated that research will be performed to determine what, if any, legislation or grant agreements describe accounting requirements of sewer activities. VI -2 Exhibit VI (Continued) ENCUMBRANCES Control Should be Established over Encumbrances At yearend, we obtained a detailed listing of open encumbrances from the Town Accountant's department. A number of instances existed where encumbrances recorded were not supported by valid purchase orders or contacts. We recommend encumbrances recorded be supported only by signed contracts, purchase orders issued to vendors or other firm commitments. OFFSITE STORAGE Offsite Back-up Procedures Should Be Established Currently no offsite storage facility exists for programs, data files, financial records and documentation. Currently, back-up files and financial records are located in the same building as the data processing facility (Town Hall). If physical damage were to occur to the building housing the computer, all programs, data files, financial records and documentation could be destroyed. Records of financial significance that are irreplaceable could be lost. We recommend routine offsite back-up procedures be established. The offsite back-up facility should be located in a secure, fireproof location apart from Town Hall (e.g. one of the schools). TAXES Correct Addresses on Tax Bills Numerous tax bills are returned from the post office classified as undeliverable. This condition delays the collection of a significant portion of the Town's tax revenue. We recommend the Town devote a block of time to correct address files. VI-3 W-1,; 1,; f [IT T TOWN OF MANSFIELD, MASSACHUSETTS Schedule of Findings Year Ended June 30, 1987 Davis -Bacon Act Finding The Town neglected to file its Equal Employment Opportunity Commission.- State and Local Information (EEO-4) by the required date of April 30, 1988. Recommendation A timetable of required documentation to be filed and their respective due dates should be maintained by the Town to ensure timely submission of required reports'in compliance with Federal regulations. Grantee Response Submission of the required report at May 20, 1988. VII - 1 Exhibit VIII STATUS OF PRIOR YEAR FINDINGS The findings noted in the June 30, 1986 single audit report have been submitted to the applicable federal and state agencies along with the Town's corrective action plan. As of June 24, 1988, the Town has not received clearance letters from any of the respective agencies. J