06/30/2004-FISCAL AUDITS - Laserfiche WebLink

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Septic Loans Comment , The Town participates in a septic loan program through the Massachusetts Water Pollution Abatement Trust (MWPAT). The MWPAT loans funds to the Town,who immediately transfers the funds to Barnstable County , (County),which administers the program. Based on eligibility requirements,the County distributes funds to Town residents for septic betterments. The residents must then repay these loans,usually over a twenty(20)year period. The loan payments are billed through a betterment assessment on the residents' tax bills. ' We noted the following deficiencies related to the accounting of this program: ➢ Receipts received from MWPAT for the program are recorded as State Revenue. These receipts should be ' recorded as proceeds from long-term debt. ➢ Proceeds from MWPAT are not recorded as long-term bonds and notes payable in the General Long 1 Term Obligations Account Group. ➢ Payments to Barnstable County are treated as expenditures only. ' ➢ Loans receivable from residents participating in the loan program are only recorded when the assessment is included in their tax bills. The current method of accounting does not record the entire receivable since ' assessments not yet due are not recorded on the general ledger or the Collector's receivable system. This is a weakness in internal controls over loans receivable. Recommendation ' We recommend the following: ➢ That receipts received from the MWPAT loan program be reported as proceeds of long-term debt ' ➢ That receipts received from the MWPAT loan program be reported in the General Long-Term Obligations ' Account Group. ➢ That immediately following the payment to Barnstable County(for the transfer of MWPAT loan ' proceeds)a receivable and corresponding deferred revenue be established for the amount disbursed to Barnstable County. o Upon communication from Barnstable County that a loan has been issued,the Barnstable County ' receivable and corresponding deferred revenue should be reduced by the loan amount. ➢ That the full amount of the loans receivable be recorded on the general ledger when Barnstable County , has notified the Town that funds have been loaned to residents. These receivables should be segregated by the unapportioned and apportioned amounts and be offset by deferred revenue. o When the Town apportions the receivable,the unapportioned receivable should be reduced and ' the apportioned receivable should be recorded. Implementation of these recommendations will strengthen internal controls over loans receivable and financial ' reporting. 3 '