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CONSTANCE R. KIRIU
('ounlp (jerk
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• r
County of Hawai `i
Office of the County Clerk
25 .4i~puni Street
Hilo. Hawni'i 96720
Telephone- (X081 961-h'155 Eacsi~nile BOS/ 961-8)/2
April 13, 2004
~f0: Council Members
FROM: Constance Kiriu~~
County Clerk
RE: Single Audit Keport for Fiscal Year Ending June 30, 2004
A copy of the Single Audi[ Report ol~the County of Hawai `i./i~r I~Yscal Year Ending
June 30, 2004, is distributed for your information and review. "fhe Single Audit Repor[
was prepared by KPMG LI,P as part of the Council's overall audit contract and is not
required by the I Iawai'i County Charter.
The Single Audit Report is prepared for federal awarded programs to meet reporting and
auditing requirements. Specifically, sub-recipients in receipt of a minimum threshold
amount of funds are audited for the purpose of identifying material weakness of internal
controls and testing compliance with certain provisions of laws, regulations, contracts
and grants, which could have a direct and material effect on the financial statement
amounts. A list of all county programs that have received federal funds can be found on
pages 7-L6 ("Schedule of Expenditures of Federal Awards"). Another separate
memorandum received on March 29, 2005 f"rom the Controller Deanna Sako submitting a
"Corrective Action Plan" is included with the Single Audit Repor[.
[n Section Compliance and Internal Control Over Federal Awards, the auditors found
that, the County complied in all material respects with the requirements applicable to
each of its major federal programs Cor the year ended .tune 30, 2004. Further, the results
of the audit reflected three instances of noncompliance with those requirements and
described in the accompanying schedule of findings and questioned costs as Findings
04-01 through 04-03.
I'he external auditors will be scheduled at a future Finance Committee meeting to answer
any questions you may have.
Enclosures Comm. No. Z-2~
Ref. To:_~L~~~
(Note: Report is on file in the Clerk's Office.) Ref. Upte
Hawaii Coun[r is an Equal O/~par[unity Provider and Emp/uyer
COUNTY OF HAWAII
STATE OF HAWAII
Single Audit of Federal Financial Assistance Programs
Year ended June 30, 2004
CORRECTIVE ACTION PLAN
Department of Housing and Urban Development
Section 8-Housing Choice Vouchers
CFDA No. 14.871
Federal Award No. HI08-V002
Award Period: July 1, 2003 to June 30, 2004
Finding 04-O1 Incorrect Calculations of Housing Assistance Payments
Recommendations: We recommend the following:
• Case managers should take greater care when reviewing the adjusted income, HAP amounts, and
HAP calculations while processing reexaminations and consider any changes in tenant and family
circumstances during the subsidy period to ensure the accuracy of HAP. Also, the Section 8
program should reimburse HUD for the amount of overpayments to the landlord.
• Case managers should use the most current payment standards available to avoid under/over
payments.
• Accounting clerks should make a thorough review of HAP amounts and adjustments while
processing HAPs to ensure the accuracy of HAP. Also, the Section 8 program should process an
adjustment to the landlord's next HAP check for the amount of overpayments to the landlord.
Administration's Comment: The County acknowledges the importance of correctly calculating HAP.
We intend to implement the recommendations along with additional corrective action measures, such as
implementing an internal quality review program.
Anticipnted Completion Dnte: This will be an ongoing effort.
Contact Person: Edwin S. Taira, Housing Administrator
Office of Housing and Community Development
Finding 04-02 Inadequate Documentation of Assets
Recommendations: We recommend the following:
• Case managers should obtain current verification to substantiate the information provided by the
family at their annual reexamination.
• Case managers should obtain the 6-month average balance for all checking accounts to substantiate
the families' checking account provided by the family at their annual reexamination. Also, the
County should revise the Administrative Plan to reflect the new procedures in obtaining the 6-month
average balance for checking accounts.
• Case managers should document verification procedures taken if required supporting documentation
is not available.
Administration's Comment: The County acknowledges the importance of adequate documentation. We
intend to implement the recommendations along with additional corrective action measures, such as
providing on-going training to staff on HUD requirements.
Anticipnted Completion Date: This will be an ongoing effort.
Contact Person: Edwin S. Taira, Housing Administrator
Office of Housing and Community Development
Page 2
Finding 04-03 Inadequate Documentation of Family Composition
Recnnrmendation: We recommend that case managers obtain an updated application or change form
from the family for any changes in family composition.
Administration's Comment: The County acknowledges the importance of adequate documentation. We
intend to implement the recommendation along with additional corrective action measures, such as
reviewing and revising our internal policies and procedures.
Anticipnted Completion Date: This will be an ongoing effort.
Contact Person: Edwin S. Taira, Housing Administrator
Office of Housing and Community Development
COUNTY OF HAWAII
STATE OF HAWAII
Single Audit of Fcderal Financial Assistance Programs
Year ended June 30, 2004
Table olContents
Page
I. INTRODUCTION
Audit Objectives I
Scope of Audit I
Organization of Report 2
II. COMPLIANCE AND INTERNAL CONTROL OVER FINANCIAL REPORTING
Report on Internal Control over Financial Reporting and on Compliance and
Other Matters Based on an Audit of Financial Statements Performed in
Accordance with Government Auditing Sla~sdards 3
III. COMPLIANCE AND INTERNAL CONTROL OVER FEDERAL AWARDS
Report on Compliance with Requirements Applicable to Each Major
Program and on Internal Control over Compliance in Accordance with
OMB Circular A-133 5
Schedule of Expenditures of Federal Awards ~
Notes to Schedule of Expenditures of Federal Awards I ~
Schedule of Findings and Questioned Costs ~ g
SECTION I
INTRODUCTION
KPMG LLP
PO Box 4150
Honolulu, HI 96812-4150
March 23, 2005
'fo [he Members of the
County Council of Hawaii
County of Hawaii
Hilo, Hawaii:
We have completed our audit of the basic financial statements of the County of Hawaii, State of Hawaii
(the County), as of and for the year ended June 30, 2004. We have also audited the Counry's compliance
with requirements applicable to its major federal financial assistance programs. We submit herein our
reports on compliance and on intemal control over financial reporting and over federal awards, a schedule
of expenditures of federal awards, and a schedule of findings and questioned costs.
The audit objectives and scope of the audit were as follows:
AUDIT OBJECTIVES
I . To provide opinions on the fair presentation of the County's basic financial statements and the
schedule of expenditures of federal awards as of and for the year ended June 30, 2004 in
accordance with accounting principles generally accepted in the United Stales of America.
2. To consider the County's internal control over financial reporting in order to determine our
auditing procedures for the purpose of expressing our opinions on the basic financial
statements.
3. To perform tests of the County's compliance with laws, regulations, contracts, and grants that
could have a direct and material effect on the determination of financial statement amounts.
4. To consider [he County's internal control over compliance with requirements that could have a
direct and material effect on a major federal program in order to determine our auditing
procedures for the purpose of expressing our opinion on compliance and to test and report on
internal control over compliance.
5. To provide an opinion on the County's compliance with applicable laws, regulations,
contracts, and grants that could have a direct and material effect on each major program.
6. To report on the status of prior year findings and questioned costs.
SCOPE OF AUDIT
We performed an audit of the County's basic financial statements and schedule of expenditures of federal
awards as of and for [he year ended June 3Q 2004, in accordance with auditing standards generally
accepted in [he United States of America, as adopted by the American Institute of Certified Public
Accountants, the standards for financial and compliance audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States, and the provisions of Office of
Managemeut and Budget (OMI3) Circular A-133, Audits of States, Local Governments, and Non-Profrt
Organizations.
KPMG I I P, e U 5 Ln Weol LebA~tylpa~nersNp, is ~~e U 5
mombei firm o~ KPMG In~ema0onel, a Swiss mopa2UVe
Members of the
County Council of Hawaii
County of Hawaii
f 1 i lo, Hawai `i
March 23, 2005
ORGANIZATION OF REPORT
Our report is organized into three sections as follows:
I. Section I, entitled "Introduction," describes the objectives and scope of our audit and the
organization and contents of this report.
2. Section Il, entitled "Compliance and Internal Control Over Financial Reporting," contains our
report on the County's internal control over financial reporting and on compliance and other
matters based upon our audit of the County's basic financial statements.
3. Section II1, entitled "Compliance and Internal Control Over Federal Awards," contains our
report on the County's compliance with requirements applicable to each of its major programs
and on the internal control over compliance in accordance with OMB Circular A-133, a
schedule of expenditures of federal awards, and a schedule of findings and questioned costs.
Our report on the basic financial statements of the County as of and for the year ended June 30, 2004 is
included under a separate cover. A separate letter containing our observations regarding the County's
system of internal control dated March 23, 2005 has also been issued to [he County Council.
We would like to take this opportunity to express our appreciation to the personnel of the County of
Hawaii for the cooperation and assistance extended to us during our audit. We will be pleased to discuss
any questions that you or your associates may have regarding our recommendations.
Very truly yours,
K`Pw(G LLB
z
SECTION II
COMPLIANCE AND INTERNAL CONTROL
OVER FINANCIAL REPORTING
KPMG LLP
PO Box 4150
Honolulu, HI 96812-4150
Report on Internal Control over Financial Reporting
and on Compliance and Other Matters Based on an
Audit of Financial Statements Performed in
Accordance with Government Auditing Standards
To the Members of the
County Council of Hawaii
County of Hawaii
f lilo, Hawaii:
We have audited the financial statements of the governmental activities, the business-type activities, the
discretely presented component unit, each major fund, and the aggregate remaining fund information of the
County of Hawaii, State of Hawaii (the County), as of and for the year ended June 30, 2004, which
collectively comprise the County's basic financial statements, and have issued our report thereon dated
March 23, 2005. 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.
Internal Control over Financial Reporting
In planning and performing our audit, we considered the County's internal control over financial reporting
in order to determine our auditing procedures for the purpose of expressing our opinions on the financial
statements and not to provide an opinion on [he internal control over financial reporting. Our consideration
of the internal control over financial reporting would not necessarily disclose all matters in the internal
control that might be material weaknesses. A material weakness is a reportable condition in which the
design or operation of one or more of the internal control components does not reduce to a relatively low
level the risk that misstatements caused by error or fraud in amounts that would be material in relation to
the tnancial statements being audited may occur and not be detected within a timely period by employees
in the normal course of performing their assigned functions. We noted no matters involving the internal
control over financial reporting and its operation that we consider to be material weaknesses.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether [he County's financial statements are free of
material misstatement, we performed tests of its compliance with certain provisions of laws, regulations,
contracts, and grant agreements, noncompliance with which could have a direct and material effect on the
determination of financial statement amounts. However, providing an opinion on compliance with those
provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The
results of our tests disclosed no instances of noncompliance or other matters that are required to be
reported under Government Auditing Standards.
3
KVMG i L P, n U 3 hmuotl LebJiry pannarSM1ip, is Jre U S
mambe. M1rm of KPMG Iniemeuonal, z SWiss moperanvo
We noted certain matters that we reported to management of the County in a separate letter dated
March 23, 2005.
This report is intended solely for the information and use of the County Council, the County
Administration, federal awarding agencies, and pass-through entities, and is not intended to be and should
not be used by anyone other than these specified parties.
~iv(G LLB
March 23, 2005
4
SECTION III
COMPLIANCE AND INTERNAL CONTROL
OVER FEDERAL AWARDS
KPMG LLP
PO Box 4150
Honolulu, HI 96812-4150
Report on Compliance with Requirements
Applicable to Each Major Program and on
Internal Control over Compliance in
Accordance with OMB Circular A-133
To the Members of [he
County Council of Hawaii
County of Hawaii
Hilo, Hawaii:
Compliance
We have audited the compliar~ce of the County of Hawaii, State of Hawaii (the County), with the types of
compliance requirements described in the U.S. OfFce of Management and Budget (OMB) C'ircularA-]33
Compliance Supplement that are applicable to each of its major federal programs for the year ended
June 30, 2004. The County's major federal programs are identified in the summary of auditors' results
section of the accompanying schedule of findings and questioned costs. Compliance with the requirements
of laws, regulations, contracts, and grants applicable to each of its major federal programs is the
responsibility of the County's management. Our responsibility is [o express an opinion on the County's
compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted in the
United States of America; the standards applicable to financial audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of
Stales, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133
require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance
with [he types of compliance requirements referred to above that could have a direct and material effect on
a major federal program occurred. An audit includes examining, on a test basis, evidence about the
County's compliance with those requirements and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our
audit does not provide a legal determination on the County's compliance with those requirements.
In our opinion, the County complied, in all material respects, with the requirements referred to above that
are applicable [o each of its major federal programs for the year ended June 30, 2004. However, the results
of our auditing procedures disclosed instances of noncompliance with those requirements, which are
required to be reported in accordance with OMB Circular A-133 and which is described in the
accompanying schedule of findings and questioned costs as Findings 04-O1 through 04-03.
5
KPMG I I P, a LLS bmitetl habibw panners'Inp, is IDe U 5
member fine of K{'MG Intema9onel. a Swiss cooperenve
Internal Control over Compliance
fhe management of the County is responsible for establishing and maintaining effective internal control
over compliance with the requirements of laws, regulations, contracts, and grants applicable to federal
programs. In planning and performing our audit, we considered the County's internal control over
compliance with requirements that could have a direct and material effect on a major federal program in
order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to
test and report on the internal control over compliance in accordance with OMB Circular A-133.
Our consideration of the internal control over compliance would not necessarily disclose all matters in the
internal control that might be material weaknesses. A material weakness is a reportable condition in which
the design or operation of one or more of the internal control components does not reduce to a relatively
low level the risk that noncompliance with applicable requirements of laws, regulations, contracts, and
grants caused by error or fraud that would be material in relation to a major federal program being audited
may occur and not be detected within a timely period by employees in the normal course of performing
their assigned functions. We noted no matters involving the internal control over compliance and its
operation that we consider to be material weaknesses.
Schedule o1'Expeuditures o(Federal Awards
We have audited the financial statements of the governmental activities, the business-type activities, the
discretely presented component unit, each major fund, and the aggregate remaining fund information of the
County as of and for the year ended June 30, 2004, and have issued our report thereon dated March 23,
2005. Our audit was performed for the purpose of forming an opinion on the financial statements that
collectively comprise the County's basis financial statements. The accompanying schedule of expenditures
of federal awards is presented for purposes of additional analysis as required by OMB Circular A-133 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 taken as a whole.
This report is intended solely for the information and use of the County Council, the County
Administration, federal awarding agencies, and pass-through entities, and is not intended to be and should
not be used by anyone other than these specified parties.
~'?~G LLB
March 23, 2005
6
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COUNTY OF HAWAI`l
STATF. OF HAWAII
Notes to Schedule of Expenditures of Federal Awards
Year ended June 30, 2004
(I) Basis of Presentation
The accompanying schedule of expenditures of federal awards includes the federal grant activity of the
County of Hawaii, State of Ilawai`i (the County). Such schedule is presented on the modified accrual
basis of accounting, which is described in note 1 to the County's basic financial statements. The
information in this schedule is presented in accordance with the requirements of OMB Circular A-133,
Audus of States, Local Governments, and Not-Prof+t Organizations.
(2) Subrecipients
Of the federal expenditures presented in this schedule, the County provided federal awards to Subrecipients
as follows:
Amount
CFDA Provided to
Program Title Number Subrecipients
Community Development Block Grant/Small Cities Program 14.219 $ 156,947
HOME Investment Partnership Program ]4.239 184
Title V Delinquency Prevention Program 16.548 59,315
Crime Victim Assistance 16.575 79,197
Local Law Enforcement Block Grants Program 16.592 9,000
Workforce Investment Act (WIA):
WIA Incumbent Worker Program 17.000 44,431
WIA Adult Program 17.258 721,567
WIA Youth Activities 17.259 I,l 13,457
WIA Dislocated Workers 17.260 545,063
Waste Reduction and Recycling Project 66.606 242,308
17
COUNTY OF HAWAII
STATE OF HAWAII
Schedule of Findings and Questioned Costs
Year ended June 30, 2004
(1) Summary of Auditors' Results
(a) The type of report issued on the basic financial statements: Unqualified opinion
(b) Reportable conditions in internal control were disclosed by the audit of the basic financial
statements: None noted Material weaknesses: None noted
(c) Noncompliance which is material to the basic financial statements: None noted
(d) Reportable conditions in internal control over major programs: None noted
Material weaknesses: None noted
(e) The type of report issued on compliance for major programs: Unqualified opinion
(f) Any audit findings which are required to be reported under Section .510(a) of OMB Circular A-133:
Yes
(g) Major programs:
Department of Housing and Urban Development:
14.239 -HOME Investment Partnership Program
14.871 -Section 8 -Housing Choice Vouchers
14.871 -Section 8 -Housing Choice Vouchers - FSS Coordinator
(h) Dollar threshold used to distinguish between Type A and Type B programs: $945,984
(i) Auditee qualified as a low-risk auditee under Section .530 of OMB Circular A-133: Yes
(2) Findings Relating to the Basic Financial Statements Performed in Accordance with Gavernment
Auditing Standards
None noted.
18 (Continued)
COUNTY OF HAWAII
STATE OF HAWAI`1
Schedule of Findings and Questioned Costs
Year ended June 30, 2004
(3) Findings and Questioned Costs Relating to Federal Awards
Department of Housing and Urban Development
Section 8 -Housing Choice Vouchers
CFDA No. 14.871
Federal Award No. H108-VO02
Award Period: July 1, 2003 to June 30, 2004
Findine 04-O1 -Incorrect Calculations of Housine Assistance Payments
During our testwork on allowability, eligibility, and special tests and provisions, we noted a number of
instances where the Housing Assistance Payments (HAP) were calculated incorrectly for various reasons
as described below:
Incorrect Dependent Allowance
Condition: For 1 out of the 30 tenant files tested, the HAP amount per the HAP Register was calculated
incorrectly as the HAP Register calculation included an additional dependent allowance.
Criteria: Per 24 CFR 982.158 and 982 subpart K, the public housing authority (PHA) must pay a monthly
HAP on behalf of [he family that corresponds with the amount on line 12u of the HUD-50058 (Family
Report). This HAP amount must be reflected on the HAP Contract and HAP Register.
Effect: "I'he incorrect HAP amount per the HAP Register was $414 and the correct HAP amount per the
IiAP Contract and Family Report was $402. However, we noted the tenant was terminated from the
program on July 17, 2003. As such the prorated amount paid the landlord was $125. 'the landlord should
have been $121, resulting in an overpayment of $4.
Cause: During the reexamination process, the tenant's FIAP was reviewed and updated. However, the
case manager did not compare the HAP amount per the HAP Register to the HAP Contract and Family
Report.
Questioned Cost: $4
19 (Continued)
COUNTY OF HAWAII
STATE OF HAWA}`1
Schedule of Findings and Questioned Costs
Year ended June 30, 2004
Incorrect Verifications of Assets
Condition: For 1 out of the 30 tenant files tested, the HAP was calculated incorrectly as [he County used
the incorrect (old) verifications of assets (checking and savings account) and income (social security
payments) to calculate the family's adjusted income.
Criteria: Per our review of the HUD Housing Choice Voucher Guidebook and County of Hawaii Oftice
of Housing and Community Development Administrative Plan, verification to substantiate the information
provided by the family at [heir annual reexamination will be valid for 120 days prior to the effective date
of the annual reexamination.
Effect: We noted the error was caught and the County adjusted the family's HAP effective June I, 2004.
The incorrect HAP was $304 and the correct HAP was $298. As such, total questioned cost (overpayment)
is $24 [($304 - 298) x 4 months] (prorated for the period February 2004 -May 2004). As this was the
County's error, the County did not ask the tenant to reimburse the County $24. We noted that total
overpayment includes the effect of the incorrect use of payment standard as described in the following
condition Improper pcrymend Standard.
Cause: During the reexamination process, the case manager incorrectly used the family's old verification
of assets and income and did not use the family's current verifications in calculating the family's adjusted
income.
Questioned Cost: $24
Improper Payment Standard
Condition: For 2 out of the 30 tenant files tested, the HAP was calculated incorrectly as the County used
the incorrect payment standard in calculating the }{Ap.
Criteria: Per 24 CFR 982.503 and 505, [he PHA is to calculate the HAP for a family according to the
PHA's adopted payment standard amounts.
Effect: In the first instance, there was an overpayment of HAP under the Section 8 program made by the
County. We noted the error was caught and the County adjusted the family's HAP effective June 1, 2004.
We noted that the correction was made in conjunction with the finding noted in the previous condition
Incorrect Verifications of Assets. In the second instance, we noted that using the proper payment standard
did not change the HAP, as the lease rent for the unit was less than both the old and new payment standard.
As such, there is no questioned cost.
20 (Continued)
COUNTY OF HAWAII
STATE OF HAWAII
Schedule of Findings and Questioned Costs
Year ended June 30, 2004
Cause: During the reexamination process, the case manager incorrectly used the old payment standard for
a one-bedroom unit of $664 in calculating the HAP. Instead, the case manager should have used the most
current payment standard for aone-bedroom unit of $679 (effective January 1, 2004).
Questioned Cost: In the first instance, note that [he correction was made in conjunction with the previous
condition described above. In the second instance, there are no questioned costs.
Incorrect Verifications of Income
Condition: For 1 out of the 30 files tested, the tenant's adjusted income was calculated incorrectly as the
County used the incorrect (old) verifications of income (social security payments) and miscalculated the
family's pension payments. We also noted that the current verification form was properly filed and
available during the reexamination.
Criteria: Per our review of the HUD Housing Choice Voucher Guidebook and County of Hawaii Office
of Housing and Community Development Administrative Plan, verification to substantiate the information
provided by the family at their annual reexamination will be valid for 120 days prior to the effective date
of the annual reexamination. Also, per 24 CFR 5.609, the PHA must convert all income to an annual figure
to complete rent calculations and may annualize income for a shorter period.
Effect: There was an underpayment of HAP under the Section 8 program made by the County. However,
we noted that the tenant was terminated from the program on July 20, 2004. As such, we noted the proper
![AP amount to be $221, compared to the wrong HAP amount of $192. As such, the total HAP
underpayment was $163 [($221 - 192) x 5 months and 20 days (February 2004 to July 20, 2004)].
Cause: The County used a 2003 social security payment amount per the 2003 verification and multiplied
it by 2.1% per the verification to obtain the 2004 estimated amount ($831.81/month = $9,982/year).
However, we noted that the County received another verification, stating the actual social security payment
amount for 2004 ($831.60/month = $9,979), which was received (December 17, 2003) prior to the case
manager completing the Family Report (December 26, 2003). As such, the case manager should have used
the actual 2004 amount instead of the estimate. We also noted that the case manager miscalculated the
pension payments in calculating the family's adjusted annual income. The incorrect pension payment
calculation of $354.46/month for 5 months = $2,789/year. We recalculated the proper amount to be $1,772.
Questioned Cos[: $0
21 (Continued)
COUNTY OF HAWAII
STATF, OF HAWAII
Schedule of Findings and Questioned Costs
Year ended June 30, 2004
Incorrect Payment to Landlord
Condition: For 1 out of the 30 tenant files tested, the HAP per the HAP Register was not paid to the
landlord. Our review of the December 2003 monthly worksheet detail indicates that the County paid the
incorrect HAP amount to the landlord.
Criteria: Per 24 CFR 982.158 and 982 subpart K, the PHA must pay a monthly HAP on behalf of the
family that corresponds with the amount on line 12u of the HUD-50058 (Family Report). This HAP
amount must be reflected on the HAP Contract and HAP Register.
Effect: The County overpaid the landlord $112 as the County paid the landlord $88 when in fact the
landlord owed the County $24. As such, total questioned cost is $I 12.
Cause: In processing the HAP checks, the Accounting Clerk miscalculated the HAP adjusted amount per
the HAP Registers when inputting the information into the system.
Questioned Cost: $112
Recommendations: We recommend the following:
• Case managers should take greater care when reviewing the adjusted income, HAP amounts,
and FLAP calculations while processing reexaminations and consider any changes in tenant and
family circumstances during subsidy period to ensure the accuracy of HAP. Also, [he Section 8
program should reimburse HUD for the amount of overpayments to the landlord.
• Case managers should use the most current payment standards available to avoid under/over
payments.
• Accounting clerks should make a thorough review of HAP amounts and adjustments while
processing HAPs to ensure the accuracy of HAP. Also, [he Section 8 program should process
an adjustment to the landlord's next HAP check for the amount of overpayments to the
landlord.
Views of Responsible Officials and Planned Corrective Actions: The County acknowledges the
importance of correctly calculating HAP. We intend to implement the recommendations along with
additional corrective action measures, such as implementing an internal quality control review program, to
help insure that similar problems do not occur in the future.
22 (Continued)
COUNTY OF HAWAII
STATE OF HAWA[`I
Schedule of Findings and Questioned Costs
Year ended June 30, 2004
Findine 04-02 -Inadequate Documentation of Assets
During our testwork on allowability and eligibility requirements, we noted inadequate documentation of
assets for various reasons as described below:
Outdated Bank Statements
Condition: For 2 out of the 30 tenant files tested, the County did not obtain current third-party
verification of assets. Per review of the tenants' files, the most recent 2 bank statements provided to the
County by the tenants were dated October 2002 and August 2002.
Criteria: Per our review of the FIUD Flousing Choice Voucher Guidebook and County of Hawaii Office
of Housing and Community Development Administrative Plan, verification to substantiate the information
provided by the family at their annual reexamination will be valid for 120 days prior to the effective date
of the annual reexamination.
Effect: The County lacked adequate supporting documentation to substantiate the propriety of asset
amounts used to calculate the family's adjusted income and HAP amount.
Cause: The County does not send out third-party verification forms to certain financial institutions, as
there is a service charge for such services. As such, the County requests that the tenants bring in their most
current bank statements when they come in for their appointment. The statements listed above were the
most recent statements provided to the County by the tenants.
Questioned Cost: $0
23 (Continued)
COUNTY OF HAWAII
STATE OF HAWAl`I
Schedule of Findings and Questioned Costs
Year ended June 3Q 2004
Incorrect Checking Account Balances
Condition: For 7 out of the 30 tenant files tested, the County did not use the proper checking account
balance in calculating the families' adjusted total income.
Criteria: Per our review of the HUD Housing Choice Voucher Guidebook and County of Hawaii Office
of Housing and Community Development Administrative Plan, the County should use an average balance
for the past six months for checking accounts.
Effect: The County lacked adequate supporting documentation to substantiate the propriety of checking
accounts used to calculate the families' adjusted income.
Cause: We noted some financial institutions charge a service fee for verifying a 6-month average balance.
As such. the County uses the verification (at no charge) provided by the financial institution (current
balance, 1-, 2-, 3-, or 6-mmrth average balance) or the most current bank statement provided by the family
(if a third-party verification is not available as the financial institution charges a service fee for this
service).
Questioned Cost: $0
Recommendations: We recommend [he following:
• Case managers should obtain current verification to substantiate the information provided by
the family at their annual reexamination.
• Case managers should obtain the 6-month average balance for all checking accounts to
substantiate the families' checking account provided by the family at their annual
reexamination. Also, the County should revise the Administrative Plan to reflect the new
procedures in obtaining the 6-month average balance for checking accounts.
• Case managers should document verification procedures taken if required supporting
documentation is not available.
Views of Responsible OfTicials and Planned Corrective Actions: The County acknowledges the
importance of adequate documentation. We intend [o implement the recommendations along with
additional corrective action measures, such as providing on-going training to staff on HUD requirements,
to help insure that similar problems do not occur in the future.
24 (Continued)
COUNTY OF HAWAII
STATE OF HAWAII
Schedule of Findings and Questioned Costs
Year ended June 3Q 2004
Finding 04-03 -Inadequate Documentation of Family Composition
Condition: During our testwork on allowability and eligibility requirements, we noted that in 1 out of the
30 tenant files tested, the County did not obtain written consent from the family for changes to the tenant's
application (change in family composition). We noted the household members listed on the application did
not agree to the household members listed per the Family Report.
Criteria: Per 24 CFR 982.516 (c), the PHA must adopt policies prescribing when and under what
conditions the family must report a change in family composition. It is the County's policy to obtain an
updated application or change form from the family for any changes in family composition.
Effcct: "fhe County lacked adequate supporting documentation to substantiate the family's eligibility in
participating in the Section 8 program.
Cause: The case manager received a phone call from the tenant stating that she wanted to remove her
brother and add her newborn child as household members. The case manager inadvertently forgot to have
the tenant fill out an updated application or change form, noting the above changes. However, per review
of the Family Report, we noted the change was processed and the proper household members were
reported. Further, we noted the subsequent updated application dated June 8, 2004 listed the proper
household members.
Questioned Cost: $0
Recommendation: We recommend that case managers obtain an updated application or change form
from the family for any changes in family composition.
Views of Responsible Officials and Planned Corrective Actions: The County acknowledges the
importance of adequate documentation. We intend to implement the recommendation along with additional
corrective action measures, such as reviewing and revising our internal policies and procedures, to help
insure that similar problems do not occur in the future.
25