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HomeMy WebLinkAboutCOM 0938.000 2008-2010 CP. "zE OF 9�9,Y, /I \ 9ii., Colleen M. Schrandt 1. Legislative Auditor Mailing ddress: g Business Address: Hawaii County Building �. J Room .4 1266 Kamehameha Avenue Lxt 25 Aupuni Street .ix of liaat 1 Ironworks Building, Room Hilo, Hawaii 96720 Hilo, Hawaii 96720 OFFICE OF THE LEGISLATIVE AUDITOR Telephone: (808) 961 -8386 Facsimile: (808) 961 -8905 Date: September 7, 2010, To J Yoshimoto, Chairman And Members of the County Council • From: Colleen Schrandt o Legislative Auditor RE: Single Audit Report for Fiscal Year Ending June 30, 2009 This letter transmits the Single Audit Report of the County of Hawai `i for Fiscal Year Ending June 30, 2009, and is distributed for your information and review. The Single Audit Report was prepared by KPMG LLP as part of the Council's overall audit contract and is not required by the Hawaii County Charter. However, the Single Audit is an audit of the County's basic financial statements and schedule of expenditures of federal awards as of and for the year ended June 30, 2009, in accordance with auditing standards generally accepted in the 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 the U.S. Office of Management and Budget (OMB) Circular A -133, Audits of States, Local Governments, and Non - Profit Organizations. A "Summary Schedule of Prior Audit Findings" is not enclosed since there was no prior audit finding for Fiscal Year 2008. KPMG LLP will be present at the Finance Committee meeting on September 20, 2010, to answer any questions you may have. Appropriate department head(s) or their representative(s) will also be asked to attend the meeting. In the meantime, please feel free to contact me should you require further information. Enclosures cc w/o enclosures: Nancy Rose, KPMG LLP Department of Finance CoTroA. fitii7, 1 J V 1n 4: f. To: f v fef. Tate_ SEP 0 8 2 Serving the Interests of the People of Our Island Hawai `i County is an Equal Opportunity Provider and Employer KPMG COUNTY OF HAWAII STATE OF HAWAII Single Audit of Federal Financial Assistance Programs Year ended June 30, 2009 COUNTY OF HAWAII STATE OF HAWAII Table of Contents Page I. Introduction: Audit Objectives 1 Scope of Audit 1 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 Standards 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 7 Notes to Schedule of Expenditures of Federal Awards 18 Schedule of Findings and Questioned Costs 19 KPMG KPMG LLP PO Box 4150 Honolulu, HI 96812 -4150 March 30, 2010 The Members of the County Council of Hawai`i County of Hawaii Hilo, Hawai`i: 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, 2009. We have also audited the County's compliance with requirements applicable to its major federal financial assistance programs. We submit herein our reports on compliance and on internal 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 1. 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, 2009 in accordance with U.S. generally accepted accounting principles. 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 grant agreements that could have a direct and material effect on the determination of financial statement amounts. 4. To consider 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 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 the year ended June 30, 2009, in accordance with auditing standards generally accepted in the 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 U.S. Office of Management and Budget (OMB) Circular A -133, Audits of States, Local Governments, and Non - Profit Organizations. KPMG LLP, a U.S. limited liability partnership, is the U.S. member firm of KPMG International, a Swiss cooperative. The Members of the County Council of Hawai`i County of Hawai`i Hilo, Hawaii March 30, 2010 Page 2 Organization of Report Our report is organized into three sections as follows: 1. Section I, entitled "Introduction," describes the objectives and scope of our audit and the organization and contents of this report. 2. Section II, 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 III, 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, 2009 is included under a separate cover. A separate management letter containing our observations regarding the County's internal controls dated February 11, 2010 has also been issued to the County Council. We would like to take this opportunity to express our appreciation to the personnel of the County of Hawai`i 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, i<I>lt1G.. LCP SECTION II COMPLIANCE AND INTERNAL CONTROL OVER FINANCIAL REPORTING KPMG 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 The Members of the County Council of Hawaii County of Hawai`i Hilo, Hawai` 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 Hawai` i, State of Hawai` i (the County), as of and for the year ended June 30, 2009, which collectively comprise the County's basic financial statements, and have issued our report thereon dated February 11, 2010. 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 as a basis for designing our auditing procedures for the purpose of expressing an opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the County's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the County's internal control over financial reporting. A deficiency in internal control over financial reporting exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. 3 KPMG LLP, a U.S . limited liability partnership, is the U.S. member firm of KPMG International, a Swiss cooperative. Compliance and Other Matters As part of obtaining reasonable assurance about whether the County's basic 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. We noted certain matters that we reported to management of the County in a separate letter dated February 11, 2010. 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. K LL1> February 11, 2010 4 SECTION III COMPLIANCE AND INTERNAL CONTROL OVER FEDERAL AWARDS KPMG 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 The Members of the County Council of Hawai`i County of Hawaii Hilo, Hawai`i: Compliance We have audited the compliance of the County of Hawaii, State of Hawai` i (the County), with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A -133 Compliance Supplement that are applicable to each of its major federal programs for the year ended June 30, 2009. 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 to 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 States, 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 the types of compliance requirements described in the OMB Circular A -133 Compliance Supplement 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 of 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 to each of its major federal programs for the year ended June 30, 2009. However, the results of our auditing procedures disclosed an instance of noncompliance with those requirements, which is 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 Finding 09 -01. • Internal Control over Compliance The 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 5 KPMG LLP, a U S. limited liability partnership, is the U.S. member firm of KPMG International, a Swiss cooperative. programs. In planning and performing our audit, we considered the County's internal control over compliance with the 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, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the County's internal control over compliance. A control deficiency in an entity's internal control over compliance exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect noncompliance with a type of compliance requirement of a federal program on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity's ability to administer a federal program such that there is more than a remote likelihood that noncompliance with a type of compliance requirement of a federal program that is more than inconsequential will not be prevented or detected by the entity's internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that material noncompliance with a type of compliance requirement of a federal program will not be prevented or detected by the entity's internal control. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in the entity's internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. Schedule of Expenditures of 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, 2009, and have issued our report thereon dated February 11, 2010. Our audit was performed for the purpose of forming opinions on the financial statements that collectively comprise the County's basic 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. 0 LEP March 30, 2010, except for the Schedule of Expenditures of Federal Awards, which is as of February 11, 2010 6 a) d•O h O O 01 O, S 00 M O, 0) L M O M O V1 N V1 00 0 N M 00 O 0 TO CT 0 O\ O oo N 7-7 .-. 01 v0 N S 0 a) �O I� M ^� O vi O N —� , .6 in O ,--� V1 lam +a. 'C7 a N N ~ ~ N N M o w G . 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VS X U o � COUNTY OF HAWAII STATE OF HAWAII Notes to Schedule of Expenditures of Federal Awards Year ended June 30, 2009 (1) Basis of Presentation The accompanying schedule of expenditures of federal awards includes the federal grant activity of the County of Hawai`i, State of Hawai`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, Audits of States, Local Governments, and Non - Profit 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 14.228 $ 763,930 HOME Investment Partnership Program 14.239 1,096,224 Juvenile Accountability Incentive Block Grant 16.523 29,915 Title V Delinquency Prevention Program 16.548 24,997 Crime Victim Assistance 16.575 103,000 Public Safety Partnership and Community Policing Grants 16.710 99,466 Workforce Investment Act (WIA): Unemployment Insurance — Title IX Reed Act 17.225 828,118 WIA Adult Program 17.258 262,190 WIA Youth Activities 17.259 515,239 WIA Dislocated Workers 17.260 197,499 18 COUNTY OF HAWAII STATE OF HAWAII Schedule of Findings and Questioned Costs Year ended June 30, 2009 (1) Summary of Auditors' Results (a) The type of report issued on the basic financial statements: Unqualified opinion (b) Significant deficiencies in internal control, which were disclosed by the audit of the basic financial statements: None reported Material weaknesses: None noted (c) Noncompliance, which is material to the basic financial statements: None noted (d) Significant deficiencies in internal control over major programs: None reported 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. See finding 09 -01. (g) Major programs: Department of Housing and Urban Development: 14.228 — Community Development Block/State's Program and Non - Entitlement Grants in Hawaii 14.239 — HOME Investment Partnerships Program 14.871— Public and Indian Housing — Section 8 — Housing Choice Vouchers 14.871— Public and Indian Housing — Section 8 — Housing Choice Vouchers — Family Self Sufficiency Program Department of Transportation: 20.205 — Highway Planning and Construction Department of Homeland Security: 97.036 — Disaster Grants — Public Assistance (Presidentially Declared Disasters) (h) Dollar threshold used to distinguish between Type A and Type B programs: $1,212,463 (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 Government Auditing Standards None noted 19 (Continued) COUNTY OF HAWAII STATE OF HAWAII Schedule of Findings and Questioned Costs Year ended June 30, 2009 (3) Findings and Questioned Costs Relating to Federal Awards Finding 09 -01— Activities Allowed and Unallowed- Calculation of Federal Expenditures Information on the Federal Programs U.S. Department of Homeland Security, Passed through the State Department of Defense, Disaster Grants — Public Assistance (Presidentially Declared Disasters): Kiholo Earthquake — CFDA 97.036; Federal Award No. FEMA- 1664- DR -HI; Award year: October 15, 2006 to October 15, 2010. Specific Requirements /Criteria In accordance with Title 44 Code of Federal Regulations (44 CFR) §206.250(c), actual and expected insurance recoveries shall be deducted from otherwise eligible costs. As such, for facilities that are insured at the time of loss, the federal share of eligible costs should be based on the insurance deductible as opposed to the actual expenditures. Condition and Context During our testwork over the activities allowed and unallowed compliance requirement, we noted that the County overstated the federal share of eligible costs related to the Ikuo Hisaoka Gymnasium. The amount the County reported was based on the actual expenditures, however, according to 44 CFR §206.250(c), it should have been based on the insurance deductible as the Ikuo Hisaoka Gymnasium was insured at the time of loss. This error occurred as the federal share is normally calculated based on the actual expenditures and 44 CFR §206.250(c) was not appropriately considered in the calculation. The total amount over reported was $27,965 out of $131,250 of total expenditures related to the Ikuo Hisaoka Gymnasium. Effect The potential effect of this condition is that failure to adhere to the activities allowed and unallowed requirements could result in potential noncompliance with the grant agreement and may be a basis for withholding financial assistance payments, suspension, or termination of funding. Questioned Costs $27,965 Systemic or Isolated Isolated Recommendation We recommend that the County be more cognizant of deviations in the calculation of the federal share to ensure that the expenditures are accurately reported, including applying the applicable guidance. 20 (Continued) COUNTY OF HAWAII STATE OF HAWAII Schedule of Findings and Questioned Costs Year ended June 30, 2009 Views of Responsible Officials and Planned Corrective Action The County continues to strive to be more diligent in meeting its activities allowed and unallowed requirements, including the accurate reporting of the federal expenditures. 21