During our review of payroll procedures, we noted that the Town does not have formal procedures for documenting pay raises. On further inquiry, we determined that pay raises were approved but that there was no formal documentation in personnel files. To ensure better controls over payroll disbursements, the Town should consider implementing more formal documentation, such as using a Wage Rate Change Form or similar documentation. The document should be reviewed and approved by the Town Manager and filed in each employee’s personnel file.
Management’s response: While emails from the Town Manager to the Treasurer authorizing salary increases have been the recent practice, after speaking with the auditor, we have this year begun including that documentation in our personnel files. We appreciate this finding and suggestion.
Cash Disbursements
During our testing of cash disbursement procedures, we determined that the Town often does not document the approval process for invoices and disbursements. Although the Town Manager and/or department heads review and approves disbursements, the approval is often not documented. In order to improve controls over cash disbursements, we recommend that the Town implement procedures for documenting approvals for cash disbursements.
Management’s response:The auditor is correct that department heads, the Treasurer, and the Town Manager all review cash disbursements prior to their approval by the Selectboard during the Board’s twice-monthly meetings. After our discussions with the auditor, the Town Manager has begun documenting his review of the check register. We appreciate this finding and suggestion.
Credit Card Transactions
As part of our review of internal controls, we selected forty credit card transactions to test. Of those forty transactions, six were missing supporting documentation, such as an invoice or receipt. We recommend that the Town require cardholders to submit all receipts or invoices for purchases. We also recommend the Town consider adopting written credit card procedures that would prohibit the use of Town credit cards for specific purchases (e.g., purchases that are personal in nature) and that prohibit the payment of sales tax unless the tax is unavoidable (e.g., out of state purchases).
Management’s response:The Town has a credit card issuance agreement, which is attached. It requires receipts and forbids personal purchases. We will add the auditor’s recommended language regarding sales tax. The Treasurer reports that recent compliance with the policy is strong. Working with the Treasurer, the Town Manager will reiterate and enforce the policy, removing cards from employees who fail to meet its standards.
We appreciate this finding and suggestion.
February 4, 2021 To the Board of Selectmen
Town of Belgrade, Maine
We have audited the financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of the Town of Belgrade, Maine for the year ended December 31, 2020. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards and Government Auditing Standards, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our discussion with a member of the Board of Selectmen on January 11, 2021.
Professional standards also require that we communicate to you the following information related to our audit.
Our Responsibilities under U.S. Generally Accepted Auditing Standards and Government Auditing Standards
As stated in our engagement letter dated January 6, 2021, our responsibility, as described by professional standards, is to express opinions about whether the financial statements prepared by management with your oversight are fairly presented, in all material respects, in conformity with U.S.
generally accepted accounting principles. Our audit of the financial statements does not relieve you or management of your responsibilities.
As part of our audit, we considered the internal control of the Town of Belgrade, Maine. Such considerations are solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control.
As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we also performed tests of the Town of Belgrade, Maine’s compliance with certain provisions of laws, regulations, contracts, and grants. However, providing an opinion on compliance with those provisions was not an objective of our audit.
Significant Audit Matters
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the Town of Belgrade, Maine are described in the notes to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during 2020. We noted no transactions entered into by the Town of Belgrade, Maine during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period.
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Accounting estimates are an integral part of the financial statements prepared by management and are based on management’s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the financial statements were:
• Management’s estimate of depreciation expense, which is based on estimated useful lives of assets.
• Management’s estimate of unavailable tax revenues, which is based on estimated collections of taxes receivable.
• Management’s estimate of the OPEB liability and related amounts, which are based on actuarial reports.
We evaluated the key factors and assumptions used to develop these estimates in determining that they are reasonable in relation to the financial statements taken as a whole.
Certain financial statement disclosures are particularly sensitive because of their significance to financial statement users. The financial statement disclosures are neutral, consistent, and clear.
Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing and completing our audit.
Corrected and Uncorrected Misstatements
Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. See the attached “Adjusting Journal Entries” which reports misstatements, some of which were material, detected as a result of audit procedures and were corrected by management.
The attached schedule “Passed Adjusting Journal Entries” summarizes uncorrected misstatements of the financial statements. Management has determined that their effects are immaterial to the financial statements taken as a whole.
Disagreements with Management
For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor’s report. We are pleased to report that no such disagreements arose during the course of our audit.
Management Representations
We have requested certain representations from management that are included in the management representation letter dated February 4, 2021. See the attached copy of the representation letter, which was signed by management.
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Management Consultations with Other Independent Accountants
In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves application of an accounting principle to the Town of Belgrade, Maine’s financial statements or a determination of the type of auditor’s opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants.
Other Audit Findings or Issues
We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the Town of Belgrade, Maine’s auditors.
However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention.
Other Matters
We applied certain limited procedures to the schedules related to the OPEB liability, which are required supplementary information (RSI) that supplement the basic financial statements. Our procedures consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We did not audit the RSI and do not express an opinion or provide any assurance on the RSI.
We were engaged to report on the combining and individual fund financial statements which accompany the financial statements but are not RSI. With respect to this supplementary information, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves.
Restriction on Use
This information is intended solely for the information and use of the Board of Selectmen serving as audit committee and management of the Town of Belgrade, Maine and is not intended to be and should not be used by anyone other than these specified parties.
Very truly yours,
Account Description Debit Credit 1
To adjust deferred taxes to current year projection.
1-236-00 DEFERRED PROPERTY TAXES 113,000.00
-1-01-11 PROPERTY TAX - 113,000.00
Total 113,000.00 113,000.00
2
To record prepaid and adjust liability accounts to actual as of year end.
1-225-00 EMP SHARE HEALTH INS DEDUCT 22,941.63
-1-226-00 DENTAL INSURANCE - 5,874.32
1-229-00 LIFE INSURANCE DEDUCTION - 1,016.08
1-110-00 Prepaid Expense 7,567.20
To correct fund balance for AP not moved between funds from prior year and plug trivial variance in general fund
1-501-00 UNDESIGNATED FUND BALANCE - 21,310.81
2-561-00 WELL CONTAMINATION 21,310.81
-1-190-02 DUE TO/DUE FROM SPECIAL REVENU 21,310.81
-2-190-01 DUE TO/DUE FROM GENERAL FUND - 21,310.81
1-550-00 HOLDING ACCOUNT FOR IN/OUT 1,264.60
-1-501-00 UNDESIGNATED FUND BALANCE - 914.00
1-01-10-25-01 TAX BILLS - 350.60
Total 43,886.22 43,886.22
4
To record as accounts payable unpaid invoices received after year end.
1-01-01-31-01 EVENTS 50.56
-1-05-05-35-04 FIRE TRUCKS 1,789.44
To bring SRF cash balance to actual at year-end
2-100-00 VILLAGE LIGHTS ACCOUNT 10,000.00
-2-05-03 Village Lights - 10,000.00
2-100-00 VILLAGE LIGHTS ACCOUNT 1,343.26
-2-62-02 Revenue - 1,343.26
2-562-00 VILLAGE LIGHTS 2,174.86
-2-100-00 VILLAGE LIGHTS ACCOUNT - 2,174.86
2-62-01-99-99 EXPENSE 1,343.26
-2-200-00 ACCOUNTS PAYABLE - 1,343.26
Total 14,861.38 14,861.38
6
To record prepaid insurance for P&C insurance paid early.
1-110-00 Prepaid Expense 15,200.00
-1-23-25-99-99 EXPENSE - 15,200.00
Total 15,200.00 15,200.00
Account Description Debit Credit
7
To book budgeted transfers to the GF from other funds.
1-35-30 TRANSFER IN - 23,231.00
3-589-00 LIBRARY CAPITAL 23,231.00
-1-35-05 TRANSFER IN - 20,000.00
3-594-00 WATER QUALITY 20,000.00
-1-35-02 PUBLIC WORKS ROAD MAINTENANCE - 20,000.00
3-591-00 PUBLIC WORKS ROAD MAINTENANCE 20,000.00
-1-35-85 TRANSFER IN - 30,000.00
3-585-00 FACILITIES TRUCK 30,000.00
-1-35-15 SOLID WASTE - 40,740.00
3-599-00 SOLID WASTE CAPITAL 40,740.00
-1-35-86 TRANSFER IN - 1,200.00
3-586-00 CEMETERY EQUIPMENT 1,200.00
-1-190-03 DUE TO/DUE FROM CAPITAL PROJEC 135,171.00
-3-190-01 DUE TO/DUE FROM GENERAL FUND - 135,171.00
1-35-01 CEMETERY PORTFOLIO - 16,280.00
1-190-04 DUE TO/DUE FROM TRUST FUNDS 16,280.00
-4-67-99 TRANSFER OUT 16,280.00
-4-190-01 DUE TO/DUE FROM GENERAL FUND - 16,280.00
1-35-01-60-12 EMERGENCY FUEL FUND - 799.00
1-190-02 DUE TO/DUE FROM SPECIAL REVENU 799.00
-2-552-00 Emergency Fuel 799.00
-2-190-01 DUE TO/DUE FROM GENERAL FUND - 799.00
Total 304,500.00 304,500.00
8
To book budgeted transfers to the reserves and trust funds from other funds.
3-91-98 TRANSFER IN - 13,667.95
1-35-01-60-99 PUBLIC WORKS ROADS 13,667.95
-3-91-98 TRANSFER IN - 14,122.49
1-35-01-60-99 PUBLIC WORKS ROADS 14,122.49
-3-88-98 TRANSFER IN - 50,000.00
1-35-01-60-30 LIBRARY 4,861.18
-3-94-98 TRANSFER IN - 9,490.45
1-35-01-60-94 WATER QUALITY 9,490.45
-3-601-00 MAINTENANCE GARAGE - 5,000.00
1-35-01-60-19 MAINTENANCE GARAGE 5,000.00
-3-190-01 DUE TO/DUE FROM GENERAL FUND 239,941.86
-1-190-03 DUE TO/DUE FROM CAPITAL PROJEC - 239,941.86
3-84-98 TRANSFER IN - 21,060.00
3-84-98 TRANSFER IN - 21,085.00
2-51-01 RENT 42,145.00
-3-190-01 DUE TO/DUE FROM GENERAL FUND 42,145.00
-2-190-01 DUE TO/DUE FROM GENERAL FUND - 42,145.00
1-190-03 DUE TO/DUE FROM CAPITAL PROJEC - 42,145.00
1-190-02 DUE TO/DUE FROM SPECIAL REVENU 42,145.00
-3-97-98 TRANSFER IN - 5,000.00
3-190-01 DUE TO/DUE FROM GENERAL FUND 5,000.00
-1-35-01-60-01 PLAN 5 5,000.00
-1-190-03 DUE TO/DUE FROM CAPITAL PROJEC - 5,000.00
1-22-01-51-09 SCHOLARSHIP 945.00
-1-190-04 DUE TO/DUE FROM TRUST FUNDS - 945.00
4-63-98 TRANSFER IN - 945.00
4-190-01 DUE TO/DUE FROM GENERAL FUND 945.00
-Total 618,208.72 618,208.72
9
To bring AR to actual as of 12/31/20.
1-01-10-25-04 MISC 4,800.00
-3-151-00 ACCOUNTS RECEIVABLE - 4,800.00
1-190-03 DUE TO/DUE FROM CAPITAL PROJEC - 4,800.00
3-190-01 DUE TO/DUE FROM GENERAL FUND 4,800.00
-Total 9,600.00 9,600.00
10
To move some of the expenditures within the reserves and close the road bond capital balance to the road maintenance reserve to offset current year expenditures.
3-605-00 ROAD BOND OBLIGATION 1,990.03
-3-591-00 PUBLIC WORKS ROAD MAINTENANCE - 1,990.03
3-27-02-20-07 CONTRACTED - 188,983.66
3-91-01-99-99 Expense 188,983.66
-3-585-00 FACILITIES TRUCK - 6,050.98
3-591-00 PUBLIC WORKS ROAD MAINTENANCE 6,050.98
-Total 197,024.67 197,024.67
Account Description Debit Credit
Account Description Debit Credit 200
To accrue the last payroll of December 2020.
1-01-01-10-11 SALARIES 360.00
-1-01-01-10-12 WAGES 80.00
-1-01-10-10-12 WAGES 2,244.03
-1-01-15-10-11 SALARIES 1,188.48
-1-01-15-20-02 TRANSPORTATI 120.00
-1-01-20-10-12 WAGES 442.08
-1-05-05-10-12 WAGES 1,307.20
-1-05-30-10-12 WAGES 273.34
-1-10-01-10-12 WAGES 311.17
-1-13-01-10-12 WAGES 922.28
-1-15-05-10-12 WAGES 1,522.61
-1-25-30-10-11 SALARIES 535.04
-1-25-30-10-12 WAGES 536.40
-1-30-01-10-12 WAGES 900.80
-1-220-00 ACCRUED PAYROLL - 10,743.43
Total 10,743.43 10,743.43
GRAND TOTAL 10,743.43 10,743.43