HomeMy WebLinkAboutFiscal Year 2010 Reports on Federal Award Programs
TOWN OF NANTUCKET, MASSACHUSETTS
REPORTS ON FEDERAL AWARD PROGRAMS
FISCAL YEAR ENDED JUNE 30, 2010
TOWN OF NANTUCKET, MASSACHUSETTS
REPORTS ON FEDERAL AWARD PROGRAMS
FISCAL YEAR ENDED JUNE 30, 2010
TABLE OF CONTENTS
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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 ......................................................................................................5
Notes to schedule of expenditures of federal awards ........................................................................................6
Schedule of findings and questioned costs........................................................................................................7
1
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
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 Nantucket, 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 Nantucket, Massachusetts, as of and for the
fiscal year ended June 30, 2010, which collectively comprise the Town of Nantucket, Massachusetts’ basic
financial statements and have issued our report thereon dated February 28, 2011. 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 Nantucket, Massachusetts' 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 of
Nantucket, Massachusetts' internal control over financial reporting. Accordingly, we do not express an opinion on
the effectiveness of the Town of Nantucket, 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 entity’s financial statements
will not be prevented, or detected and corrected on a timely basis.
Our consideration of the internal control over financial reporting was for the limited purpose described in the first
paragraph of this section and would not necessarily identify all deficiencies in internal control that might be
deficiencies, significant deficiencies or material weaknesses. However, we consider the significant deficiency
described in the accompany schedule of findings and questioned costs as finding 2010-1 to be a material
weakness.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Town of Nantucket, Massachusetts' financial
statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws,
regulations, contracts, and grants, 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 no instances of noncompliance or other matters that are required to be reported under
Government Auditing Standards.
2
We noted certain other matters that we reported to management of the Town of Nantucket, Massachusetts in a
separate letter dated February 28, 2011. The Town of Nantucket’s response to the findings identified in our audit
is described in the accompanying schedule of findings and questioned costs. We did not audit the Town of
Nantucket’s response and accordingly we express no opinion on it.
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.
February 28, 2011, except for the Nantucket Islands Land Bank which is as of September 24, 2010
3
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
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 Nantucket, Massachusetts
Compliance
We have audited the compliance of the Town of Nantucket, Massachusetts, with the types of compliance
requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance
Supplement that could have a direct and material effect on each of the Town of Nantucket’s major federal
programs for the fiscal year ended June 30, 2010. The Town of Nantucket, Massachusetts' 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 of Nantucket, Massachusetts' management. Our
responsibility is to express an opinion on the Town of Nantucket, 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, 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 of Nantucket, 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 on the Town of Nantucket, Massachusetts' compliance with those requirements.
In our opinion, the Town of Nantucket, Massachusetts, 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 fiscal
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 item 2010-3.
Internal Control Over Compliance
Management of the Town of Nantucket, Massachusetts, is responsible for establishing and maintaining effective
internal control over compliance with requirements of laws, regulations, contracts and grants applicable to federal
programs. In planning and performing our audit, we considered the Town of Nantucket, Massachusetts' internal
control over compliance with requirements that could have a direct and material effect on a major federal program
in order to determine our 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 Nantucket, Massachusetts’ internal control over
compliance.
4
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 that material noncompliance with a type of
compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis.
Our consideration of the 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 identified deficiencies in internal
control over compliance that we consider to be material weaknesses, as described in finding 2010-2.
This report is intended solely for the information and use of management of the Town of Nantucket 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.
REPORT ON 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 Nantucket, Massachusetts, as of and for the
fiscal year ended June 30, 2010, and have issued our report thereon dated February 28, 2011. Our audit was
performed for the purpose of forming opinions on the financial statements that collectively comprise the Town of
Nantucket, 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.
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.
February 28, 2011, except for the Nantucket Islands Land Bank which is as of September 24, 2010
Federal
CFDA
Federal Grantor/Program Title Number Expenditures
U.S. DEPARTMENT OF AGRICULTURE:
Passed through Massachusetts Department of Elementary and
Secondary Education:
Non-Cash Assistance (Commodities):
National School Lunch Program 10.555 $ 20,290
Cash Assistance:
School Breakfast Program 10.553 7,044
National School Lunch Program 10.555 39,504
TOTAL AGRICULTURE 66,838
U.S. DEPARTMENT OF THE INTERIOR:
Passed through U.S. Fish and Wildlife Service
Northeast Region Division:
Clean Vessel Act 15.616 14,037
U.S. DEPARTMENT OF JUSTICE:
Direct:
ARRA - Edward Byrne Memorial Justice Assistance Grant (JAG) Program, Recovery Act 16.804 18,598
U.S. DEPARTMENT OF TRANSPORTATION - FEDERAL
AVIATION ADMINISTRATION:
Direct:
Airport Improvement Program 20.106 4,709,003
Passed through Massachusetts Department of Transportation -
Aeronautics Division:
Airport Improvement Program 20.106 739,385
U.S. DEPARTMENT OF TRANSPORTATION - FEDERAL
HIGHWAY ADMINISTRATION:
Passed through Massachusetts Department of Transportation -
Highway Division:
Highway Planning and Construction 20.205 228,205
TOTAL TRANSPORTATION 5,676,593
U.S. DEPARTMENT OF EDUCATION:
Passed through Massachusetts Department of Elementary and
Secondary Education:
Title I Grants to Local Educational Agencies 84.010 49,302
Special Education Grants to States 84.027 222,713
Improving Teacher Quality State Grants 84.367 25,141
ARRA - Special Education Grants to States, Recovery Act 84.391 155,483
Passed through Massachusetts Department of Early Education and Care:
Special Education Preschool Grants 84.173 8,509
ARRA - Special Education Preschool Grants, Recovery Act 84.392 6,225
TOTAL EDUCATION 467,373
U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES:
Passed through Health Resources and Services Administration:
National Bioterrorism Hospital Preparedness Program 93.889 2,000
SOCIAL SECURTIY ADMINISTRATION:
Passed through Massachusetts Rehabilitation Commission:
Social Security Disability Insurance 96.001 50,000
U.S. DEPARTMENT OF HOMELAND SECURITY:
Direct:
Airport Law Enforcement Officer Reimbursement Agreement Program 97.090 146,076
ARRA - Port Security Grant Program 97.116 67,119
TOTAL HOMELAND SECURITY 213,195
TOTAL $ 6,508,634
See notes to schedule of expenditures of federal awards.
FOR THE FISCAL YEAR ENDED JUNE 30, 2010
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Town of Nantucket, Massachusetts 5 Reports on Federal Award Programs
Notes to Schedule of Expenditures of Federal Awards Fiscal Year Ended June 30, 2010
Town of Nantucket, Massachusetts 6 Reports on Federal Awards Programs
Note 1 - Definition of Reporting Entity
Notes to schedule of expenditures of federal awards
The accompanying Schedule of Expenditures of Federal Awards presents the activity of all federal financial
assistance programs of the Town of Nantucket, Massachusetts. All federal financial assistance received directly
from federal agencies as well as federal financial assistance passed through other governmental agencies is
included on the schedule.
Note 2 - Significant Accounting Policies
The accounting and reporting policies of the Town of Nantucket, Massachusetts, are set forth below:
(a) Basis of Presentation – The accompanying Schedule of Expenditures of Federal Awards is presented on the
modified accrual basis of accounting. Accordingly, grant revenues are recognized when they are susceptible to
accrual and expenditures are recognized when the related liability is incurred.
(b) Cash Assistance – School Lunch Program - Program expenditures represent federal reimbursement for meals
provided during the year.
(c) Non-Cash Assistance (Commodities) – School Lunch Program – Program expenditures represent the value of
donated foods received during the fiscal year.
Note 3 - Program Clusters
In accordance with Subpart A §_.105 of OMB Circular No. A-133, Audits of States, Local Governments and Non
Profit Organizations, certain programs have been clustered in determining major programs. The following
represents the clustered programs:
CFDA
Name of Cluster/Program Number
Child Nutrition Cluster
School Breakfast Program 10.553
National School Lunch Program 10.555
Special Milk Program for Children 10.556
Summer Food Service Program for Children 10.559
Special Education Cluster
Special Education Grants to States 84.027
Special Education Preschool Grants 84.173
ARRA-Special Education Grants to States, Recovery Act 84.391
ARRA-Special Education Preschool Grants, Recovery Act 84.392
Schedule of Findings and Questioned Costs Fiscal Year Ended June 30, 2010
Town of Nantucket, Massachusetts 7 Report on Federal Award Programs
A. Summary of Auditors’ Results
Schedule of findings and questioned costs
1. The auditors’ report expresses a qualified opinion on the basic financial statements of the Town of
Nantucket, Massachusetts.
2. Material weaknesses relating to the audit of the basic financial statements are reported in the 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.
3. No instances of noncompliance material to the financial statements of the Town of Nantucket,
Massachusetts, were disclosed during the audit.
4. Significant deficiencies relating to the audit of the major federal award programs are reported in the
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.
5. The auditors’ report on compliance for the major federal award programs for the Town of Nantucket,
Massachusetts, expresses an unqualified opinion.
6. There were two audit findings relative to the major federal award programs for the Town of Nantucket.
7. The programs tested as major grants include:
CFDA
Program Title Number
Airport Improvement Program 20.106
Special Education Grants to States 84.027
Special Education Preschool Grants 84.173
ARRA-Special Education Grants to States, Recovery Act 84.391
ARRA-Special Education Preschool Grants, Recovery Act 84.392
8. The threshold for distinguishing Types A and B programs was $300,000.
9. The Town of Nantucket, Massachusetts was not determined to be a low-risk auditee.
Schedule of Findings and Questioned Costs Fiscal Year Ended June 30, 2010
Town of Nantucket, Massachusetts 8 Report on Federal Award Programs
B. Findings-Financial Statements Audit
2010-1 Material Weaknesses
Condition and Criteria: The following deficiencies exist within the Town’s system of internal control:
• Failure to Act on Previously Communicated Weaknesses
• The Town’s audits have reported significant deficiencies in the design and operation of
internal controls for several years which have not been resolved.
• Inadequate Design of Internal Control Over Significant Accounts
• The Town has not accurately reconciled cash between the Treasurers cash book and the
bank balances throughout the year.
• The Town did not accurately record all financial activity on the general ledger during the fiscal
year, resulting in 37 late adjustments.
• The Town Treasurer did not transfer the exact amount of the warrants from the Airport bank
accounts to reimburse the Town accounts on a timely basis throughout the year. This
resulted in cash being misstated between the Town and Airport bank statements throughout
the year requiring significant adjustments subsequent to year end.
• During fieldwork, the Town provided several supporting schedules that were inaccurate and
were adjusted during the audit as errors were identified. A system of controls should be
designed to detect and correct errors on a timely basis.
• The Town does not have a reliable system for monitoring capital borrowing and the
associated capital expenditures.
Proper internal controls require that procedures be in place to provide reasonable assurance that 1) assets
are properly safeguarded; 2) that transactions are executed in accordance with management’s authorization
and 3) that transactions are recorded properly in the general and subsidiary ledgers.
Cause: Lack of procedures in place to obtain the objectives of a system of internal control as defined above.
Effect: The is unable to provide reasonable assurance that assets are properly safeguarded and transactions
are executed in accordance with management’s authorization and recorded timely and properly in the general
and subsidiary ledgers.
Auditors’ Recommendation: We recommend that the Town implement system to insure that reconciliations
are performed and that all transactions are processed in a timely manner.
Auditee’s Response: Beginning in the 3rd Quarter of fiscal year 2011, the Town is implementing procedures
to ensure that cash is reconciled between the bank, cashbook and general ledger on a monthly basis and to
ensure that transactions are reported accurately and timely on the Town’s general ledger.
Schedule of Findings and Questioned Costs Fiscal Year Ended June 30, 2010
Town of Nantucket, Massachusetts 9 Report on Federal Award Programs
C. Findings and Questioned Costs-Major Federal Award Programs Audit
2010-2 Material Weakness
U.S. DEPARTMENT OF TRANSPORTATION Questioned
Costs
Highway Planning and Construction 20.205 None
Condition and Criteria: The Town has under reported federal expenditures on the Schedule of
Expenditures of Federal Awards for the past several years.
Cause: The Town does not have procedures for reconciling grant activity recorded in the general ledger
with records maintained by Town’s departments and reported to granting agencies.
Effect: Indirect costs that have been reported to the granting agency have not been charged to the grant
on the general ledger for several years. This has resulted in an excess balance in the general ledger
grant account and an underreporting of federal expenditures on the Schedule of Expenditures and
Federal Awards. In an effort to reconcile the grant balances on the general ledger to the balance
maintained by the planning department as of June 30, 2010, the Town reclassified over $600,000 in
expenditures from the general fund to the Highway Planning and Construction grant.
Auditors’ Recommendation: We recommend that Town implement procedures to reconcile all grant
activity with the respective departments on a monthly basis.
Auditee’s Response: Beginning in the 3rd Quarter of Fiscal Year 2011, the Town Accountant will meet
with the Transportation Planner on a monthly basis to reconcile the activities associated with the
Transportation Grant.
2010-3
U.S. DEPARTMENT OF EDUCATION
Special Education Grants to States 84.027 None
Special Education Preschool Grants 84.173 None
ARRA-Special Education Grants to States, Recovery Act 84.391 None
ARRA-Special Education – Preschool Grants, Recovery Act 84.392 None
Condition and Criteria: OMB Circular A-87, “Cost Principles for State, Local and Indian Tribal
Governments” requires grantees to maintain documentation of employee time and effort that has been
charged to federal awards. The District has not maintained such documentation. If 100% of an
employee’s salary is charged to a federal award, a grant recipient is required to maintain semi-annual
certifications stating that 100% of the employee’s time was spent working on grant activities. If less than
100% of an employee’s salary is charged to a federal award, a grant recipient is required to maintain
monthly personnel activity reports documenting 100% of the employee’s time.
Cause: The District did not maintain semi-annual certifications or personnel activity reports for employee
salaries charged to the SPED Grants.
Effect: The District is not in compliance with the grant requirements.
Schedule of Findings and Questioned Costs Fiscal Year Ended June 30, 2010
Town of Nantucket, Massachusetts 10 Report on Federal Award Programs
Auditors’ Recommendation: We recommend that the District implement procedures to
comply with OMB Circular A-87, “Cost Principles for State, Local and Indian Tribal Governments”.
Auditee’s Response: The School Department has compiled a corrective action plan to address this
finding.
D. Prior Year Audit Findings and Questioned Costs
2009-1 Material Weaknesses
Condition and Criteria: In fiscal year 2009, the following deficiencies existed within the Town’s system of
internal control:
• Failure to Act on Previously Communicated Weaknesses
• The Treasurer’s cash book was not accurately reconciled to the bank balances throughout the year.
• Although the activity in the general ledger was reconciled to the Treasurer’s cashbook throughout the
fiscal year, a consistent variance of approximately $36,000 was not identified until several months
after year end.
• The Town has not performed reconciliations between the balances of individual enterprise funds
accounts on the general ledger and the supporting bank balances. Variances identified six months
after the end of the fiscal year required material adjustments.
Proper internal controls require that procedures be in place to provide reasonable assurance that 1) assets
are properly safeguarded; 2) that transactions are executed in accordance with management’s authorization
and 3) that transactions are recorded properly in the general and subsidiary ledgers.
Cause: Lack of procedures in place to obtain the objectives of a system of internal control as defined above.
Effect: The Town was unable to provide reasonable assurance that assets are properly safeguarded and
transactions are executed in accordance with management’s authorization and recorded timely and properly
in the general and subsidiary ledgers.
Current Status: During fiscal year 2010 the Town was unable to completely reconcile cash activity from the
cash book to the bank and has not implemented a system of internal control to insure that all transactions are
properly recorded in a timely manner. Please refer to finding 2010-1 for additional current information.