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1990CITY OF BANGOR, MAINE Auditor's Report on Supplementary Information Schedule of Federal Financial Assistance June 30, 1990 l ooks er Certified Public Accountants CITY OF BANGOR, MAINE REPORT ON FEDERAL FINANCIAL ASSISTANCE YEAR ENDED JUNE 30, 1990 TABLE OF CONTENTS Page Independent Auditor's Reports: Schedule of Federal Financial Assistance 1 Internal Controls at the General Purpose Financial Statement Level 2 Internal Accounting and Administrative Controls at the Federal Financial Assistance Program Level -- Major Programs More Than 50 Percent Compliance at the General Purpose Financial Statement Level 11 Compliance with General Requirements 12 Compliance with Specific Requirements Applicable to Major Federal Financial Assistance Programs 13 Schedule of General Findings 15 Schedule of Specific Findings 17 Schedule of Federal Financial Assistance 22 Notes to Schedule of Federal Financial Assistance 25 Brooks land EarterCertified Public Accountants SCBBDULE OF FEDERAL FINANCIAL ASSISTANCE Independent Auditor's Report The Honorable Mayor and City Council City of Bangor, Maine We have audited the general purpose financial statements of the City of Bangor, Maine, for the year ended June 30, 1990, and have issued our.report thereon dated November 30, 1990 (except for Note 12, as to which the date is April 8, 1991). These general purpose financial statements are the responsibility of the City of Bangor, Maine, 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 City of Bangor, Maine, taken as a whole. The 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 information in this schedule has been subjected to the auditing procedures applied in the audit of the general purpose financial statements and, in our opinion, is fairly presented in all material respects in relation to the general purpose financial statements taken as a whole. 90k,.r-i �� November 30, 1990 1 P.O. Box 1167, 84 Harlow Street, Bangor, Maine 04401 (207) 947-8568 rooks ar't (2-r' Certified Public Accountants Internal Controls at the General Purpose Financial Statement Level Independent Auditor's Report The Honorable Mayor and City Council City of Bangor, Maine We have audited the general purpose financial statements of the City of Bangor, Maine for the year ended June 30, 1990, and have issued our report thereon dated November 30, 1990 (except for Note 12, as to which the date Is April 8, 1991). 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. In planning and performing our audit of the financial statements of the City of Bangor, Maine for the year ended June 30, 1990, we considered its internal control structure in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control structure. The management of the City of Bangor, Maine 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, and that transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles. Because of inherent limitations in any internal control structure, errors or irregularities 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. 2 P.O. Box 1167, 84 Harlow Street, Bangor, Maine 04401 (207) 947-8568 For the purpose of this report, we have classified the significant internal control structure policies and procedures in the following categories: * Treasury or financing * Revenue/receipts * Purchases/disbursements * External financial reporting Our consideration of the internal control structure included all of the control categories listed above. The purpose of our consideration of the internal control structure was to determine the nature, timing, and extent of the auditing procedures necessary for expressing an opinion on the general purpose financial statements. We noted certain matters involving the internal control structure and its operation that we consider to be reportable conditions under standards established by the American Institute of Certified Public Accountants. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control structure that, in our judgment, could adversely affect the entity's ability to record, process, summarize, and report financial data consistent with the assertions of management in the general purpose financial statements. We noted the following reportable condition that we consider to be a material weakness: Reportable Condition Condition: During our audit of Cash and Securities we noted the following: 1. The treasurer has access to cash, makes daily deposits, and reconciles the checking accounts. There is a lack of segregation of duties regarding cash. The treasurer is both custodian and record keeper with the audit division acting as overseer. 2. Payments received in the mail are opened and entered by the cashiers in Treasury. This represents a lack of proper segregation of duties. The cashiers are both custodian and record keeper. 3. The treasurer reconciles cash from cash sheets to bank balance. This creates an underlying assumption that the cash sheets are accurate, when in fact warrants are often omitted. In addition, Treasury doesn't track cash on a per fund basis. The audit division reconciles cash from the general ledger to cash sheets by fund. This is where errors in the cash sheets and general ledger are detected and corrected. 4. The treasurer bases all investing decisions on the balance reflected on the cash sheets. In addition, when investments are made they are coded as belonging solely to the general fund which is not accurate. Since Treasury doesn't keep track of cash by fund, when investments are made Treasury is unaware of how much belongs to which fund. 5. When employees, who are authorized signers for the City, leave their position, all affected banks should be notified immediately that they are no longer empowered by the City to sign checks. The previous finance director hasn't been employed by the City since December 1989, but was still listed as an authorized signer for several cash accounts including both Fleet Bank accounts at June 30, 1990. 3 6. There was no written Policy and Procedures Manual for Investments adopted and implemented as of June 30, 1990. We understand that in the subsequent period the City has engaged Fleet Bank to handle the overnight idle cash investments, and the City reviews all other investment options on a daily basis to insure that prudent investment decisions are being implemented. 7. The treasurer does not have adequate written procedures for the preparation of the Statement of Governmental Accounting Standards No. 3 worksheet, which is required every year at June 30, for financial statement disclosure purposes. Effects: Failure to have a written investment policy, to segregate duties for persons having custody of cash and investments from the record keeping function are violations of an effective internal control structure and exposes City assets to a greater risk of loss. Recommendations: We recommend that: 1. Someone other than Treasury should prepare the bank reconciliation and report directly to the audit division. 2. A finance employee, who is not involved with the daily deposits or posting to customer's accounts, should open and log all cash received in the mail. 3. Cash should be reconciled from the general ledger balance to the bank balance by fund. This would greatly reduce the amount of time spent reconciling cash on a monthly basis thereby increasing employee efficiency. 4. The City should institute a procedure whereby the cash sheets can be used to monitor cash by fund on a daily basis and incorporate omitted warrants. Then the treasurer would be able to make investing decisions based upon a more accurate cash balance. Also, this would allow the treasurer to properly record the investments and resulting income in the proper fund on a continuous basis versus an adjustment by the finance director at year end. 5. By notifying the banks immediately, the City could prevent ex-employees from having complete access to the City's cash accounts. The act of notification would also lessen the City's liability for checks signed without authorization. 6. If a Policies and Procedures Manual for Investments has not been implemented, it should be immediately. 7. Written procedures for the preparation of the Statement of Governmental Accounting Standards No. 3 disclosure be prepared and implemented. A material weakness is a reportable condition in which the design or operation of the specific 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. 4 Our consideration of the internal control structure would not necessarily disclose all reportable conditions that are also considered to be material weaknesses as defined above. However, we believe the reportable condition described above to be a material weakness. We also noted other matters involving the internal control structure and its operation that we have reported to the management of the City of Bangor, Maine, in a separate letter dated April 17, 1991. This report is intended for the information of the City Council, management and the federal cognizant agency. This restriction is not intended to limit the distribution of this report, which is a matter of public record. It4 49--k �� November 30, 1990 5 Brooks and EE]r'tP,r' Certified Public Accountants Internal Accounting and Administrative Controls at the Federal Financial Assistance Program Level --Major Programs More Than 50 Percent Independent Auditor's Report The Honorable Mayor and City Council City of Bangor, Maine We have audited the general purpose financial statements of the City of Bangor, Maine for the year ended June 30, 1990, and have issued our report thereon dated November 30, 1990 (except for Note 12, as to which the date is April 8, 1991). As part of our audit, we made a study and evaluation of the internal control systems, including applicable internal administrative controls, used in administering federal financial assistance programs to the extent we considered necessary to evaluate the systems as required by generally accepted auditing standards, Government Auditing Standards, issued by the Comptroller General of the United States, the Single Audit Act of 1984, and the provisions of Office of Management and Budget Circular A-128, "Audits of State and Local Governments". The management of the City of Bangor, Maine, is responsible for establishing and maintaining internal control systems used in administering federal financial assistance programs. In fulfilling that responsibility, estimates and judgements by management are required to assess the expected benefits and related costs of control procedures. The objectives of internal control systems used in administering federal financial assistance programs are to provide management with reasonable, but not absolute, assurance that, with respect to federal financial assistance programs, resource use is consistent with laws, regulations, and policies; resources are safeguarded against waste, loss, and misuse; and reliable data are obtained, maintained, and fairly disclosed in reports. Because of inherent limitations in any system of internal accounting and administrative controls used in administering federal financial assistance programs, errors or irregularities may nevertheless occur and not be detected. Also projection of any evaluation of the systems to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the degree of compliance with the procedures may deteriorate. 6 P.O. Box 1167, 84 Harlow Street, Bangor, Maine 04401 (207) 947-8568 For the purpose of this report, we have classified the significant internal accounting and administrative controls used in administering federal financial assistance programs in the following categories: Accounting Controls: * Treasury or financing * Revenue/receipts * Purchases/disbursements * External financial reporting Administrative Controls: General Requirements - * Political Activity * Davis -Bacon Act * Civil Rights * Cash Management * Relocation Assistance and Real Property Acquisition * Federal Financial Reports * Drug Free Work Place Act * Allowable Costs/Cost Principles Specific Requirements: * Types of services * Eligibility * Matching level of effort * Reporting * Special requirements, if any Our study included all of the applicable control categories listed above. During the year ended June 30, 1990, the City of Bangor, Maine expended 76% of its total federal financial assistance under major federal financial assistance programs. With respect to internal control systems used in administering major federal financial assistance programs, our study and evaluation included considering the types of errors and irregularities that could occur, determining the internal control procedures that should prevent or detect such errors and irregularities, determining whether the necessary procedures are prescribed and are being followed satisfactorily, and evaluating any weaknesses. With respect to the internal control systems used solely in administering the nonmajor federal financial assistance programs of the City of Bangor, Maine, our study and evaluation was limited to a preliminary review of the systems to obtain an understanding of the control environment and the flow of transactions through the accounting system. Our study and evaluation of the internal control systems used solely in administering the nonmajor federal financial assistance programs of the City of Bangor, Maine, did not extend beyond this preliminary review phase. Accordingly, our audit would not necessarily disclose material weaknesses in the internal control systems used solely in administering nonmajor federal financial assistance programs. 7 Our study and evaluation described in the two preceding paragraphs was more limited than would be necessary to express an opinion on the internal control systems used in administering the major and nonmajor federal financial assistance programs of the City of Bangor, Maine. Accordingly, we do not express an opinion on the internal control systems used in administering the major and nonmajor federal financial assistance programs of the City of Bangor, Maine, taken as a whole, or on any of the control categories identified above. However, our study and evaluation and our audit disclosed the following condition that we believe results in more than a relatively low risk that errors or irregularities in amounts that would be material to a federal financial assistance program may occur and not be detected within a timely period. Reportable Condition Condition: During our audit of Cash and Securities we noted the following: 1. The treasurer has access to cash, makes daily deposits, and reconciles the checking accounts. There is a lack of segregation of duties regarding cash. The treasurer is both custodian and record keeper with the audit division acting as overseer. 2. Payments received in the mail are opened and entered by the cashiers in Treasury. This represents a lack of proper segregation of duties. The cashiers are both custodian and record keeper. 3. The treasurer reconciles cash from cash sheets to bank balance. This creates an underlying assumption that the cash sheets are accurate, when in fact warrants are often omitted. In addition, Treasury doesn't track cash on a per fund basis. The audit division reconciles cash from the general ledger to cash sheets by fund. This is where errors in the cash sheets and general ledger are detected and corrected. 4. The treasurer bases all investing decisions on the balance reflected on the cash sheets. In addition, when investments are made they are coded as belonging solely to the general fund which is not accurate. Since Treasury doesn't keep track of cash by fund, when investments are made Treasury is unaware of how much belongs to which fund. S. When employees, who are authorized signers for the City, leave their Position, all affected banks should be notified immediately that they are no longer empowered by the City to sign checks. The previous finance director hasn't been employed by the City since December 1989, but was still listed as an authorized signer for several cash accounts including both Fleet Bank accounts at June 30, 1990. 6. There was no written Policy and Procedures Manual for Investments adopted and implemented as of June 30, 1990. We understand that in the subsequent period the City has engaged Fleet Bank to handle the overnight idle cash investments, and the City reviews all other investment options on a daily basis to insure that prudent investment decisions are being implemented. 8 7. The treasurer does not have adequate written procedures for the preparation of the Statement of Governmental Accounting Standards No. 3 worksheet, which is required every year at June 30, for financial statement disclosure purposes. Effects: Failure to have a written investment policy, to segregate duties for persons having custody of cash and investments from the record keeping function are violations of an effective internal control structure and exposes City assets to a greater risk of loss. Recommendations: We recommend that: 1. Someone other than Treasury should prepare the bank reconciliation and report directly to the audit division. 2. A finance employee, who is not involved with the daily deposits or posting to customer's accounts, should open and log all cash received in the mail. 3. Cash should be reconciled from the general ledger balance to the bank balance by fund. This would greatly reduce the amount of time spent reconciling cash on a monthly basis thereby increasing employee efficiency. 4. The City should institute a procedure whereby the cash sheets can be used to monitor cash by fund on a daily basis and incorporate omitted warrants. Then the treasurer would be able to make investing decisions based upon a more accurate cash balance. Also, this would allow the treasurer to properly record the investments and resulting income in the proper fund on a continuous basis versus an adjustment by the finance director at year end. 5. By notifying the banks immediately, the City could prevent ex-employees from having complete access to the City's cash accounts. The act of notification would also lessen the City's liability for checks signed without authorization. 6. If a Policies and Procedures Manual for Investments has not been implemented, it should be immediately. 7. Written procedures for the preparation of the Statement of Governmental Accounting Standards No. 3 disclosure be prepared and implemented. A material weakness is a reportable condition in which the design or operation of the specific 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 also noted other matters involving the internal control structure and its operation that we have reported to the management of the City of Bangor, Maine in a separate letter dated April 17, 1991. 9 These conditions were considered in determining the nature, timing, and extent of the audit tests to be applied in (I)our audit of the June 30, 1990, general purpose financial statements and (2)our audit and review of the City of Bangor, Maine, compliance with laws and regulations non-compliance with which we believe could have a material effect on the allowability of program expenditures for each major federal financial assistance program and non -major federal financial assistance programs. This report does not affect our reports on the general purpose financial statements and on the City of Bangor, Maine, compliance with laws and regulations dated November 30, 1990. This report is intended for the information of the City Council, management and the federal cognizant agency. The restriction is not intended to limit the distribution of this report, which is a matter of public record. November 30, 1990 10 Drooks land Carter, Certified Public Accountants Compliance at the General Purpose Financial Statement Level Independent Auditor's Report The Honorable Mayor and City Council City of Bangor, Maine We have audited the general purpose financial statements of the City.of Bangor, Maine for the year ended June 30, 1990, and have issued our report thereon dated November 30, 1990 (except for Note 12, as to which the date is April 8, 1991). 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 City of Bangor, Maine is the responsibility of the City's management. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we performed tests of the City's compliance with certain provisions of laws, regulations, contracts, and grants. However, it should be noted that 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 City of Bangor, Maine 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 City of Bangor, Maine had not complied, in all material respects, with those provisions. This report is intended for the information of the City Council, management and the federal cognizant agency. This restriction is not intended to limit the distribution of this report, which is a matter of public record. November 30, 1990 11 P.O. Box 1167, 84 Harlow Street,. Bangor, Maine 04401 (207) 947-8568 Brooks sand Carter, Certified Public Accountants Compliance with General Requirements Independent Auditor's Report The Honorable Mayor and City Council City of Bangor, Maine We have audited the general purpose financial statements of the City of Bangor, Maine as of and for the year ended June 30, 1990, and have issued our report thereon dated November 30, 1990 (except for Note 12, as to which the date is April 8, 1991). We have also applied procedures to test the City of Bangor, Maine's compliance with the following requirements applicable to each of its major federal financial assistance programs, which are identified in the schedule of federal financial assistance for the year ended June 30, 1990: political activity, Davis -Bacon Act, civil rights, cash management, relocation assistance, federal financial reports, and drug free workplace. 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 City of Bangor, Maine's 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 City of Bangor, Maine, 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 the City Council, management and the federal cognizant agency. This restriction is not intended to limit the distribution of this report, which is a matter of public record. " -.14-k alvc, November 30, 1990 12 P.O. Box 1167, 84 Harlow Street, Bangor, Maine 04401 (207) 947-8568 rooks ar'ter' Certified Public Accountants Compliance with Specific Requirements Applicable to Major Federal Financial Assistance Programs Independent Auditor's Report The Honorable Mayor and City Council City of Bangor, Maine We have audited the general purpose financial statements of the City of Bangor, Maine as of and for the year ended June 30, 1990, and have issued our report thereon dated November 30, 1990 (except for Note 12, as to which the date is April 8, 1991). We. have also audited the City of Bangor, Maine's compliance with the requirements governing types of services allowed or unallowed; eligibility; matching, level of effort, or earmarking; reporting; claims for advances and reimbursements; and amounts claimed or used for matching that are applicable to each of its major federal financial assistance programs, which are identified in the accompanying schedule of federal financial assistance, for the year ended June 30, 1990. The management of the City of Bangor, Maine is responsible for the City of Bangor, Maine's compliance with those requirements. our responsibility is to express an opinion on compliance with those requirements based on our audit. We conducted our audit in accordance with generally accepted auditing standards, Government Auditing Standards, issued by the Comptroller General of the United States, and OMB 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 material noncompliance with the requirements referred to above occurred. An audit includes examining, on a test basis, evidence about the City of Bangor, Maine's compliance with those requirements. We believe that our audit provides a reasonable basis for our opinion. The results of our audit procedures disclosed immaterial instances of noncompliance with the requirements referred to above, which are described in the accompanying schedule of findings and questioned costs. We considered these instances of noncompliance in forming our opinion on compliance, which is expressed in the following paragraph. 13 P.O. Box 1167, 84 Harlow Street, Bangor, Maine 04401 (207) 947-8568 In our opinion, the City of Bangor, Maine complied, in all material respects, with the requirements governing types of services allowed or unallowed; eligibility; matching, level of effort, or earmarking; reporting; claims for advances and reimbursements; and amounts claimed or used for matching that are applicable to each of its major federal financial assistance programs for the year ended June 30, 1990. November 30, 1990 14 CITY OF BANGOR, MAINE SCHEDULE OF GENERAL FINDINGS FOR THE YEAR BLADED JUNE 30, 1990 Condition The City of Bangor adopted a policy on alcohol and drug abuse. The existing policy is deficient on several issues and will require revisions. Criteria- In 1988 the Federal Government passed the Drug Free Work Place Act. The law requires that recipients of federal funding must adopt a formal written policy concerning alcohol and drug use in the work place. Effect• If the City does not amend the existing policy as prescribed by the Department of Labor, federal funding could be denied. Recommendation: The City of Bangor should make revisions to the existing drug free policy as soon as possible. Auditee Response: 6 The City will prepare necessary revisions to the Substance Abuse Policy and resubmit the Policy to the State of Maine for their review and approval. Document should be ready for resubmission on or before June 15, 1991. 15 CITY OF BANGOR, MAINE SCHEDULE OF GENERAL FINDINGS FOR THE YEAR ENDED JUNE 30, 1990 Condition: The City of Bangor is currently using an outdated indirect cost allocation plan (ICRP). Criteria• OMB Circular A-87 requires that indirect costs charged to a federal program be supported by an ICAP. Effect• If City departments do not consistently use current federally approved ICAP rates, grant programs will be inappropriately charged for indirect costs. If the rates used are higher than the approved rates, the grants will be over -billed, and this will result in questioned costs. If the rates used are lower than the approved rates, the City will end up absorbing the additional costs. Recommendation: A new indirect cost allocation plan must be implemented and submitted to the,Department of Health and Human Services as soon as possible. Auditee Response: City is preparing proposal solicitation for preparation of an ICAP based on fiscal year 90 audited costs; and anticipates incorporating annual update of the ICAP as part of the annual audit process. 16 CITY OF BANGOR, MAINE SCHEDULE OF SPECIFIC FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 1990 Federal Grantor: Department of Housing and Urban Development City Department: Community Development Pass -Through Grantor: N/A FINDING/NON-COMPLIANCE NO. 1 Program Condition: Community The City is currently using an outdated Development indirect cost allocation plan. Block Grant CFDA No. Criteria: 14.218 OMB Circular A-87 requires that indirect costs charged to a federal program be supported by an ICRP. Effect: If City departments do not consistently use current federally approved CAP rates, grant programs will be inappropriately charged for indirect costs. If the rates used are higher than the approved rates, the grants will be over -billed and this will result in questioned costs. Conversely, lower rates could result in the City absorbing the cost difference. Recommendation: A new indirect cost allocation plan must be implemented and submitted to HHS as soon as possible. Auditee Response: City is preparing proposal solicitation for preparation of an ICAP based on fiscal year 90 audited costs; and anticipates incorporating annual update of the ICAP asi part of the annual audit process. 17 QUESTIONED COSTS $ 0 CITY OF BANGOR, MAINE SCHEDULE OF SPECIFIC FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 1990 Federal Grantor: Department of Housing and Urban Development City Department: Community Development Pass -Through Grantor: N/A FINDING/NON-COMPLIANCE NO. 2 QUESTIONED COSTS Program Condition: Community ( A computer system was purchased with CDBG $3,286 Development Block Grant CFDA No. 14.218 funds, and it was determined by HUD that this system was not necessary to administer the grant program. Criteria: OMB Circular A-87 states that to be allowable under a grant program, costs must meet the following general criteria: a. Be necessary and reasonable for proper and efficient administration of the grant program; and b. Be allowable to a particular cost objective to the extent of benefits received by such objective. Effect• Program expenses have been overstated. Recommendation: The $3,286 be reimbursed to the funding source. Auditee Response: I I $3,286 has been reimbursed to the CDBG program. I I 18 CITY OF BANGOR, MAINE SCHEDULE OF SPECIFIC FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 1990 Federal Grantor: U.S. Department of Transportation City Department: Airport Pass -Through Grantor: Federal Aviation Administration FINDING/NON-COHPLIANCE NO. 3 QUESTIONED COSTS Program Condition: AIP Engineering costs were applied against they $468.32 3-23-0005-02 project after the project was closed out. CFDA No. Criteria: 20.106 ( Engineering costs should be submitted on al timely basis to the consulting firm over- seeing the AIP projects, to insure that the request for reimbursements include ally project costs. Effect: When direct costs of the projects have been omitted from the request for reimbursements, the City pays more than the required matching requirement. Recommendation: Reconciliations should be done by the en- gineering department from their records tol the request for reimbursements to insure that costs have been accounted for on the projects. A_uditee Response: City is revising handling of capital projects, which will include improved monitoring and reconciliations. The $468.32 questioned was not included in closeout costs reported to FAA. 19 CITY OF BANGOR, MAINE SCHEDULE OF SPECIFIC FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 1990 Federal Grantor: Department of Agriculture City Department: WIC Pass -Through Grantor: Department of Human Services FINDING/NON-COMPLIANCE NO. 4 W QUESTIONED COSTS Program Condition: WIC The City of Bangor is currently charging $ 0 actual workers' compensation losses against the WIC program. These costs have not been allowed for 6/30/90; therefore there were no questioned costs. CFDA No. Criteria: 10.557 OMB Circular A-87 states that to be I allowable under a grant program, costs must be necessary, reasonable and allowable. Effect: Program expenses have been charged with actual workers' compensation losses instead of an allowable method as prescribed by Circular A-87. Recommendation: That the allocation of workers' compensation be modified to comply with Circular A-87 to insure that all costs of the grants have been recovered. A_uditee Response: City is creating an internal service fund effective July 1, 1991, and will charge all units based on manual premium for Maine Municipal Association Workers' Comp. Fund. I I W CITY OF BANGOR, MAINE SCHEDULE OF SPECIFIC FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 1990 Federal Grantor: Department of Transportation City Department: Airport Pass -Through Grantor: N/A FINDING/NON-COMPLIANCE NO. 5 0a? QUESTIONED COSTS Program Condition: Airport The City is currently using an outdated $ 8,387 Development Aidl indirect cost allocation plan. Program/Airport Improvement Program CFDA No. Criteria: 20.106 OMB Circular A-87 requires that indirect costs charged to a federal program be supported by an ICAP. Effect: If City departments do not consistently use current federally approved CAP rates, grant programs will be inappropriately charged for indirect costs. If the rates used are higher than the approved rates, the grants will be over -billed and this will result in questioned costs. Conversely, lower rates could result in the City absorbing the cost difference. Recommendation: A new indirect cost allocation plan must be implemented and submitted to HHS as soon as possible. Auditee Response: City is preparing proposal solicitation for preparation of an ICAP based on fiscal year 90 audited costs; and anticipates incorporating annual update of the ICAP ash part of the annual audit process. I I 0a? CITY OF BANGDR, MAl� SCHEDULE OF FEDERAL FINANCIAL ASSISTANCE FOR THE YEAR ENDED JUNE 30, 1990 22 Reference Catalogue Federal of Federal Received Through State Other-, Local Total Total Assistance Directly State Grants Income Income Transfers Revenues Expenditures Department of Agriculture WIC 10.557 $ - $1,410,115 $ 16,855 $ - $ - $ - $1,426,970 $1,438,661 Department of Health S Human Services i Venereal Disease Clinics $ - $ - $ 55,538 $ 26,490 $ - $ - $ 82,028 $ 73,912 Childhood Immunization - - 17,674 - - - 17,674 40,917 Public Health Nurse - - 44,889 2,065 133,619 - 180,573 180,573 Dental Clinic 16,000 50,367 50,338 116,705 116,705 Total - Accrual Basis $ $ $ 134,101 $ 78,922 $ 183,957 $ $ 396,980 $ 412,107 Department of Housing and Urban Development Community Development Block Grants/Entitle- ment Grants: 14.218 B -87 -MC -23-0004 $ 251,574 $ - $ - $ - $ - $ (427,832) $ (176,258) $ - B -88 -MC -23-0004 534,107 - - - - - 534,107 765,656 B -89 -MC -23-0004 - - - - - 457,831 457,831 558,176 Program Income 12.221 - - - 176,266 - (29,999) 146,267 - Urban Development Action Grants: Program Income - - - 12,953 - - 12,953 Total - Cash Basis 785,681 - - 189,219 - 974,900 1,323,832 Receivables - 7/1/89 (106,220) - - - - - (106,220) - 6/30/90 416,528 416,528 Total - Accrual Basis $1,095,989 $ - $ - $ 189,219 $ - S - $1,285,208 $1,323,832 22 CITY OF BANGOR, NA188 SCHEDULE OF FEDERAL FINANCIAL ASSISTANCE FOR THS YEAR ENDED JDNE 30, 1990 Reference Catalogue Federal of Federal Received Through State Other Local Total Total Assistance Directly State Grants income Income Transfers Revenues Expenditures Department of Education Adult Basic Education 84.002 $ - $ 29,000 $ - $ - $ - $ - $ 29,000 $ 29,000 Indo-Chinese Bilingual 84.146 - - - - - - - 163 E.S.E.A. Chapter I 84.010 - 535,504 - - - - 535,504 432,698 Local Entitlement 84.027 - 134,250 - - - - 134,250 147,417 E.S.E.A. Chapter I Handicapped 84.009 - 10,974 - - - - 10,974 10,794 E.S.E.A. Chapter I Migrant 84.011 - 66,850 - - - - 66,850 31,599 E.S.E.A. Chapter ii 84.151 - 56,743 - - - - 56,743 73,954 Arts 6 Humanities - - 41840 - - - 4,840 4,740 Teacher Recertification - - 34,183 - - - 34,183 32,374 Dwight D. Eisenhower Act 84.164 - 11,877 - - - - 11,877 20,293 Drug Free Schools 84.186 - 20,955 - - - - 20,955 18,198 Aids Grant 13.118 - 2,000 - - - - 2,000 3,674 Project Rebound - 16,000 44,000 - - 60,000 51,509 Total - Accrual Basis $ $ 868,153 $ 55,023 $ 44,000 $ S S 967,176 $ 856,413 23 CITY OF BANGOR, NAIVE SCBEDULS OF FEDERAL FINANCIAL ASSISTANCE FOR THE YEAR ENDED JUNE 30, 1990 24 Reference Catalogue Federal of Federal Received Through State Other Local Total Total Assistance Directly State Grants Income Income Transfers Revenues Expenditures Department of Transportation Airport Development Aid Program/Airport Improvement Program 20.106 6-23-0005-06 $ - $ - $ - $ - $ - $ - $ - $ - 6-23-0005-06 Amendment - - - - 87,714 - 87,714 - 6-23-0005-07 - - - - - - - - 6-23-0005-09 - - - - - (37,609) (37,609) 9,005 6-23-0005-10 71,224 - - - - - 71,224 - 6-23-0005-11 - - - - - - - - 3-23-0005-01 - - 199 - - - 199 - 3-23-0005-02 - - - - - - - - 3-23-0005-03 - - - - 87,787 25,523 113,310 - 3-23-0005-04 - - - - 9,361 (193,127) (183,766) - 3-23-0005-05 - - - - - 230,736 230,736 82,831 3-23-0005-06 - - - - - (25,523) (25,523) - 3-23-0005-07 - - 1,319 - 45,000 - 46,319 88,932 3-23-0005-0889 91,057 - 5,059 - - - 96,116 40,886 3-23-0005-09 - - 24,227 - 20,000 - 44,227 1,360,844 - 3-23-0005-10 80,213 Subtotal 162,281 - 30,804 - 249,862 - 442,947 1,662,711 Other Airport Projects (1,071) - - - - - (1,071) - Total - Cash Basis 161,210 - 30,804 - 249,862 - 441,876 1,662,711 Receivables - 7/1/89 (821,734) - (27,693) - - - (849,427) - 6/30/90 2,094,718 68,102 341,678 2,504,498 - Total - Accrual Basis $1,434,194 $ - S 71,213 $ - S 590,640 $ - $2,096,947 $1,662,711 Urban Mass Transportation Capital and Operating Assistance 20.057 Operating $ - $ 172,815 $ 34,563 $ 234,455 $ 150,514 $ - $ 592,347 $ 592,347 Capital - - - - - - - - Total - Cash Basis - 172,815 34,563 234,455 150,514 - 592,347 592,347 Receivables - 7/1/89 - (15,183) (3,037) - - - (18,220) - 6/30/90 Total - Accrual Basis S $ 157,632 $ 31,526 $ 234,455 $ 150,514 $ $ 574,127 $ 592,347 24 CITY OF BANGOR, MAINE NOTES TO THE SCHEDULE OF FEDERAL FINANCIAL ASSISTANCE JUNE 30, 1990 Basis of Preparation Receipts and expenditures presented in the Schedule of Federal Financial Assistance are taken directly from the books and records of the City, with the net change in receivables being added to convert the statements to accrual basis, which is in conformance with generally accepted accounting principles. Major Federal Programs A major federal financial assistance program, in accordance with the Single Audit Act of 1984 as it relates to the City for the year ended June 30, 1990, is defined as any program for which total expenditures of federal financial assistance are the larger of $300,000 or 3% of total federal financial assistance expenditures. CFDA Source: Catalogue of Federal Domestic Assistance 25