Audit 330037

Title: Note 1 - Definition of the Reporting Entity Accounting Policies: The Trust’s accounting policies conform with U.S. generally accepted accounting principles applicable to governmental units as set forth by the Governmental Accounting Standards Board. Basis of Presentation The accompanying schedule of expenditures of federal awards is presented using the cash basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance for all awards with the exception of amounts provided to subrecipients under the base clean water and drinking water capitalization grants programs; which follow criteria determined by the Environmental Protection Agency for the allowability of costs. Under these principles, certain types of expenditures are not allowable or are limited as to reimbursement. De Minimis Rate Used: N Rate Explanation: The Trust has not elected to use the 10% deminimus indirect cost rate outlined in UG Section 200.414. The Massachusetts Clean Water Trust (the Trust) is an authority established by the Massachusetts General Laws and is a component unit of the Commonwealth of Massachusetts (the Commonwealth). The Trust administers the Massachusetts State Revolving Funds (SRFs). The SRF programs (Clean Water SRF and Drinking Water SRF) are partnerships between the United States Environmental Protection Agency (EPA) and the Commonwealth of Massachusetts. SRFs function like an environmental infrastructure bank by financing water infrastructure projects in cities and towns across the Commonwealth. The SRFs are different from other federal funding programs because they are managed and co-funded by states. Though they receive seed funding via federal capitalization grants from EPA, the SRFs have non-federal sources of money in them (e.g., state match, recycled principal repayments, interest earning and bond proceeds). Once funding from SRF federal capitalization grants is loaned by the SRFs to recipients and then repaid by those recipients to the SRFs, those funds lose their federal character. Because only a small amount of the total funds in the SRF are federal, the requirements that apply to “federal awards” are applied only to a subset of total projects funded by the SRFs. This subset is defined as “equivalency projects”. For each capitalization grant, the Trust selects assistance agreements from its infrastructure fund that will comply with the equivalency requirements. The accompanying schedule of expenditures of federal awards (the Schedule) includes the federal awards of the Trust under programs, equivalency projects, of the federal government for the year ended June 30, 2024. The information on this Schedule is prepared in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operation of the Trust, it is not intended to and does not present the financial position, changes in net position, or cash flows of the Trust.

Title: Note 4 - Subrecipient Disbursements Accounting Policies: The Trust’s accounting policies conform with U.S. generally accepted accounting principles applicable to governmental units as set forth by the Governmental Accounting Standards Board. Basis of Presentation The accompanying schedule of expenditures of federal awards is presented using the cash basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance for all awards with the exception of amounts provided to subrecipients under the base clean water and drinking water capitalization grants programs; which follow criteria determined by the Environmental Protection Agency for the allowability of costs. Under these principles, certain types of expenditures are not allowable or are limited as to reimbursement. De Minimis Rate Used: N Rate Explanation: The Trust has not elected to use the 10% deminimus indirect cost rate outlined in UG Section 200.414. The Trust passes certain federal awards received from the Environmental Protection Agency to other governmental entities (subrecipients). As Note (2) describes the Trust reports expenditures of federal awards to subrecipients when paid in cash. As a pass-through entity, the Trust has certain compliance responsibilities, such as monitoring its subrecipients to help assure they use these subawards as authorized by laws, regulations, and the provisions of the grant agreements.