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Nantucket Single Audit 17 TOWN OF NANTUCKET, MASSACHUSETTS SINGLE AUDIT REPORTS PURSUANT TO UNIFORM GUIDANCE JUNE 30, 2017 TOWN OF NANTUCKET, MASSACHUSETTS TABLE OF CONTENTS JUNE 30, 2017 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 .......................................................................... 9-10 Corrective Action Plan .......................................................................................................... 11 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, 2017, 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 20, 2017. 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. Town of Nantucket, Massachusetts 1 of 11 Uniform Guidance Single Audit Report Town of Nantucket, Massachusetts 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 20, 2017. 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 20, 2017 Town of Nantucket, Massachusetts 2 of 11 Uniform Guidance Single Audit Report 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, 2017. 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, 2017. Town of Nantucket, Massachusetts 3 of 11 Uniform Guidance Single Audit Report Town of Nantucket, Massachusetts Page Two Other Matters The results of our auditing procedures disclosed an instance of noncompliance, which is required to be reported in accordance with the Uniform Guidance and which is described in the accompanying schedule of findings and questioned costs as item 2017-001. Our opinion on each major federal program is not modified with respect to this matter. The Town of Nantucket, Massachusetts’ response to the noncompliance 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 compliance and, accordingly, we express no opinion on the response. 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 of 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. Town of Nantucket, Massachusetts 4 of 11 Uniform Guidance Single Audit Report Town of Nantucket, Massachusetts Page Three 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, 2017, and the related notes to the financial statements, which collectively comprise the Town of Nantucket, Massachusetts’s basic financial statements. We have issued our report thereon dated October 20, 2017, which contained unmodified opinions on those financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. 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 20, 2017 Town of Nantucket, Massachusetts 5 of 11 Uniform Guidance Single Audit Report TOWN OF NANTUCKET, MASSACHUSETTS SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2017 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 -$ 13,575$ National School Lunch Program:10.555 10-197 Cash Assistance - 192,269 Non-Cash Assistance (Commodities)- 41,037 Total Child Nutrition Cluster - 246,881 U.S. Department of Transportation Passed through the Commonwealth of Massachusetts - Department of Transportation/Division of Aeronautics Airport Improvement Program 20.106 AIP 3-25-0033-064-2016 - 717,829 Airport Improvement Program 20.106 AIP 3-25-0033-065-2016 - 54,000 Total Airport Improvement Program - 771,829 Highway Planning and Construction Cluster Passed through the Commonwealth of Massachusetts - Department of Transportation/Division of Highways Highway Planning and Construction 20.205 SPR-002-S-607-000 - 218,407 Total Highway Planning and Construction Cluster - 218,407 Total U.S. Department of Transportation - 990,236 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 84.027 240-095431-2017-0197 - 276,419 Special Education - Grants to States 84.027 240-030-6-0197-Q - 117,920 Special Education - Grants to States 84.027 274-083-7-0197-R - 12,726 Total Special Education - Grants to States - 407,065 (Continued) Town of Nantucket, Massachusetts 6 of 11 Uniform Guidance Single Audit Report TOWN OF NANTUCKET, MASSACHUSETTS SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2017 (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 26217Nantucket - 8,834 Total Special Education Cluster (IDEA)- 415,899 Passed through the Commonwealth of Massachusetts - Department of Elementary and Secondary Education Title I Grants to Local Educational Agencies 84.010 305-108412-2017-0197 - 97,856 Title I Grants to Local Educational Agencies 84.010 305-072386-2016-0197 - 21,934 Title I Grants to Local Educational Agencies 84.010 305-061121-2015-0197 - 55 Total Title I Grants to Local Educational Agencies - 119,845 English Language Acquisition Grants 84.365 180-108408-2017-0197 - 11,638 English Language Acquisition Grants 84.365 180-082-6-0197-Q - 14,308 English Language Acquisition Grants 84.365 184-006-7-0197-R - 1,051 Total English Language Acquisition Grants - 26,997 Supporting Effective Instruction State Grants 84.367 140-118433-2017-0197 - 18,806 Supporting Effective Instruction State Grants 84.367 140-066111-2015-0197 - 996 Total Supporting Effective Instruction State Grants - 19,802 Total U.S. Department of Education - 582,543 U.S. Department of Homeland Security Direct Award Law Enforcement Officer Reimbursement Agreement Program 97.090 - 70,458 Passed through the Commonwealth of Massachusetts- Massachusetts Emergency Management Agency Disaster Grants - Public Assistance (Presidentially Declared)97.036 CTFEMA4214NANTU00523 - 8,003 Disaster Grants - Public Assistance (Presidentially Declared)97.036 CTFEMA4097NANTU00277 - 6,611 Total Disaster Grants - Public Assistance (Presidentially Declared)- 14,614 Emergency Management Performance Grants 97.042 FY17EMPG1600000NANTU - 2,686 Emergency Management Performance Grants 97.042 FY16EMPG1500000NANTU - 686 Total Emergency Management Performance Grants - 3,372 Total U.S. Department of Homeland Security - 88,444 Total Federal Grant Expenditures -$ 1,908,104$ (Concluded) Town of Nantucket, Massachusetts 7 of 11 Uniform Guidance Single Audit Report TOWN OF NANTUCKET, MASSACHUSETTS NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2017 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, 2017. 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. The Town has elected not to use the 10 percent de minimis indirect cost rate allowed under 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 2017, $41,037 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 2017 was $10,791. Town of Nantucket, Massachusetts 8 of 11 Uniform Guidance Single Audit Report TOWN OF NANTUCKET, MASSACHUSETTS SCHEDULES OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2017 A. Summary of Audit Results 1. The auditor’s report expresses an unmodified opinion on the financial statements of the Town of Nantucket. 2. No 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 is one audit finding 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 Child Nutrition Cluster (CFDA# 10.553 & 10.555), and the Airport Improvement Program (CFDA# 20.106). 8. The threshold for distinguishing Types A and B programs was $750,000. 9. The Town did qualify as a low risk auditee. B. Schedule of Findings – Financial Statements Audit None Town of Nantucket, Massachusetts 9 of 11 Uniform Guidance Single Audit Report TOWN OF NANTUCKET, MASSACHUSETTS SCHEDULES OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2017 (Continued) C. Schedule of Findings and Questioned Costs – Major Federal Award Programs Audit Finding Questioned Costs 2017-001. U.S. Department of Agriculture Passed through the Commonwealth of Massachusetts Department of Elementary and Secondary Education Child Nutrition Cluster (CFDA#10.553 & 10.555) Criteria: Federal guidelines for Child Nutrition Cluster programs require schools select a sample of applications and verify that family income information reported to the district is correct. Districts must the review the income documentation to confirm students are receiving the correct benefits of free or reduced-price meals or paying for meals at full price. Statement of Condition: The school was required to verify one application for program eligibility. The schools tested this application and properly made a change in the eligibility status of the application, however, during our compliance testing we came across numerous applications that had a corresponding request to provide documentation to support the income submitted on the application. This is not in compliance with federal guidelines as the school is not permitted to verify the income on more applications than is required by the federal formula used by the school. Cause and Effect: The school lunch program experienced turnover in staff performing the verification process at the beginning of the 2016- 2017 school year. New personnel did not have a clear understanding of the verification process which led to testing more applications than necessary. Recommendation: We recommend the schools establish internal controls and train staff regarding federal nutrition program verification requirements and that the school management provide oversight to confirm that the annual verification process is completed properly. D. Summary Schedule of Prior Year Audit Findings None Town of Nantucket, Massachusetts 10 of 11 Uniform Guidance Single Audit Report TOWN OF NANTUCKET, MASSACHUSETTS CORRECTIVE ACTION PLAN YEAR ENDED JUNE 30, 2017 Findings – Major Federal Award Programs Audit 2017-001. U.S Department of Agriculture Child Nutrition Cluster (CFDA#’s 10.553 & 10.555) Recommendation: We recommend the schools establish internal controls and train staff regarding federal nutrition program verification requirements and that the school management provide oversight to confirm that the annual verification process is completed properly. Corrective Action Planned: As described in the audit finding in the Single Audit report and as discussed with the auditors during their visit, in the fall of 2016 the school hired a new staff member to replace a long-serving retiring person, that was in charge of the verification process associated with Free and Reduced applications. The new staff member starting date precluded her from attending the annual “Nuts and Bolts” training that Department of Elementary and Secondary Education Nutrition Division offers in August, which covers any updates in laws and regulations regarding Free and Reduced application procedures and processes. In the beginning of October 2016, after finding out that testing and requests for additional information should only be limited to the required sample, the verification official stopped the requests and the school district has been in complete compliance since. In 2017 only the required sample was tested and all other applications were taken at face value. As a way to stay current of new laws and regulations, the verification official for the school attended the “Nuts and Bolts” training in August of 2017 and will be attending it annually to remain on top of any new developments or changes. Internally, the Chief Financial Officer of the school has been working in close coordination with the verification official and the Food Service Director of Nantucket Public Schools to ensure compliant and timely reporting and will continue to do so in the future. Anticipated Completion Date: Fiscal year 2018 Contact: Martin Anguelov, Chief Financial Officer, Nantucket Public Schools Town of Nantucket, Massachusetts 11 of 11 Uniform Guidance Single Audit Report