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HomeMy WebLinkAboutAUDIT 06-30-1991Peat Marwick Certified Public Accountants TOWN OF NORTH ANDOVER, MASSACHUSETTS General Purpose Financial Statements Year Ended June 30, 1991 (With Independent Auditors' Report Thereon) TOWN OF NORTH ANDOVER, MASSACHUSETTS General Purpose Financial Statements Year Ended June 30, 1991 Table of Contents Independent Auditors' Report General Purpose Financial Statements: Combined Balance Sheet - All Fund Types and Account Group Combined Statement of Revenues, Expenditures and Changes in Fund Equity (Deficit) - All Governmental Fund Types and Expendable Trust Funds Statement of Revenues and Expenditures - Budgetary Basis Statement of Revenues, Expenses and Changes in Fund Equity - Nonexpendable Trust Funds Statement of Cash Flows - Nonexpendable Trust Funds Notes to General Purpose Financial Statements Page 1 5 6 7-20 Peat Marwick Certified Public Accountants One Boston Place Boston, MA 02108 Telephone 617 723 7700 Telex 617 443 0082 PMMBOST Telecopier 617 723 6864 Independent Auditors' Report To the Board of Selectmen Town of North Andover, Massachusetts: We have audited the general purpose financial statements of the Town of North Andover, Massachusetts, as of and for the year ended June 30, 1991, as listed in the accompanying table of contents. 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 Government Auditing Standards issued by the Comptroller General of the United States. 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. An audit includes ex~mining, on a test basis, evidence supporting the amounts and disclosures in the general purpose financial statements. 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 Town has not maintained records of the cost of its general fixed assets and, therefore, a general fixed assets account group is not presented in the accompanying general purpose financial statements as required by generally accepted accounting principles. In our opinion, except that the omission of a general fixed asset group of accounts results in an incomplete presentation, as discussed in the preceding paragraph, the general purpose financial statements referred to above present fairly, in all material respects, the financial position of the Town of North Andover, Massachusetts, at June 30, 1991, and the results of its operations and cash flows of its nonexpendable trust funds for the year then ended, in conformity with generally accepted accounting principles. January 3, 1992 Member Firm of Klynveld Peat Marwick Goerdeler TOWN OF NORTH ANDOVER, MASSACHUSETTS Combined Balance Sheet - Ail Fund Types and Account Group June 30, 1991 (with comparative amounts for the General Fund for 1990) Assets Cash and investments (note 5) Receivables: Property taxes Motor vehicle excise Intergovernmental Other Total receivables Due from other funds (note 10) Other assets Amounts to be provided for the retirement of general long-term obligations Total assets Liabilities and Fund Equity Pooled cash overdraft Warrants and accounts payable Other liabilities Accrued liabilities: Vacation (note 7) Payroll Guaranteed deposits Due to other funds (note 10) General obligation bonds and notes payable (notes 7 and 8) Deferred revenue and allowance for uncollectible accounts Total liabilities Fund equity (deficit): Reserved for: Encumbrances and continuing appropriations Nonexpendable trust purposes Abatements and exemptions Unreserved: Designated for subsequent year's expenditures Undesignated Total fund equity (note 9) Contingencies (note 12) Total liabilities and fund equity See accompanying notes to general purpose financial statements. Governmental Fund Types General 1991 1990 1,169,369 706,541 269,905 378,620 4,027 2,100,941 2,356,018 1,821,490 3,799t319 5,007,592 397,988 64,613 18,214 - Special revenue 557,793 154,707 154,707 Capital projects 3,397,633 1,084,523 518,311 - - 301,698 465,251 13,006 456,291 373,778 372,445 - - 874,281 900,603 - - 154,707 187,791 - - 7,671,603 3,615,742 2,789,403 154,707 - 6,250t022 5,046,013 322,420 8,315,685 227,445 325,206 256,732 50,000 (2,261,946) (605,746) (2,034,501) 26,192 390,080 390,080 (4~918,252) (4,918,252) Fiduciary Fund Type Trust and agency 1,238,037 1.238.037 893,797 55,490 949,328 75,491 213,218 288,709 $ 4.2!S.521 ~ ?12.500 ~ 1.238.037 Account Group General long-term obligations 16,334,847 454,847 15,880,000 16,334,847 Total (memorandum only) 1991 5,193,263 1,169,369 269,905 158,734 2,356,018 3,954,026 397,988 18,214 16,334,847 25.898.338 1,084,523 770,995 373,819 454,847 874,281 893,797 397,988 23,551,603 3,770,449 32,1721302 227,445 75,491 (6,576,900) (6,273,964) TOWN OF NORTH ANDOVER, ~/ASSACRUSETTS Combined Statement of Revenues, Expenditures and Changes in Fund Equity (Deficit) - Ail Governmental Fund Types and Expendable Trust Funds Year ended June 30, 1991 (with comparative amounts for the General Fund for 1990) Governmental Fund Types General Special 1991 1990 revenue Revenues: Real and personal property taxes ~otor vehicle excise Licenses and permits Investment income Intergovernmental Payments in lieu of taxes Water revenue Departmental and other revenue Fines Total revenues $ 17,814,O82 17,748,674 - 1,377,847 1,308,358 - 104,905 55,900 - 258,600 239,250 10,515 3,515,839 4,596,103 483,742 19,643 39,222 - 4,606,011 3,097,444 - 1,176,198 1,825,437 582,329 268,678 355,415 - 29,141,803 29,265,803 1,076,586 Expenditures: Current: Education General government Public safety Public works Culture and recreation Pension and fringe State and district assessments Human services and other Capital outlay Debt service Total expenditures Excess (deficiency) of revenues over expenditures Other financing sources (uses): Bond proceeds (note 7) Operating transfers in (out), net (note 11) Total other financing sources (uses), net Excess (deficiency) of revenues and other financing sources over expenditures and other financing uses Fund equity (deficit), beginning of year, as previously reported Residual equity transfers Fund equity (deficit), beginning of year, as restated Fund equity (deficit), end of year See accompanying notes to general purpose financial statements. 14,886,413 14,712,340 785,955 1,791,368 1,360,959 - 4,667,458 4,513,243 20,815 3.385.277 3.631.072 179.677 351,544 405,929 229,56~ 2,514,665 2,299,607 - 430.389 367.748 - 287,169 664,999 7,209 3,089,703 2,172,307 - 31,203,986 29,928t204 1,223,220 (2,062,183) (662,601) (146,634) !,690 259,941 - 1,690 259,041 - (2,060,693) (403,360) (166,634) 26,192 433,873 536,714 (4,321) - 26,192 629,552 536,716 $ ~) 26.192 ~ Capital projects 2.568.160 2,568,160 5,828,300 ltO00,O00 6,828,300 (4,260,140) 10,700,000 54,000 10,754,000 6,493,860 ~) Fiduciary Fund Type Expendable trust 5,319 20,141 25,660 1,000 190 23,959 25,149 311 (55,490) (55,179) 268,397 268,397 ~13.218 Total (memorandum only) 1991 17,814,082 1,377,847 104,905 274,634 6,567,741 19,643 6,606,011 1,778,668 268,678 32,812,009 15,673,368 1,791,558 4,512,232 3,564,954 581,108 2,514,665 430,389 294,378 5,828,300 4,089,703 39,280,655 (6,468,646) 10,700,000 10,700,000 6,231,354 (10,580,809) (!0,580,809) ~) TOWN OF NORTH ANDOVER, MASSACHUSETTS Statement of Revenues and Expenditures - Budgetary Basis Budget and Actual Year ended June 30, 1991 (with comparative actual amounts for 1990) Revenues: Real and personal property taxes Motor vehicle excise Licenses and permits Investment income Intergovernmental Payments in lieu of taxes Water revenue Departmental and other revenue Fines Total revenues Variance Final 1991 favorable 1990 budget Actual (unfavorable) Actual $ 18,830,733 18,771,527 (59,206) 17,841,307 1,310,000 1,377,847 67,847 1,308,358 50,000 104,905 54,905 55,900 455,010 258,600 (196,410) 239,250 3,518,606 4,329,335 810,729 3,782,607 42,000 19,643 (22,357) 39,222 5,381,976 4,606,011 (775,965) 3,097,444 1,788,447 1,176,594 (611,853) 1,825,437 360,000 268,678 (91,322) 355,415 31,736~772 30,913,140 (923,632) 28,544,9~0 Expenditures: Education General government Public safety Public works Culture and recreation Pension and fringe State and district assessments Human services and other Debt service Total expenditures Deficiency of revenues over expenditures 15,140,483 14,822,740 1,835,376 1,777,695 4,483,022 4,408,562 3,565,882 3,4L2,987 364,105 352,306 2,605,780 2,519,819 437,770 437,770 293,709 289,313 3,089,703 3~089~703 31,815,830 31,110,895 (79,058) (197,755) Other financing sources (uses): Operating transfers in (out): Stabilization fund Capital projects Special revenue funds Total other financing sources (uses) Deficiency of revenues and other financing sources over expenditures and other financing uses 55,490 55,490 (54,000) 317,743 57,681 74,460 152,895 11,799 85,961 4,396 704,935 (!18,697) (54,000) 55,490 1,&90 (54~000) (23,56~) . (196.265) (172.697) Other budget items: Prior year deficits raised (86,680) Overlay surplus 50,000 Other 60,248 Total other budget items 23,568 Net budget and actual See accompanying notes to general purpose financial statements. 14,831,079 1,311,934 4,462,287 3,422,530 405,349 2,299,607 367,748 667,495 2~171,977 29,940,006 (1~395;066) 222,100 36,941 259,041 (1.136.025) TOWN OF NORTR ANDOVER, MASSACHUSETTS Statement of Revenues, Expenses and Changes in Fund Equity - Nonexpendable Trust Funds Year ended June 30, 1991 Revenues: Investment income Contributions Total revenues Expenses: Administrative and general Total expenses Net income Fund equity, beginning of year Fund equity, end of year Nonexpendable trust funds $ 5,175 300 5,475 520 520 4,955 70,536 See accompanying notes to general purpose financial statements. 5 TOWN OF NORTH ANDOVER, ~SSACHUSETTS Statement of Cash Flows - Nonexpendable Trust Funds Year ended June 30, 1991 Cash flows from operating activities: Cash contributions received from individuals Cash payments for trust purposes Net cash used in operating activities Cash flows from investing activities: Interest on investments Net cash provided by investing activities Net increase in cash Cash, beginning of year Cash, end of year See accompanying notes to general purpose financial statements. Nonexpendable trust funds 300 (520) (220) 5,175 5,175 4,955 70,536 6 TOWN OF NORT~ ANDOVER, MASSACHUSETTS Notes to General Purpose Financial Statements June 30, 1991 (1) Reporting Entity The Town's general purpose financial statements include the operations of all organizations for which the Board of Selectmen exercises oversight responsibility. Oversight responsibility is demonstrated by financial interdependency, selection of governing authority, designation of management, ability to significantly influence operations and accountability for fiscal matters. Based on the aforementioned oversight criteria, the operations of the following entity have been excluded from the accompanying general purpose financial statements: · Town Housing Authority. Four of the Board members are elected and one member is appointed by the State. The Town has no oversight responsibility for the Authority's operations and no responsibility for the Authority's deficits or debt. (2) Summary of Significant Accounting Policies (a) Basis of Presentation The financial condition and results of operations of the Town's funds are presented as of and for the year ended June 30, 1991. The accounting policies of the Town conform with generally accepted accounting principles ("GAAP"), except that the Town does not maintain, and therefore does not report, a general fixed assets account group in accordance with generally accepted accounting principles. Such a departure from GAAP is permissible under the Massachusetts Uniform Municipal Accounting System. (b) Fund Accountin~ The operations of the Town are recorded in the following fund types and account group: · Governmental Fund Types Governmental funds are used to account for the Town's expendable financial resources and related liabilities (except those accounted for in nonexpendable trust funds). The measurement focus is upon determination of changes in financial position. The following are the Town's governmental fund types: General Fund - The general fund is the general operating fund of the Town. It is used to account for all financial resources except those required to be accounted for in another fund. (Continued) 7 TOWN OF NORTH ANDOVER, MASSACHUSETTS Notes to General Purpose Financial Statements Special Revenue Funds - Special revenue funds are used to account for the proceeds of specific revenue sources (other than expendable trusts or major capital projects) that are legally restricted to specified purposes. Capital Project Funds - Capital project funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities (other than those financed by trust funds). · Fiduciary Fund Types Trust and Agency Funds - Fiduciary funds are used to account for assets held by the Town in a trustee capacity or as an agent. Trust funds include expendable trust funds and nonexpendable trust funds. Expendable trust funds are accounted for similar to governmental funds. Nonexpendable trust funds are accounted for similar to proprietary funds, where the measurement focus is upon determination of net income and capital maintenance. Agency funds are custodial in nature and do not involve measurement of results of operations. · Account Group General Long-term Obligations Account Group - This account group is used to account for all long-term obligations of the Town. (c) Basis of Accounting The modified accrual basis of accounting is followed by governmental funds, expendable trust funds and agency funds. Under the modified accrual basis of accounting, revenues are recorded when they become measurable and available to pay liabilities of the current period. Revenues not considered available are recorded as deferred revenues. Expenditures are recorded when the liability is incurred except for (1) interest on general long-term obligations, which is recorded when due, and (2) the noncurrent portion of accrued vacation leave, which is recorded in the general long-term obligations account group. In applying the susceptible to accrual concept to intergovernmental revenues, there are essentially two types of revenues. In one, moneys must be expended on the specific purpose or project before any amounts will be paid to the Town; therefore, revenues are recognized based upon the expenditures incurred. In the other, moneys are virtually unrestricted and are usually revocable only for failure to comply with prescribed compliance requirements. These resources are reflected as revenues at the time of receipt or earlier if the susceptible to accrual criteria are met. (Continued) TOWN OF NORTH ANDOVER, MASSACHUSETTS Notes to General Purpose Financial Statements Property taxes are recognized as revenue in the year for which taxes have been levied, provided they are collected within 60 days after year-end. Licenses and permits, fines and forfeitures, and miscellaneous revenues are recorded as revenues when received in cash because they are generally not measurable until actually received. Investment earnings are recorded as earned. The accrual basis of accounting is used by nonexpendable trust funds. (d) Encumbrances and Continuing Appropriations Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of funds are recorded in order to reserve that portion of the applicable appropriation, is employed in governmental funds. Open encumbrances at year-end are reported as reservations of fund balances. Encumbrances do not constitute expenditures or liabilities, except for budgetary purposes (see note 4). Certain unexpended and unencumbered appropriations for uncompleted projects are carried over to succeeding years. Such continuing appropriations are accounted for similar to encumbrances. (e) Accrued Vacation Employees are granted vacation in varying amounts. Upon retirement, termination or death, certain employees are compensated for unused vacation (subject to certain limitations) at their then current rates of pay. The amount of vacation costs which are not due and payable is recorded in the General Long-term Obligations Account Group. The amount recorded is the unused days earned at the current rate of pay. (f) Self-Insurance The Town has established a self-insured medical program which is accounted for as an expendable trust fund. Both employees and the Town contribute to the Fund based upon a 65% (Town) and 35% (Employee) primary care formula. The Town carries insurance on individual medical claims in excess of $50,000 annually. The purpose of this program is to pay medical claims of the Town's employees and their covered dependents. The Town accrues claims submitted for medical services rendered prior to June 30, 1991. (g) Total Columns Total columns on the general purpose financial statements are captioned "Memorandum only" to indicate that they are presented only to facilitate financial analysis. Data in these columns do not present financial position, results of operations or changes in financial position in conformity with generally accepted accounting principles. Such data are not comparable to a consolidation since interfund eliminations have not been made. (Continued) TOWN OF NORT~ ANDOVER, MASSACHUSETTS Notes to General Purpose Financial Statements (3) ProPerty Taxes Real and personal property taxes are based on values assessed as of each January 1 and are due in quarterly installments. By law, all taxable property in the Commonwealth must be assessed at 100% of fair cash value. Taxes due and unpaid after the respective due dates are subject to interest and penalties. The Town has an ultimate right to foreclose on property for which taxes have not been paid. Property taxes levied are recorded as receivables in the fiscal year of the levy. A statewide tax limitation statute known as "Proposition 2-1/2" limits the property tax levy to an amount equal to 2-1/2% of the value of all taxable property in the Town. A secondary limitation is that no levy in a fiscal year may exceed the preceding year's allowable tax levy by more than 2-1/2%, plus taxes levied on certain property newly added to the tax rolls. In 1990, Proposition 2-1/2 was overridden by a Town-wide referendum vote. (4) Budgetary Basis of Accounting The Town must establish its property tax rate each year so that the resulting property tax levy will comply with the limits required by Proposition 2-1/2 and also constitute that amount which will equal the sum of (a) the aggregate of all annual appropriations for expenditures and transfers, plus (b) provision for the prior fiscal year's deficits, if any, less (c) the aggregate of all nonproperty tax revenue and transfers projected to be received by the Town, including available surplus funds. The budgets for all departments and operations of the Town, except that of public schools, are prepared under the direction of the Town Manager who presents the budget to the Board of Selectmen. The School Department budget is prepared under the direction of the School Committee. Original and supplemental appropriations are acted upon by Town Meeting Vote. All General Fund functions are budgeted. The budget is prepared on a basis other than generally accepted accounting principles ("GAAP"). The "actual" results column of the Statement of Revenues and Expenditures - Budgetary Basis is presented on a "budget basis" to provide a meaningful comparison with the budget. The major differences between the budget and GAAP bases a~e that: (Continued) 10 TOWN OF NORT~ ANDOVER, MASSACHUSETTS Notes to General Purpose Financial Statements (a) Budgeted revenues are recorded when cash is received, except for real estate and personal property taxes, which are recorded as revenue when levied (budget), as opposed to when susceptible to accrual (GAAP). (b) Encumbrances and continuing appropriations are recorded as the equivalent of expenditures (budget), as opposed to a reservation of fund balance (GAAP). The following reconciliation summarizes the differences between budget and GAAP basis accounting principles for the year ended June 30, 1991: Revenue Expenditures Other financing sources (uses), net As reported on a budgetary basis $ 30,913,140 31,110,895 1,490 Adjustment of property tax revenues to a modified accrual basis (957,841) Adjustment of Supreme Judicial Court revenues (813,496) Adjustment for encumbrances and continuing appropriations 93,09! As reported on a GAAP basis (5) Cash and Investments State and local statutes place certain limitations on the nature of deposits and investments available to the Town. Deposits (including demand deposits, term deposits and certificates of deposit) in any one financial institution may not exceed certain prescribed levels without collateralization by the financial institutions involved. Investments can also be made in securities issued by or unconditionally guaranteed by the U.S. government or agencies that have a maturity of less than one year from the date of purchase, repurchase agreements guaranteed by the U.S. government or agencies that have a maturity of less than one year from the date of purchase, repurchase agreements guaranteed by such securities with maturity dates of no more than 90 days from the date of purchase, and units in the Massachusetts Municipal Depository Trust ("MMDT"). (Continued) 11 TOWN OF NORTH ANDOVER, MASSACHUSETTS Notes to General Purpose Financial Statements Deposits The following summary presents the amount of Town deposits which are fully insured or collateralized with securities held by the Town or its agent in the Town's name (Category 1), those deposits which are collateralized with securities held by the pledging financial institution's trust department or agent in the Town's name (Category 2) and those deposits which are not collateralized (Category 3) at June 30, 1991. Bank balance Total Category bank Carrying 1 2 3 balance amount Cash $ 893.362 -- 3.a07.928 ~ ~ Investments The Town categorizes investments according to the level of risk assumed by the Town. Category 1 includes investments that are insured, registered or held by the Town's agent in the Town's name. Category 2 includes uninsured and unregistered investments held by the counterparty's trust department or agent in the Town's name. Category 3 includes uninsured and unregistered investments held by the counterparty, its trust department or its agent, but not in the Town's name. Carrying amount Cateffory 1 Category 2 Category 3 Market Total value Common and preferred stock Corporate bond and notes Money market and related investments $ - - 25,246 25,246 46,267 - - 67,570 67,570 74,966 32,417 32,417 201,721 Totals The composition of the Town's bank recorded deposits and investments fluctuates depending primarily on the timing of real estate tax receipts, proceeds from borrowings, collections of state and federal aid, and capital outlays throughout the year. (Continued) 12 TOWN OF NORTH ANDOVER, MASSACHUSETTS Notes to General Purpose Financial Statements (6) Pension Plan (a) Plan Description The Town provides retirement benefits to employees through a contributory retirement system administered by the Essex County Retirement System ("System"), a cost-sharing, multiple-employer public employee retirement system. Each participating employer's share of the total annual contribution is determined on the basis of active payroll. The Town's payroll for employees covered by the System for the year ended June 30, 1991 was $6,793,061; the Town's total payroll was $17,379,724. Public school teachers are covered by the Con~nonwealth of Massachusetts Teachers' Retirement System ("TRS") to which the Town of North Andover, Massachusetts, does not contribute. The Town's payroll for teachers covered by the TRS for the year ended June 30, 1991, was $9,667,222. The System and the TRS are contributory defined benefit plans covering all Town employees and teachers deemed eligible. The System is a member of the Massachusetts Contributory System and is governed by Chapter 32 of the Massachusetts General Laws (MGL). Membership in the System and the %'RS is mandatory immediately upon the commencement of employment for all permanent, full-time employees. Both systems provide for retirement allowance benefits up to a maximum of 80% of a member's highest three-year average annual rate of regular compensation. Benefit payments are based upon a member's age, length of creditable service, level of compensation and group classification. Members joining the System after January 1, 1979, were subject to a cap of $30,000 on the level of compensation upon which their benefits were calculated. Effective July 1, 1989, the $30,000 salary cap was removed. Members of both systems become vested after 10 years of creditable service. A retirement allowance may be received upon reaching age 65 or upon attaining 20 years of service. The System also provides for early retirement at age 55 if the participant (1) has a record of 10 years of creditable service, (2) was on the Town payroll on January 1, 1978, (3) voluntarily left Town employment on or after that date, and (4) left accumulated annuity deductions in the Fund. Active members contribute either 5, 7 or 8% of their gross regular compensation depending on the date upon which their membership began and certain employees contribute an additional 2% over $30,000 of annual compensation. The Town is required to contribute the remaining amounts necessary to pay benefits when due. The systems also provide death and disability benefits. The accounting records of the System are maintained on a calendar year basis in accordance with the standards and procedures established by the Commissioner of the Public Employee Retirement Administration. (Continued) 13 TOWN OF NORTH ANDOVER, MASSACHUSETTS Notes to General Purpose Financial Statements (b) Funding Status and Progress The amount shown below as the "Pension Benefit Obligation" for the System is a standardized disclosure measure of the present value of pension benefits, adjusted for the effects of projected salary increases and step-rate benefits, estimated to be payable in the future as a result of employee service to date. The measure is intended to help users assess the funding status of the System on a going-concern basis, assess progress made in accumulating sufficient assets to pay benefits when due and make comparisons among employers. The measure is the actuarial present value of credited projected benefits and is independent of the funding method used to determine contributions to the System. The pension benefit obligation was computed as part of an actuarial valuation performed as of January 1, 1987. Significant actuarial assumptions used in the valuation include (a) a rate of return on the investment of present and future assets of 8% a year compounded annually and (b) projected salary increases of 4.5% a year compounded annually, attributed to inflation. The total unfunded pension benefit obligation applicable to the System was $55,686,000 at January 1, 1987 (the most recent information available), as follows (in thousands): Pension benefit obligation: Retirees and beneficiaries currently receiving benefits and terminated employees not yet receiving benefits Current employees: Accumulated employee contributions, including allocated investment earnings Employer-financed vested Employer-financed nonvested Total pension benefit obligation $ h6,629 16,656 11,756 15,348 90,389 Net assets available for benefits, at market value 34,703 Unfunded pension benefit obligation $ 55.686 (Continued) 14 TOWN OF NORTH AN-DOVER, ~L~SSACHUSETTS Notes to General Purpose Financial Statements (c) Contribution Requirements and Contribution Made The System assesses participating employers for their share of pension benefits (less certain interest credits) expected to be paid during the year ("pay-as-you-go" method). This amount is determined in advance by the Public Employee Retirement Administration (PERA) and is based in part on the previous year's benefit payout. The Town's contribution to the System for 1991 of $1,045,056 was made in accordance with the funding policy described above and represents 14% of System-wide employer contributions for that calendar year. The Commonwealth of Massachusetts currently reimburses the System on a quarterly basis for the portion of benefit payments owing to cost-of-living increases granted after the implementation of Proposition 2-1/2. (d) Trend Information Trend information showing the System's progress in accumulating sufficient assets to pay benefits when due is presented in the System's December 31st, annual financial report. Trend information showing the System's progress in accumulating sufficient assets to pay benefits when due is required by GAAP to be included in the System's annual financial report. It is not known whether that report will contain the required historical trend information. (Continued) 15 TOWN OF NORTH ANDOVER, ~SSACHUSETTS Notes to General Purpose Financial Statements (7) Lon&-ter~ Debt The following is a summary of changes in long-term debt for the year ended June 30, 1991: Bonds: General purpose, serial maturities through 5/15~09 Schools, serial maturities through 9~15/94 Water, serial maturities through 9/15~10 Note payable - Mazurenko property Other long-term obligations: Vacation Interest rates June 30~ 1990 6.2~,, to 10.2~, 5.3% t.o 7. 6.2~, to 7. 2,817,300 1,001,104 2,681,596 1,000,000 7,500~000 365t490 $ 1,865.490 Additions 1,940,000 115,000 8,645,000 10,700,000 89~357 Retirements 529,700 523,000 267,300 1~000~000 2,320,000 June 30~ 1991 4,227,600 593,104 11,059,296 ~5~880~000 454~847 (Continued) 16 TOWN OF NORTH ANDOVER, MASSACHUSETTS Notes to General Purpose Financial Statements The annual requirements to amortize all general obligation bonds outstanding as of June 30, 1991, including interest, are as follows: Principal Interest Tota~ Year ending June 30, 1992 $ 1,530,000 1,349,695 2,879,695 1993 1,520,000 991,405 2,511,405 1994 1,500,000 884,755 2,384,755 1995 965,000 779,405 1,744,405 1996 935,000 713,760 1,648,760 Thereafter 9,430,000 4,610,510 14,040,510 The Commonwealth of Massachusetts has approved school construction assistance to the Town. The assistance program which is administered by the School Building Assistance Bureau (SBAB) provides funds for future debt service of general obligation school bonds outstanding. These resources are subject to annual appropriation by the state legislature and the Town's compliance with certain reporting requirements. During 1991, the Town received $439,953 of such assistance and will receive an additional $25,113 during 1992. The Town is subject to a dual level general debt limit; the normal debt limit and the double debt limit. Such limits are equal to 5% and 10%, respectively, of the valuation of taxable property in the Town as last equalized by the Commonwealth's Department of Revenue. Debt may be authorized up to the normal debt limit without state approval. Authorizations under the double debt limit, however, require the approval of the Commonwealth's Emergency Finance Board. Additionally, there are many categories of general obligation debt which are exempt from the debt limit but are subject to other limitations. Authorized and unissued debt at June 30, 1991, is as follows: School building addition Waste treatment plant Street improvements Water and sewer Land purchase Library Departmental equipment School - asbestos removal 551,285 12,161,104 340,934 3,435,000 1,235,000 1,100,000 675,216 75,00~ 19.573:539 As of June 30, 1991, the Town may issue approximately $93,267,000 additional general obligation debt under the normal debt limit. The Town has approximately $11,517,000 of debt exempt from the debt limit. (Continued) 17 TOWN OF NORTff ANDOVER, MASSACHUSETTS Notes to General Purpose Financial Statements The Town pays assessments which include debt service payments to other local governmental units providing services within the Town's boundaries (commonly referred to as overlapping debt). The primary overlapping debt relates to the Greater Lawrence Sanitary District and The Merrimack Valley Regional Transit Authority. The following summary sets forth the long-term debt of the entity at June 30, 1991, the estimated share of such debt being serviced by the Town and the total of its share of estimated indirect debt. Long-term Town's debt Town's estimated outstanding estimated indirect (unaudited) share debt Greater Lawrence Sanitary District Merrimack Valley Regional Transit Authority 12,435,000 5.89% 732,/*22 165,000 1.78% 2,937, (8) Temporary Borrowings Under state law and by authorization of the Board of Selectmen, the Town is authorized to borrow on a temporary basis to fund the following: · Current operating costs prior to the collection of revenues through issuance of revenue or tax anticipation notes (PANS or TANS) · Capital project costs incurred prior to obtaining permanent financing through issuance of bond anticipation notes (BANS) Federal and state aided capital projects and other program expenditures prior to receiving reimbursement through issuance of federal and state aid anticipation notes (FAANs and SAANs) Temporary loans are general obligations of the Town and carry maturity dates which are limited by statute. Interest expenditures for temporary borrowings were 51,340,001 and are accounted for in the General Fund. At June 30, 1991, 54,350,000 of 5.27% BANS maturing March 18, 1992 and 53,321,603 of 5.12%-5.90% SAANS maturing on September 20, 1991 were outstanding. (Continued) 18 TOWN OF NORTH ANDOVER, MASSACHUSETTS Notes to General Purpose Financial Statements (9) Fund Deficits The following capital project funds had deficit fund balances as of June 30, 1991: Water filtration Water feedline Municipal Buildings Act 24 1989 Asbestos Removal 1989 Communications 1990 Ambulance 1990 Mazurenko Land Acq. Architect Fees 1990 Municipal Building Act 24 1990 $ (4,204,547) (534,634) (109,870) (56,574) (105,321) (86,851) (160,000) (413) ...(114,434) The deficits in these funds will be eliminated through future bond issues or federal and state grants. (10) Interfund Receivable and Payable Balances Individual fund interfund receivable and payable balances at June 30, 1991 were as follows: Interfund Interfund Fund receivables payables General Special revenue Capital projects Trust and agency $ 397,988 - - 154,707 - 187,791 - 55~490 (Continued) 19 TOWN OF NORTH ANDOVER, ~L~SSACHUSETTS Notes to General Purpose Financial Statements (11) Operating Transfers Operating transfers constitute the transfer of resources from the fund that receives the resources to the fund that utilizes them. Operating transfers during the year were as follows: Transfers in (out) Capital Expendable General projects trusts Purpose of operating transfer: Stabilization $ 55,490 Other capital improvements (54,000) - (55,490) - (12) Contingencies There are several pending lawsuits in which the Town is involved. The Town Attorney estimates that the potential claims against the Town not covered by insurance resulting from such litigation would not materially affect the financial statements of the Town. 20 Peat Marwick ~,~,,'- . [.,,~ Certified Public Accountants TOWN OF NORTH ANDOVER, MASSACHUSETTS Schedule of Federal Financial Assistance and Independent Auditors' Reports Required under the Single Audit Act of 1984 Year Ended June 30, 1991 TOWN OF NORTH ANDOVER, MASSACHUSETTS Schedule of Federal Financial Assistance and Independent Auditors' Reports Required under the Single Audit Act of 1984 Year Ended June 30, 1991 Table of Contents Independent Auditors' Report on Schedule of Federal Financial Assistance Schedule of Federal Financial Assistance Independent Auditors' Compliance Report Based on an Audit of General Purpose Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditors' Report on Compliance with General Requirements Independent Auditors' Single Audit Report on Compliance with Specific Requirements Applicable to Nonmajor Federal Financial Assistance Program Transactions Independent Auditors' Report on the Internal Control Structure at the General Purpose Financial Statement and Federal Financial Assistance Program Levels Findings and Questioned Costs Status of Prior Year Findings Exhibit I Exhibit II Exhibit III Exhibit IV Exhibit V Exhibit VI Exhibit VII Exhibit VIII Peat Marwick Certified Public Accountants One Boston Place Boston, MA 02108 Telephone 617 723 7700 Telex 617 443 0082 PMMBOST Exhibit I Telecopier 617 723 6864 INDEPENDENT ADDITORS' ~RPORT ON SUPPI,EMENTAR¥ INFORMATION - SCHEDULE OF FEDERAL FINANCIAL ASSISTANCE The Board of Selectmen Town of North Andover, Massachusetts: We have audited the general purpose financial statements of the Town of North Andover, Massachusetts, for the year ended June 30, 1991, and have issued our report thereon dated January 3, 1992. 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 Government Auditing Standards issued by the Comptroller General of the United States. 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the general purpose financial statements. 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 North Andover, Massachusetts, taken as a whole. /'he 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. The infarmation in that schedule 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. January 3, 1992 Member Firm Of Klynveld Peat Marwick Goerdeler I-1 Exhibit II Federal Grantor/Pass-Through Grantor/ Pro~ram Title U.S. Department of Education: Passed-Through State Department of Education: Educationally Deprived Children - Chapter 1 Assistance for Education of Handicapped Children: Project mainstream Early Childhood - (Project Entry) Inservice - Appleworks Building - Based Support Project Inform CFDA Number 84.010 84.027 Improving School Programs - Chapter 2 84.151 Education of Handicapped Children 84.009 State Grants for Strengthening the Skills of Teachers 84.164 Direct Program: School Assistance in Federally Affected Areas 84.041 U.S. Department of Agriculture: Passed-Through State Department of Education: National School Lunch Program (includes state and local expenditures of $336,196) 10.555 10.550 Food Distribution U.S. Department of HousinS and Urban Development: Direct Programs: Emergency Boat Ramp Areawide Housing Opportunity Plan Housing Grant 14.218 Total TOWN OF NORTH ANDOVER, NASSACHUSETTS Schedule of Federal Financial Assistance June 30, 1991 Pass-Through Fund Balance Grantor's Number July it 1990 305-127-1-0211-2 240-037-1-0211-2 262-131-1-0211-2 380-123-0-0211-2 266-041-1-0211-2 251-213-1-0211-2 302-199-1-0211-2 200-035-1-0211-2 303-085-0-0211-2 4,007 13,532 438 66 14~036 3,004 53~437 05-211 05-211 9,341 9~341 35,051 33,140 31,555 99,746 Revenue Recognized Federal State Other 10211~0 114,083 22,343 2,000 1~000 139,4Z§ 12~260 19,500 4~409 67,583 29~835 97~418 29,269 29~269 304,335 304 ~ 33~ Fund Balance Expenditures June 30~ 1991 99~127 7,070 117,521 10,094 22,311 470 66 - 1,754 246 - 1,000 141~652 ~ 12,282 - 16,075 3~425 6,487 926 53,437 403,779 6,749 29~835 - 433,614 6,749 1,662 18,785 17,928 324 33,464 - 1,06~ 32,621 - 3~052 84,870 17,928 307.387 794.10~ 101.345 See accompanying notes to schedule of federal financial assistance. II -1 Exhibit II (Continued) TOWN OF NORT~ ANDOVER, MASSACHUSETTS Notes to Schedule of Federal Financial Assistance Year ended June 30, 1991 (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 North Andover, Massachusetts. Ail federal financial assistance received directly from federal agencies as well as federal financial assistance passed through other government agencies is included on the schedule. (2) Summary of Significant Accountin~ Policies The accounting and reporting policies of the Town of North Andover, 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. (b) School Lunch Pro~ra~.. The Town accounts for local, state and federal expenditures of the National School Lunch program in one combined fund. Federal reimbursements for meals provided during 1991 was $67,583. (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. Such commodities are not recorded in the financial records although memorandum records are maintained. II - 2 Peat Marwick Certified Public Accountants One Boston Place Boston. MA 02108 Telephone 617 723 7700 Telex 617 443 0082 PMMBOST Exhibit III Telecopler 617 723 6864 INn~.PEND__S~T A_m~_ITORS' COMPLIANCE REPORT BASED ON AN AUDIT OF GENg~ AL PIIIIPOSE FINANCIAL STATEIq]~S PERFO~ IN _A_CCOP~CE WIT~ GOVKRNMKNT AUDITINC STANDARDS The Board of Selectmen Town of North Andover, Massachusetts: We have audited the general purpose financial statements of the Town of North Andover, Massachusetts, as of and for the year ended June 30, 1991, and have issued our report thereon dated January 3, 1992. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. 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. Compliance with laws, regulations, contracts and grants applicable to the Town of North Andover, Massachusetts, is the responsibility of the management of the Town. As part of obtaining reasonable assurance about whether the general purpose financial statements are free of material misstatement, we performed tests of the Town's compliance with certain provisions of laws, regulations, contracts and grants. However, our objective was not to provide an opinion on overall compliance with such provisions. Accordingly, we do not express such an opinion. The results of our tests indicate that, with respect to the items tested, the Town of North Andover, Massachusetts, complied, in all material respects, with the provisions referred to in the preceding paragraph. With respect to items not tested, nothing came to our attention that caused us to believe that the Town had not complied, in all material respects, with those provisions. This report is intended for the information of Town officials and federal and state agencies that have provided federal financial assistance to the Town. This restriction is not intended to limit the distribution of this report, which is a matter of public record. January 3, 1992 Member Firm of Klynveld Peat Marwick Goerdeler III - 1 Peat Marwick Certified Public Accountants One Boston Place Boston, MA 02108 Telephone 617 723 7700 Telex 617 443 0082 PMMBOST Exhibit IV Telecopier 617 723 6864 AUDITORS' REPORT ON COMPLIANCE WI~ GENERg llgqUI~ The Board of Selectmen Town of North Andover, Massachusetts: We have audited the general purpose financial statements of the Town of North Andover, Massachusetts, as of and for the year ended June 30, 1991, and have issued our report thereon dated January 3, 1992. We have also applied procedures to test the Town of North Andover, Massachusetts', compliance with the following requirements applicable to its federal financial assistance programs, which are identified in the schedule of federal financial assistance for the year ended June 30, 1991: · Political activity · Civil rights · Cash management · Federal financial reports · Drug-free workplace · Allowable costs/cost principles · Administrative requirements Our procedures were limited to the applicable procedures described in the Office of Management and Budget's Compliance Supplement for Single Audits of State and Local Governments. Our procedures were substantially less in scope than an audit, the objective of which is the expression of an opinion on the Town of North Andover, Massachusetts', compliance with the requirements listed in the preceding paragraph. Accordingly, we do not express such an opinion. With respect to the items tested, the results of those procedures disclosed no material instances of noncompliance with the requirements listed in the second paragraph of this report. With respect to items not tested, nothing came to our attention that caused us to believe that the Town of North Andover, Massachusetts, had not complied, in all material respects, with those requirements. However, the results of our procedures disclosed i~m~aterial instances of noncompliance with those requirements, which are described in the accompanying schedule of findings and questioned costs. This report is intended for the information of Town officials and federal and state agencies that have provided federal financial assistance to the Town. This restriction is not intended to limit the distribution of this report, which is a matter of public record. January 3, 1992 IV - 1 Member Firm of Klynveld Peat Marwick Goerdeler Peat Marwick Certified Public Accountants One Boston Place Boston, MA 02108 Telephone 617 723 7700 Telex 617 443 0082 PMMBOST Exhibit V Telecopier 617 723 6864 INDEPENDENT AUDITOILS' SINDLE AUDIT REPORT ON COMPLIANCE WITH SPXCIFIC RE(~UI~F~NTS APPLICABLE TO NONMAJOIi FEDERAL FINANCIAL ASSISTANCE PROGRAM TRANSACTIONS The Board of Selectmen Town of North Andover, Massachusetts: In connection with our audit of the 1991 general purpose financial statements of the Town of North Andover, Massachusetts, and with our study and evaluation of the Town's internal control structure used to administer federal financial assistance programs, as required by Office of Management and Budget Circular A-128, "Audits of State and Local Governments," we selected certain transactions applicable to certain nonmajor federal financial assistance programs for the year ended June 30, 1991. As required by OMB Circular A-128, we have performed auditing procedures to test compliance with' the requirements governing types of services allowed or unallowed; eligibility; and all other special tests and provisions that are applicable to those transactions. Our procedures were substantially less in scope than an audit, the objective of which is the expression of an opinion on the Town's compliance with these requirements. Accordingly, we do not express such an opinion. With respect to the items tested, the results of those procedures disclosed no material instances of noncompliance with the requirements listed in the preceding paragraph. With respect to items not tested, nothing came to our attention that caused us to believe that the Town of North Andover, Massachusetts, had not complied, in all material respects, with those requirements. However, the results of our procedures disclosed immaterial instances of noncompliance with those requirements, which are described in the accompanying schedule of findings and questioned costs. This report is intended for the information of Town officials and federal and state agencies that have provided federal financial assistance to the Town. This restriction is not intended to limit the distribution of this report, which is a matter of public record. January 3, 1992 Member Firm ol Klynveld Peat Marwick Goerde{er V-1 Peat Marwick Certified Public Accountants One Boston Place Boston, MA 02108 Telephone 617 723 7700 Telex 617 443 0082 PMMBOST Exhibit VI Telecopier 617 723 6864 INDEPENDENT ADDITOI~S' REPORT ON THE INTERNAL CONTROL STRUCTURE AT THEGENE~PURPOSE FINANCIAL STATEMENTANDFEDERALFINANCIAL ASSISTANCE PRO~RAMLEVELS The Board of Selectmen Town of North Andover, Massachusetts: We have audited the general purpose financial statements of the Town of North Andover, Massachusetts, as of and for the year ended June 30, 1991, and have issued our report thereon dated January 3, 1992. We conducted our audit in accordance with generally accepted auditing standards; Government AuditinK Standards issued by the Comptroller General of the United States; and Office of Management and Budget Circular A-128, "Audits of State and Local Governments." Those standards and OMB Circular A-128 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 about whether the Town of North Andover, Massachusetts, complied with certain laws and regulations. In planning and performing our audit for the year ended June 30, 1991, we considered the Town's internal control structure in order to determine our auditing procedures for the purpose of expressing our opinion on the Town's general purpose financial statements. The management of the Town of North Andover, Massachusetts, is responsible for establishing and maintaining an internal control structure. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of internal control structure policies and procedures. The objectives of an internal control structure are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, that transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of general purpose financial statements in accordance with generally accepted accounting principles, and that federal financial assistance programs are managed in compliance with applicable laws and regulations. Because of inherent limitations in any internal control structure, errors, irregularities, or instances of noncompliance may nevertheless occur and not be detected. Also projection of any evaluation of the structure to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the effectiveness of the design and operation of policies and procedures may deteriorate. Member Firm ol Klynveld Peat Marwick Goeraeler VI - 1 Exhibit VI ~Peat Marwick (Continued) The Board of Selectmen Town of North Andover, Massachusetts For the purpose of this report, we have classified the significant internal control structure policies and procedures in the following categories: Accounting Controls · Revenue/receipts · Purchasing/disbursements · Payroll · External financial reporting Administrative Controls General Requirements: · Political activity Civil rights · Cash management · Federal financial reports · Drug-Free Workplace Act · Allowable costs/cost principle · Administrative requirements Specific Requirements: · Types of services · Eligibility · Matching/level of effort · Reporting · Special requirements For all of the internal control structure categories listed above, we obtained an understanding of the design of relevant policies and procedures and determined whether they have been placed in operation, and we assessed control risk. During the year ended June 30, 1991, the Town of North Andover, Massachusetts had no major federal financial assistance programs and expended 53 percent of its total federal financial assistance under the following nonmajor federal financial assistance programs: "Educationally Deprived Children - Chapter 1 (84.010) and Assistance for Education of Handicapped Children (84.027)". We performed tests of controls, as required by OMB Circular A-128, to evaluate the effectiveness of the design and operation of internal control structure policies and procedures that we considered relevant to preventing or detecting material noncompliance with specific requirements, general requirements, and requirements governing claims for advances and reimbursements, and amounts claimed or used for matching that are applicable to the aforementioned nonmajor programs. Our procedures were less in scope than would be necessary to render an opinion on these internal control structure policies and procedures. Accordingly, we do not express such an opinion. VI - 2 Pea'[ Marwick Exhibit VI (Continued) The Board of Selectmen Town of North Andover, Massachusetts Our consideration of the internal control structure would not necessarily disclose all matters in the internal control structure that might be material weaknesses under standards established by the American Institute of Certified Public Accountants. A material weakness is a reportable condition in which the design or operation of one or more of the internal control structure elements does not reduce to a relatively low level the risk that errors or irregularities in amounts that would be material in relation to the general purpose financial statements being audited or that noncompliance with laws and regulations that would be material to a federal financial assistance program may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control structure and its operation that we consider to be material weaknesses as defined above. However, we noted other matters involving the internal control structure and its operation that we have reported to the management of the Town of North Andover, Massachusetts, in a separate letter dated January 3, 1992. This report is intended for the information of Town officials and federal and state agencies that have provided assistance to the Town. This restriction is not intended to limit the distribution of this report, which is a matter of public record. January 3, 1992 VI - 3 Exhibit VII TOWN OF NORTH ANDOVER, MASSACHUSETTS Findings and Questioned Costs Year Ended June 30, 1991 Finding Number: Federal Agency: U.S. Department of Education CFDA Number: Program: 84.010 Educationally Deprived Children - Chapter 1 Finding: Untimely Filing of Final Reports KPMG noted that final reports required to be sent to the Massachusetts Department of Education were submitted 78 days late. According to the grant agreement, final reports must be submitted within 30 days of the grant termination date. Failure to submit reports on a timely basis may result in the suspension, reduction or termination of the grant. Recomendation: The Town should submit final reports within the filing requirements or obtain approval for extensions. Grantee Response: The Town will submit the final reports within the deadline or obtain written approval for extensions. VII - 1 Exhibit VII (Continued) TOWN OF NORTH ANDOYER, MASSACHUSETTS Findings and Questioned Costs Finding Number: Federal Agency: U.S. Department of Education CFDA Number: 84.027 Program: Assistance to States for Education of Handicapped Children Finding: Untimely Filing of Final Reports KPMG noted that final reports required to be sent to the Massachusetts Department of Education for Project Mainstream, Project Entry, and the In-Service Project were submitted 89, 67 and 89 days late, respectively. According to the grant agreement, final reports must be submitted within 30 days of the grant termination date. Failure to submit reports on a timely basis may result in the suspension, reduction or termination of the grant. Recommendation: The Town should submit final reports within the filing requirements or obtain approval for extensions. Grantee Response: The Town will submit the final reports within the deadline or obtain written approval for extensions. VII - 2 Exhibit VII (Continued) TOWN OF NORTH ANDOVER, MASSACHUSETTS Findings and Questioned Costs Finding Number: Federal Agency: CFDA Number: Program: Finding: The Town 3 U.S. Department of Education 84.027 Assistance to States for Education of Handicapped Children No Documentation of Vendor Invoice could not locate one vendor invoice or the corresponding vendor file. The Town is required to keep such records as may be required for fiscal audit and program evaluation. This may lead to possible suspension, reduction or termination of the grant. Recommendation: We recommend that the Town keep better control of all invoices, regardless of the size of purchase. Grantee Response: The Town Accountant's Office will, in the future, control over all invoices. try to maintain better VII - 3 Exhibit VII (Continued) TOWN OF NORTH ANDOVER, MASSACHUSETTS Findings and Questioned Costs Finding Number: Federal Agency: CFDA Number: Program: Finding: KPMG noted that final 4 U.S. Department of Education 84.009 Education of Handicapped Children Untimely Filing of Final Reports reports required to be sent to the Massachusetts Department of Education were submitted 89 days late. According to the grant agreement, final reports must be submitted within 30 days of the grant termination date. Failure to submit reports on a timely basis may result in the suspension, reduction or termination of the grant. Recommendation: The Town should submit final reports within the filing requirements or obtain approval for extensions. Grantee Response: The Town will submit the final reports within the deadline or obtain written approval for an extension. VII - 4 Exhibit VII (Continued) TOWN OF NORT~ ANDOVER, MASSACHUSETTS Findings and Questioned Costs Finding Number: 5 Federal Agency: U.S. Department of Education Program: All Federal Grants Finding: No Policy to Address the Drug-Free Workplace Act There is no formal policy for the Town or the School Department to address the Drug-Free Workplace Act. As of March 18, 1989, as a precondition for receiving federal grants, every grantee, except a State or State agency, is required to certify a drug-free workplace for each grant. Failure to do so may result in the loss of grants for a specified period up to 5 years. Recomendation: The Town should draft a formal policy to ensure a drug-free workplace that would cover the entire School Department and the Town. Grantee Response: The School Department is currently in the process of developing a drug-free workplace policy and the Town hopes to adopt a policy by the end of fiscal 1992. VII - 5 Exhibit VIII STATUS OF PRIOR YEAR FINDINGS There are no material known but uncorrected findings from prior years' single audit reports. VIII - 1