HomeMy WebLinkAboutNantucket Single Audit 16
TOWN OF NANTUCKET, MASSACHUSETTS
SINGLE AUDIT REPORTS
PURSUANT TO
UNIFORM GUIDANCE
JUNE 30, 2016
TOWN OF NANTUCKET, MASSACHUSETTS
TABLE OF CONTENTS
JUNE 30, 2016
Page
Independent Auditor’s 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 ...................................... 1-2
Independent Auditor’s Report on Compliance for Each Major Program and on
Internal Control Over Compliance Required by Uniform Guidance .................................. 3-5
Schedule of Expenditures of Federal Awards .......................................................................... 6-7
Notes to Schedule of Expenditures of Federal Awards .............................................................. 8
Schedules of Findings and Questioned Costs .......................................................................... 9-12
Corrective Action Plans .......................................................................................................... 13
INDEPENDENT AUDITOR’S 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, 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, the financial statements of the governmental activities, the
business-type activities, the discretely presented component units, each major fund, and the aggregate
remaining fund information of the Town of Nantucket, Massachusetts, as of and for the year ended June 30,
2016, and the related notes to the financial statements, which collectively comprise the Town of Nantucket,
Massachusetts’s basic financial statements and have issued our report thereon dated October 4, 2016.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Town’s internal control
over financial reporting (internal control) to determine the audit procedures that are appropriate in the
circumstances 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. Accordingly, we do not express
an opinion on the effectiveness of the Town’s internal control.
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 a 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. 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.
Our consideration of internal control was for the limited purpose described in the first paragraph of this
section and was not designed to identify all deficiencies in internal control that might be material weaknesses
or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were
not identified. Given these limitations, during our audit we did not identify any deficiencies in internal
control that we consider to be material weaknesses. We did identify certain deficiencies in internal control,
described in the accompanying schedule of findings and questioned costs as findings 2016-001 and 2016-002
that we consider to be significant deficiencies
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Page Two
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Town’s financial statements are free from
material misstatement, we performed tests of its compliance with certain provisions of laws, regulations,
contracts and grant agreements, 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.
We noted certain other matters that we reported to management of the Town in a separate letter dated
October 4, 2016.
Response to Findings
The Town’s response to the findings identified in our audit is described in the accompanying schedule of
findings and questioned costs. The Town’s response was not subjected to the auditing procedures applied in
the audit of the financial statements and, accordingly, we express no opinion on it.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and
the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or
on compliance. This report is an integral part of an audit performed in accordance with Government
Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this
communication is not suitable for any other purpose.
Roselli, Clark and Associates
Certified Public Accountants
Woburn, Massachusetts
October 4, 2016
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INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR
PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY
THE UNIFORM GUIDANCE
To the Honorable Board of Selectmen
Town of Nantucket, Massachusetts
Report on Compliance for Each Major Federal Program
We have audited the Town of Nantucket, Massachusetts’ compliance with the types of compliance
requirements described in the OMB Compliance Supplement that could have a direct and material effect
on each of the Town of Nantucket, Massachusetts’ major federal programs for the year ended June 30,
2016. The Town of Nantucket, Massachusetts’ major federal programs are identified in the summary of
auditor’s results section of the accompanying schedule of findings and questioned costs.
Management’s Responsibility
Management is responsible for compliance with the requirements of laws, regulations, contracts, and
grants applicable to its federal programs.
Auditor’s Responsibility
Our responsibility is to express an opinion on compliance for each of the Town of Nantucket,
Massachusetts’ major federal programs based on our audit of the types of compliance requirements
referred to above. 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 the audit
requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative
Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those
standards and the Uniform Guidance 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 on compliance for each major
federal program. However, our audit does not provide a legal determination of the Town of Nantucket,
Massachusetts’ compliance.
Opinion on Each Major Federal Programs
In our opinion, the Town of Nantucket, Massachusetts complied, in all material respects, with the types of
compliance 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, 2016.
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Page Two
Report on Internal Control Over Compliance
Management of the Town of Nantucket, Massachusetts is responsible for establishing and maintaining
effective internal control over compliance with the types of compliance requirements referred to above.
In planning and performing our audit of compliance, we considered the Town of Nantucket,
Massachusetts’ internal control over compliance with the types of requirements that could have a direct
and material effect on each major federal program to determine the auditing procedures that are
appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major
federal program and to test and report on internal control over compliance in accordance with the
Uniform Guidance, 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.
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. A significant deficiency in
internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over
compliance with a type of compliance requirement of a federal program that is less severe than a material
weakness in internal control over compliance, yet important enough to merit attention by those charged
with governance.
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 material weaknesses or significant efficiencies and therefore, material
weaknesses or significant deficiencies may exist that were not identified. We did not identify any
deficiencies in internal control over compliance that we consider to be material weaknesses. However,
material weaknesses may exist that have not been identified.
The purpose of this report on internal control over compliance is solely to describe the scope of our
testing internal control over compliance and the results of that testing based on the requirements of
Uniform Guidance. Accordingly, this report is not suitable for any other purpose.
Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance
We have audited the financial statements of the governmental activities, the business-type activities, the
discretely presented component units, each major fund, and the aggregate remaining fund information of
the Town of Nantucket, Massachusetts, as of and for the year ended June 30, 2016, and the related notes
to the financial statements, which collectively compromise the Town of Nantucket, Massachusetts’s basic
financial statements. We have issued our report thereon dated October 4, 2016, which contained
unmodified opinions on those financial statements. Our audit was conducted for the purpose of forming
our opinions on the financial statements that collectively comprise the basic financial statements.
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Town of Nantucket, Massachusetts
Page Three
The accompanying schedule of expenditures of federal awards is presented for purposes of additional
analysis as required by Uniform Guidance, and is not a required part of the basic financial statements.
Such information is the responsibility of management and was derived from and relates directly to the
underlying accounting and other records used to prepare the basic financial statements. The information
has been subjected to the auditing procedures applied in the audit of the financial statements and certain
additional procedures, including comparing and reconciling such information directly to the underlying
accounting and other records used to prepare the basic financial statements or to the basic financial
statements themselves, and other additional procedures in accordance with auditing standards generally
accepted in the United States of America.
In our opinion, the schedule of expenditures of federal awards is fairly stated in all material respects in
relation to the basic financial statements as a whole.
Roselli, Clark & Associates
Certified Public Accountants
Woburn, Massachusetts
October 4, 2016
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TOWN OF NANTUCKET, MASSACHUSETTS
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2016
See notes to Schedule of Expenditures of Federal Awards
Federal Grantor /Passed
Pass-Through Agency /CFDA Pass-Through Through to Federal
Program Title Number Number Subrecipients Expenditures
U.S. Department of Agriculture
Child Nutrition Cluster
Passed through the Commonwealth of Massachusetts -
Department of Elementary and Secondary Education
School Breakfast Program 10.553 10-197 -$ 5,958$
National School Lunch Program:10.555 10-197
Cash Assistance - 146,172
Non-Cash Assistance (Commodities)- 35,212
Total Child Nutrition Cluster - 187,342
U.S. Department of Justice
Direct Award
Public Safety Partnership and Community Policing Grants 16.710 - 1,716
Total U.S. Department of Justice - 1,716
U.S. Department of Transportation
Passed through the Commonwealth of Massachusetts -
Department of Transportation/Division of Aeronautics
Airport Improvement Program 20.106 AIP 3-25-0033-063-2015 - 88,629
Airport Improvement Program 20.106 AIP 3-25-0033-062-2015 - 1,857,180
Airport Improvement Program 20.106 130015ACKMAINV1 - 45,396
Airport Improvement Program 20.106 AIP 3-25-0033-060-2014 - 66,202
Airport Improvement Program 20.106 AIP 3-25-0033-057-2013 - 84,990
Highway Planning and Construction Cluster
Passed through the Commonwealth of Massachusetts -
Department of Transportation/Division of Highways
Highway Planning and Construction * 20.205 INTF00X02010H0059646 - 234,195
Total Highway Planning and Construction Cluster - 234,195
Total U.S. Department of Transportation - 2,376,592
U.S. Department of Education
Special Education Cluster (IDEA)
Passed through the Commonwealth of Massachusetts -
Department of Elementary and Secondary Education
Special Education - Grants to States 84.027 240-030-6-0197-Q - 221,693
Special Education - Grants to States 84.027 240-039-5-0197-P - 63,253
Special Education - Grants to States 84.027 274-021-6-0197-Q - 12,726
Special Education - Preschool Grants 84.173 298-690-6-0197-Q - 1,750
(Continued)
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TOWN OF NANTUCKET, MASSACHUSETTS
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2016
(Continued)
See notes to Schedule of Expenditures of Federal Awards
Federal Grantor/Passed
Pass-Through Agency /CFDA Pass-Through Through to Total
Program Title Number Number Subrecipients Expenditures
Passed through the Commonwealth of Massachusetts -
Department of Early Education and Care
Special Education - Preschool Grants 84.173 26216Nantucket - 8,575
Total Special Education Cluster (IDEA)- 307,997
Passed through the Commonwealth of Massachusetts -
Department of Elementary and Secondary Education
Title I Grants to Local Educational Agencies 84.010 305-072386-2016-0197 - 109,168
Title I Grants to Local Educational Agencies 84.010 305-061121-2015-0197 - 48,831
English Language Acquisition Grants 84.365 180-082-6-0197-Q - 24,130
English Language Acquisition Grants 84.365 180-069-5-0197-P - 11,791
English Language Acquisition Grants 84.365 184-031-6-0197-Q - 675
Improving Teacher Quality State Grants 84.367 140-075291-2016-0197 - 19,485
Improving Teacher Quality State Grants 84.367 140-066111-2015-0197 - 1,693
Improving Teacher Quality State Grants 84.367 140-032747-2014-0197 - 205
Race to the Top 84.395 133-048-5-0197-P - 244
Total U.S. Department of Education - 524,219
U.S. Department of Health & Human Services
Passed Through the Commonwealth of Massachusetts -
Executive Office of Health and Human Services/
Department of Public Health
National Bioterrorism Hospital Preparedness Program 93.889 INTF6207P01W21916410 - 18,764
Total U.S. Department of Health & Human Services - 18,764
U.S. Department of Homeland Security
Direct Award
Law Enforcement Officer Reimbursement Agreement Program 97.090 - 133,570
Passed through the Commonwealth of Massachusetts-
Massachusetts Emergency Management Agency
Disaster Grants - Public Assistance (Presidentially Declared) * 97.036 CTFEMA4214NANTU00397 - 819,251
Disaster Grants - Public Assistance (Presidentially Declared) * 97.036 CTFEMA4214NANTU00316 - 17,054
Disaster Grants - Public Assistance (Presidentially Declared) * 97.036 CTFEMA4214NANTU00474 - 7,500
Emergency Management Performance Grants 97.042 FY16EMPG1500000NANTU - 2,534
Emergency Management Performance Grants 97.042 FY15EMPG1314000NANTU - 5,955
Total U.S. Department of Homeland Security - 985,864
Total Federal Financial Assistance Expenditures -$ 4,094,497$
* Denotes Major Program (Concluded)
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TOWN OF NANTUCKET, MASSACHUSETTS
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
YEAR ENDED JUNE 30, 2016
A. Basis of Presentation
The accompanying schedule of expenditures of federal awards (the Schedule) includes the federal
award activity of the Town of Nantucket, Massachusetts (the Town) under programs of the
federal government for the year ended June 30, 2016. The information in this Schedule is
presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part
200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal
Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the
operations of the Town, it is not intended to and does not present the financial position, changes
in net position, or cash flows of the Town.
B. Summary of Significant Accounting Policies
Accounting policies and financial reporting practices permitted for municipalities in
Massachusetts are prescribed by the Uniform Municipal Accounting System (UMAS)
promulgated by the Commonwealth of Massachusetts Department of Revenue.
The accompanying Schedule includes the federal grant transactions of the Town, although some
of these programs may be supplemented with state and other revenue, only federal activity is
shown. Expenditures reported on the Schedule are reported on the modified accrual basis of
accounting. Such expenditures are recognized following the cost principles contained in the
Uniform Guidance.
C. Non-Cash Commodities
The Town receives non-cash commodities from the U.S. Department of Agriculture as a part of
the School Lunch program. In fiscal year 2016, $35,212 was received; however, this amount is
not included in the financial statements.
D. Teacher Pension On-Behalf Payments
With regards to specific education grants awarded to the Town, the Massachusetts Department of
Elementary and Secondary Education and Department of Early Education and Care withhold
from the total grant awards 7.2% and 9.0% of the amounts shown on applicable wage budget
lines. The Commonwealth utilizes those funds as direct payments to the Massachusetts Teachers
Retirement Board made on-behalf of the Town. The amount of these payments from federal
grants in fiscal year 2016 was $10,514.
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TOWN OF NANTUCKET, MASSACHUSETTS
SCHEDULES OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2016
A. Summary of Audit Results
1. The auditor’s report expresses an unmodified opinion on the financial statements of the Town
of Nantucket.
2. Two significant deficiencies disclosed during the audit of the financial statements are
reported in the Independent Auditor’s 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
which would be required to be reported in accordance with Government Auditing Standards
were disclosed during the audit.
4. No reportable conditions relating to the audit of the major federal award programs are
reported in the Independent Auditor’s Report on Compliance for Each Major Program and on
Internal Control Over Compliance Required By the Uniform Guidance.
5. The auditor’s report on compliance for the major federal award programs for the Town of
Nantucket expresses an unmodified opinion.
6. There are no audit findings that are required to be reported in accordance with 2 CFR section
200.516(a) in this Schedule.
7. The programs tested as major programs include the Highway Planning and Construction
Cluster (CFDA #20.205) and Disaster Grants – Presidentially Declared (CFDA #’s 97.036)
grant programs.
8. The threshold for distinguishing Types A and B programs was $750,000.
9. The Town of Nantucket did qualify as a low risk auditee.
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TOWN OF NANTUCKET, MASSACHUSETTS
SCHEDULES OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2016
(Continued)
B. Schedule of Findings – Financial Statements Audit
Finding
Questioned
Costs
2016-001. Financial Statements Audit: Significant Deficiency –
Closing Process
Criteria: The internal controls related to the general ledger closing
process should be designed to effectively identify and correct errors in a
timely manner.
Statement of Condition: Despite the Finance Director implementing a
quarterly close process during fiscal year 2016, the following errors still
occurred at year-end: (1) The Siasconset Water Enterprise Fund and the
Sewer Enterprise Fund receivables were overstated by $614,000; (2) a
$250,000 transfer to the General Fund from sale of real estate was
recorded to the Capital Projects Fund in error; (3) indirect cost transfers
in the amount of $376,869 from the various enterprise funds were not
made to the General Fund at year-end; (4) a $1.2 million bond offering
was instead recorded as a State grant in the Capital Project Fund; (5)
numerous other minor errors not individually significant.
Cause and Effect: By not completing a timely and accurate general
ledger close, errors were not identified and corrected in a timely manner.
The cumulative impact of (2) and (3) above would have been to
understate free cash by over $600,000 had these errors not been
corrected.
Recommendation: The Town should review the current closing process
and make the changes necessary to promote more efficiency and
accuracy to the overall process including the possibility of reassigning
some of the tasks to gain more efficiency and in-turn more accuracy.
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TOWN OF NANTUCKET, MASSACHUSETTS
SCHEDULES OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2016
(Continued)
B. Schedule of Findings – Financial Statements Audit
Finding
Questioned
Costs
2016-002. Financial Statements Audit: Significant Deficiency –
Federal Withholding Process
Criteria: The internal controls related to the Federal withholding
process should be designed to process transactions timely and accurately.
Statement of Condition: Due to the amount of the Town’s weekly
payroll, the required payment of the Town’s withholdings due to the
Internal Revenue Service (IRS) is within 1 day of the processing of the
payroll. During the majority of fiscal year 2016 the payments required
to be made to the IRS were not made within this required timeframe.
Cause and Effect: In the past it was the Town’s practice to make
payments immediately upon the processing of the payroll so the Town
would be in compliance with the regulations. This practice was revised
at the end of fiscal 2015 by the payroll office without permission from
the Finance Office. This resulted in the assessment of significant
penalties which were subsequently abated by the IRS.
Recommendation: The Town should implement procedures to process
Federal withholdings within the appropriate time period.
C. Schedule of Findings and Questioned Costs – Major Federal Award Programs Audit
None
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TOWN OF NANTUCKET, MASSACHUSETTS
SCHEDULES OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2016
(Continued)
D. Summary Schedule of Prior Year Audit Findings
Finding 2015-001 – Significant Deficiency in Internal Control Over Compliance – Child
Nutrition Cluster
Status: The School Department implemented procedures to monitor the timely filing of claims
for reimbursements. This finding is deemed to be closed.
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CORRECTIVE ACTION PLANS
YEAR ENDED JUNE 30, 2016
Findings – Financial Statements Audit
2016-001. Financial Statements Audit: Significant Deficiency – Closing Process
Recommendation: The Town should review the current closing process and make the changes necessary
to promote more efficiency and accuracy to the overall process including the possibility of reassigning
some of the tasks to gain more efficiency and in-turn more accuracy.
Corrective Action Planned: The close process has been reviewed and additional changes have been
implemented including reassigning duties and the hiring of additional staff. The review is done on a
quarterly basis, however on a weekly basis the trial balance, revenue and expenditure reports are
reviewed by the Director of Municipal Finance for anomalies. All journal entries must now be signed off
on by the Director of Municipal Finance. The reviews, in conjunction with the reconfiguration of the job
duties of some employees should allow the town to complete the close in a more efficient and accurate
manner.
Anticipated Completion Date: Fiscal year 2017
Contact: Brian E. Turbitt, Director of Municipal Finance
2016-002. Financial Statements Audit: Significant Deficiency – Federal Withholding Process
Recommendation: The Town should implement procedures to process Federal withholdings within the
appropriate time period.
Corrective Action Planned: The Director of Municipal Finance upon learning of the payroll tax deposit
issue with the Internal Revenue Service (IRS) immediately implemented the following process. Deposits
are to be made immediately after the payroll has been transmitted and funded, this must happen by the
Wednesday before the Thursday check date. Upon submission of the tax deposit, a printout of the
confirmation number is to be printed and attached to the deposit documentation. By the Tuesday of the
following week, the payroll administrator or the treasurer must contact the IRS and confirm that the
deposit was received by the Friday deadline. Since this process was implemented there have been no
further issues as they relate to this finding.
Anticipated Completion Date: Fiscal year 2017
Contact: Brian E. Turbitt, Director of Municipal Finance
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