MASSACHUSETTS DEPARTMENT OF TRANSPORTATION (A …

MASSACHUSETTS DEPARTMENT OF TRANSPORTATION (A Component Unit of the Commonwealth of Massachusetts) Financial Statements and Supplementary Schedules June 30, 2010 (With Independent Auditors' Report Thereon)

MASSACHUSETTS DEPARTMENT OF TRANSPORTATION (A Component Unit of the Commonwealth of Massachusetts)

Table of Contents

Independent Auditors' Report Basic Financial Statements:

Statement of Net Assets Statement of Activities Governmental Funds Balance Sheet Reconciliation of the Governmental Funds Balance Sheet Total Fund Balances to the

Statement of Net Assets Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances

of Governmental Funds to the Statement of Activities Proprietary Funds Statement of Net Assets Proprietary Funds Statement of Revenues, Expenses, and Changes in Fund Net Assets Proprietary Funds Statement of Cash Flows Fiduciary Fund Statement of Net Assets Fiduciary Fund Statement of Changes in Net Assets Notes to Basic Financial Statements MassDOT MBTA (Blended Component Unit) Other Supplementary Information Massachusetts Transportation Trust Fund Combining Schedule of Balance Sheet Accounts Massachusetts Transportation Trust Fund Combining Schedule of Revenues, Expenditures, and Changes in Fund Balances

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KPMG LLP Two Financial Center 60 South Street Boston, MA 02111

Independent Auditors' Report

Members of the Board of Directors Massachusetts Department of Transportation:

We have audited the accompanying financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund and the aggregate remaining fund information of the Massachusetts Department of Transportation (MassDOT), a component unit of the Commonwealth of Massachusetts, as of June 30, 2010 and for the eight-month period then ended, which collectively comprise MassDOT's basic financial statements, as listed in the table of contents. Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of entities which represent 94% and 95% of the total assets and total revenues of the aggregate discretely presented component units or the Owner Controlled Insurance Program, an Internal Service Fund, which represent 13% and less than 1% of the total assets and total revenues of the aggregate remaining fund information and less than 1% of the total assets and total revenues of the governmental activities. Those financial statements were audited by other auditors whose reports thereon have been furnished to us, and our opinions, insofar as they relate to the amounts included for those entities and funds, are based solely on the reports of the other auditors.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in 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 financial statements are free of material misstatement. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of MassDOT's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the 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 and the reports of the other auditors provide a reasonable basis for our opinions.

As discussed in note 1(a), MassDOT commenced operations on November 1, 2009. Also as discussed in note 1(m), MassDOT adopted the provisions of Governmental Accounting Standards Board (GASB) Statement No. 53, Accounting and Financial Reporting for Derivative Instruments as of November 1, 2009.

In our opinion, based on our audit and the reports of the other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund and the aggregate remaining fund information of MassDOT at June 30, 2010, and the respective changes in financial position and, where applicable, cash flows thereof for the eight-month period then ended in conformity with U.S. generally accepted accounting principles.

KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative ("KPMG International"), a Swiss entity.

MassDOT has not presented Management's Discussion and Analysis that U.S. generally accepted accounting principles has determined necessary to supplement, although not required to be part of, the basic financial statements. Our audit was made for the purpose of forming opinions on the financial statements that collectively comprise MassDOT's basic financial statements. The Other Supplementary Information listed in the accompanying table of contents is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements. In accordance with Government Auditing Standards, we have also issued our report dated January 10, 2011 on our consideration of MassDOT's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

January 10, 2011

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MASSACHUSETTS DEPARTMENT OF TRANSPORTATION (A COMPONENT UNIT OF THE COMMONWEALTH OF MASSACHUSETTS)

STATEMENT OF NET ASSETS

JUNE 30, 2010 (Dollars in thousands)

ASSETS AND DEFERRED OUTFLOWS Current assets:

Cash and short-term investments Restricted cash and investments Derivative instrument Receivables, net of allowance for uncollectibles:

Due from Commonwealth Due from federal government Other Other assets

Total current assets

Noncurrent assets: Restricted cash and investments Other assets Capital assets: Nondepreciable Depreciable, net of accumulated depreciation

Total noncurrent assets

Deferred outflows from derivative instruments

Total assets and deferred outflows

LIABILITIES Current liabilities:

Accounts payable and accrued expenses Deferred revenue Accrued interest Bonds and notes payable Capital lease obligations Other liabilities

Total current liabilities

Noncurrent liabilities: Accrued interest on capital appreciation bonds Bonds payable Capital lease obligations Net OPEB and pension obligation Liability for derivative instruments Other liabilities

Total noncurrent liabilities

Total liabilities

NET ASSETS Invested in capital assets, net of related debt Restricted for other purposes Unrestricted (deficit)

Total net assets

See notes to basic financial statements.

Governmental Activities

Primary Government Business-type Activities

$

115,919

963,493

2,632

112,985 35,564 -

246,553 308

64,371 4,184

120,342 7,009

14,820 107,748

1,397,460

398,468

Total

228,904 999,057

2,632

366,895 7,317

79,191 111,932

1,795,928

Component Units

15,161 23,135

-

66,823 32,947 52,845

5,723

196,634

118,045 12,139

2,829,805 19,032,645

21,992,634

80,613

23,470,707

728,640 181,442

791,399 7,354,049

9,055,530

98,665

9,552,663

846,685 193,581

3,621,204 26,386,694

31,048,164

179,278

33,023,370

11,520

28,691 249,921

290,132

-

486,766

442,185 46,807 10,814 19,276 44,494

563,576

91,960 2,176,335

316,605 104,009

2,688,909

3,252,485

19,666,839 942,819 (391,436)

$ 20,218,222

121,308 -

127,725 266,975

36,871 65,530

618,409

563,493 46,807

138,539 286,251

36,871 110,024

1,181,985

5,255,145

262,159 327,265 120,542 125,151

6,090,262

6,708,671

91,960 7,431,480

262,159 327,265 437,147 229,160

8,779,171

9,961,156

3,308,851 19,251

(484,110)

2,843,992

22,975,690 962,070 (875,546)

23,062,214

33,769 652

2,304 136,383

578

173,686

36,600

6,477

9,996

53,073

226,759

276,975 2,722

(19,690)

260,007

3

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