Audit of Community Teamwork, Inc. Objectives, Scope, and Methodology

An overview of the purpose and process of auditing Community Teamwork, Inc.

Overview

In accordance with Section 12 of Chapter 11 of the Massachusetts General Laws, the Office of the State Auditor has conducted a performance audit of certain activities of Community Teamwork, Inc. (CTI) for the period July 1, 2017 through June 30, 2019.

We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

Below are our audit objectives, indicating the questions we intended our audit to answer and the conclusions we reached regarding each objective.

Objective	Conclusion
Do CTI’s non-payroll contract expenses comply with Sections 1.04(1) and 1.05 of Title 808 of the Code of Massachusetts Regulations (CMR)?	Yes
Does the compensation (including salaries and fringe benefits) that is provided to CTI’s chief executive officer (CEO) and chief financial officer (CFO) comply with 808 CMR 1.05(24) and 808 CMR 1.05(9)?2	Yes

 

To achieve our audit objectives, we gained an understanding of the internal controls we determined to be relevant to the objectives by reviewing agency policies and procedures, as well as conducting interviews with CTI’s staff and management. We evaluated the design and implementation, and tested the operating effectiveness, of controls over contract expenditures and executive compensation. Additionally, we conducted further audit testing as described below.

Non-payroll Expenses

We selected a statistical, random sample (with a confidence level of 95%, a tolerable error rate of 10%, and an expected error rate of 0%) of 30 expenditures, totaling $74,433, from a population of 16,868 non-payroll expenses, totaling $22,881,772. We reviewed supporting documentation (e.g., receipts, invoices, packing slips) for these expenditures to determine whether each one was properly charged to a state contract and documented.

Management Compensation

We obtained salary information from CTI’s director of human resources for CTI’s CEO and CFO.³ We then compared the salaries with the yearly maximum salary amounts that can be charged to state contracts according to 808 CMR 1.05(24).⁴

We also tested whether the fringe benefits provided to CTI’s CEO and CFO⁵ complied with 808 CMR 1.05(9). We reviewed details of the employee benefit package CTI offers to all its employees. We then obtained fringe benefit data from the federal Bureau of Labor Statistics, calculated the average fringe benefits offered by private-industry employers as a percentage of average salary (30%), and compared it to the fringe benefits paid to CTI’s CEO and CFO for fiscal years 2018 and 2019, to determine whether the fringe benefits CTI provided were excessive.

Finally, we tested whether the allocation of the CEO and CFO salaries and fringe benefits to state programs was reasonable. We verified that indirect costs were allocated to applicable state programs using CTI’s cost allocation method by identifying applicable programs in the Uniform Financial Statements and Independent Auditor’s Reports CTI filed for fiscal years 2018 and 2019 and recalculating CTI’s indirect costs allocated to these programs.

Data Reliability Assessment

CTI uses the Sage Micro Information Products, Inc. (MIP) accounting system to record and process all accounting transactions. We determined the reliability of the data obtained from MIP by testing selected system controls (access controls, configuration management, contingency planning, security management, and segregation of duties) that were in place during our audit period. We also performed the following tests:

• We selected a judgmental sample of 20 expenses from MIP and determined whether the information in MIP matched information on hardcopy supporting documentation (such as invoices and reimbursement check requests).
• We selected a judgmental sample of 10 expenses from hardcopy supporting documentation and traced them to MIP for agreement.

To determine the reliability of compensation data used in our testing, we compared salary expenses from CTI’s Form W-2s (Wage and Tax Statements submitted to the Internal Revenue Service) for the CEO and CFO to the amounts reported by the director of human resources and disclosed in the financial report CTI submitted to the state Operational Services Division.

Based on our audit work, we determined that the data obtained for our audit were sufficiently reliable for the purposes of our audit work.

Conclusion

Our audit revealed no significant instances of noncompliance that must be reported under generally accepted government auditing standards.

2.     Under 808 CMR 1.05(9), fringe benefits that are nonreimbursable include those that are not available to all employees under a documented policy of the service provider and those that are deemed excessive compared to those of similar service providers.

3.       As reported in CTI’s Uniform Financial Statements and Independent Auditor’s Reports, the CEO’s salary totaled $163,960 in fiscal year 2018 and $177,625 in fiscal year 2019. The CFO’s salary totaled $136,250 in fiscal year 2018 and $147,175 in fiscal year 2019.

4.     Every year, the state’s Operational Services Division determines the maximum salary amounts that can be charged to state contracts for officers and managers of human service vendors. In fiscal years 2018 and 2019, the amounts were $178,036 and $183,448, respectively. Salaries above these amounts must be charged to a nonreimbursable expense account, and the vendors must disclose what non-state revenues (e.g., fundraising, commercial activities, investment earnings, gifts) funded the excess.

5.     As reported in CTI’s Uniform Financial Statements and Independent Auditor’s Reports, the cost of the fringe benefits CTI provided to the CEO totaled $16,014 in fiscal year 2018 and $16,467 in fiscal year 2019. The cost of the fringe benefits CTI provided to the CFO totaled $14,603 in fiscal year 2018 and $14,898 in fiscal year 2019.

Date published:	August 19, 2020