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Home My WebLink AboutCOM 0489.004 2012-2014 J Yoshimoto Q�11ty u �p y;. Telephone: (808)961-8272 Chair&Presiding Officer C. V,,l Facsimile: (808)961-8912 Council District 2 ;• �.� � ,4; Email:jyoshimoto @co.hawaii.hi.us HAWAII COUNTY COUNCIL Office of the County Clerk County of Hawai 25 Aupuni Street Hilo, Hawaii 96720 Date: December 18, 2013 c-) CD To: Stewart Maeda, County Clerk Council Members co Hawaii County Council From: J Yoshimoto, Chairg 4 %.n Hawai'i County Council -- Re: External Quality Control Review County of Hawai'i Office of the Legislative Auditor Attached please find the External Quality Control Review of the Hawai'i County Office of the Legislative Auditor for the period July 1, 2009 through June 30, 2012. This review was conducted by the Peer Review Team in accordance with standards and guidelines established by the Association of Local Government Auditors ("ALGA"). Please place this item on the agenda for the January 8, 2014 meeting of the Hawai'i County Council. JY:awm Comm. N• 1/81. I Ref.To: .01_.. Ref. Date I 1 8 f Hawai`i County Is An Equal Opportunity Provider And Employer J Yoshimoto Telephone: (808)961-8272 Chair&Presiding Officer yi_;;'• Facsimile: (808)961-8912 Council District 2 ; :.,.,1,s ;*', Email:jyoshimoto @co.hawaii.hi.us -_mot +'1;4 Oi 4+49 • HAWAII COUNTY COUNCIL Office of the County Clerk County of Hawaii 25 Aupuni Street N_ -) Hilo, Hawaii 96720 `^' -' 7. 3 -- --I V 9? Date: December 16, 2013 w .o To: Council Members Hawaii County Council From: J Yoshimoto, Chair`qk Hawaii County Council Re: External Quality Control Review County of Hawaii Office of the Legislative Auditor Attached please find the External Quality Control Review of the Hawaii County Office of the Legislative Auditor for the period July 1, 2009 through June 30, 2012. This review was conducted by the Peer Review Team in accordance with standards and guidelines established by the Association of Local Government Auditors ("ALGA"). JY:awm Comm: t �� ' '3 Ref.To: r Cf7"4.1 Ref. Dote Hawaii County Is An Equal Opportunity Provider And Employer P�,OC%ATION O r IIIpp e O 0 ti CCOfrE-RNMENl PJO\ of the County of Hawai'i Office of the Legislative Auditor Conducted in accordance with guidelines of the Association of Local Government Auditors for the period July 1, 2009 through June 30, 2012 Association of Local Government Auditors • December 12, 2013 Mr. Lane Shibata, Acting Legislative Auditor County of Hawai'i Office of the Legislative Auditor 25 Aupuni Street Hilo, Hawai'l 96720 Dear Mr. Shibata, We have completed a peer review of the Office of the Legislative Auditor, County of Hawaii for the period July 1, 2009, through June 30, 2012. In conducting our review, we followed the standards and guidelines contained in the Peer Review Guide published by the Association of Local Government Auditors (ALGA). We reviewed the internal quality control system of your audit organization and conducted tests in order to determine whether your internal quality control system operated to provide reasonable assurance of compliance with Government Auditing Standards issued by the Comptroller General of the United States. Our procedures included: • Reviewing the audit organization's written policies and procedures. • Reviewing audit and nonaudit service engagements and working papers. • Reviewing documents related to independence, training, and development of auditing staff. • Interviewing auditing staff to assess their understanding of, and compliance with, relevant quality control policies and procedures. Due to variances in individual performance and judgment, compliance does not imply adherence to standards in every case, but does imply adherence in most situations. Based on the results of our review, it is our opinion that the Office of the Legislative Auditor, County of Hawai'i's internal quality control system was suitably designed and operating effectively to provide reasonable assurance of compliance with Government Auditing Standards for audits during the period July 1, 2009, through June 30, 2012. We have prepared a separate letter offering suggestions to further strengthen your internal quality control system. 4 1,1,x. � 1 Gary S. apman, CIA, CGAP, CFE Mary Jo Emanuele, CIA, CGFM Senior Auditor Audit Manager City of Tampa, Florida City of Kansas City, Missouri Fi .t IS7,IA`Ir 7 t L" Association of Local Government Auditors December 12, 2013 Mr. Lane Shibata, Acting Legislative Auditor County of Hawai'i Office of the Legislative Auditor 25 Aupuni Street Hilo, Hawai'l 96720 Dear Mr. Shibata, We have completed a peer review of the Office of the Legislative Auditor, County of Hawai'i for the period July 1, 2009, through June 30, 2012 and issued our report thereon dated December 12, 2013. We are issuing this companion letter to offer certain observations and suggestions stemming from our peer review. We would like to mention some of the areas in which we believe your office excels: • The office is effective at identifying criteria and including it in the report to help the reader understand the findings, conclusions, and recommendations. • The office is receptive to management's comments and changes the report when warranted to ensure the report is accurate and balanced. • The amount of research the office performs in preparation of planning the report is effective in helping the office assess risk, scope its work, and develop its audit objectives. We offer the following observations and suggestions to enhance your organization's demonstrated adherence to Government Auditing Standards: • GAS 3.84 requires the audit organization to"document its quality control policies and procedures and communicate those policies and procedures to its personnel." The OLA's Audit Manual did not adequately address GAS 3.42, which requires "an auditor who previously performed nonaudit services for an entity that is a prospective subject of an audit . . . to evaluate the impact of those nonaudit services on independence before accepting an audit." The OLA's Audit Manual also did not adequately address GAS 3.60, which requires auditors to"use professional judgment in planning and performing audits and in reporting the results." To strengthen its procedures related to independence and professional judgment, we recommend that the Office of the Legislative Auditor address the identified Standards in its policies and procedures. During our review, the Office of the Legislative Auditor revised it policies and procedures to address these Standards. • GAS 3.93 requires audit organizations to"establish policies and procedures for monitoring of quality in the audit organization." GAS 3.95 requires the audit organization to analyze and summarize the results of its monitoring process at least annually, with identification of any systemic or repetitive issues needing improvement, along with recommendations for County of Hawai'i Office of the Legislative Auditor December 12,2013 Page 2 corrective action." While the OLA performed certain QCS review procedures after the completion of each audit, it had not addressed these Standards in it policies and procedures or performed the required annual summary evaluation. We recommend that the Office of the Legislative Auditor establish procedures to identify any systemic issues in it quality control system and to annually analyze and summarize the results of its monitoring process. During our review, the Office of the Legislative Auditor revised it policies and procedures to address these Standards. • GAS 3.76 requires that professional competence be maintained through continuing professional education. At a minimum, "each auditor performing work in accordance with GAGAS should complete, every 2 years, at least 24 hours of CPE that directly relates to government auditing" and "an additional 56 hours of CPE (for a total of 80 hours of CPE in every 2-year period)that enhances the auditor's professional proficiency to perform audits." The GAO's Guidance on GAGAS Requirements for Continuing Professional Education states that documentation should be maintained by the audit organization supporting completion of the required training. The guidance also provides examples of programs and activities and subjects and topics that qualify and do not qualify as acceptable continuing professional education. Finally, the guidance provides a two-month window following the 2- year reporting period to make up any deficiencies with respect to the required number of CPE hours. The OLA did not maintain adequate support for the completion of the required training; certain training claimed as part of the 24-hour and 80-hour requirements did not qualify as continuing professional education; and a deficiency to the 80-hour requirement was made up after the two-month window had lapsed. We recommend the Office of the Legislative Auditor maintain the required evidence supporting the completion of required training and adhere to the GAO's supplemental guidance with respect to the programs and activities and subjects and topics that qualify and do not qualify as acceptable continuing professional education. Any deficiencies in the requirements should be made up within 2 months of the reporting period. • GAS 6.51 requires"a written audit plan for each audit." Of the three audits completed during the review period, none contained a written audit plan that provided detailed audit steps of the work to be performed. According to GAS 6.52, "a written audit plan provides an opportunity for the audit organization management to supervise audit planning and to determine whether: a. the proposed audit objectives are likely to result in a useful report; b. the audit plan adequately addresses relevant risks; c. the proposed audit scope and methodology are adequate to address the audit objectives; d. available evidence is likely to be sufficient and appropriate for purposes of the audit; and e. sufficient staff, supervisors and specialists with adequate collective professional competence and other resources are available to perform the audit and to meet expected time frames for completing the work." We recommend the Office of the Legislative Auditor prepare an audit plan with detailed audit steps for every audit engagement performed in compliance with GAGAS. • GAS 6.83 requires auditors to document °supervisory review, before the audit report is issued, of the evidence that supports the findings, conclusions, and recommendations contained in the audit report.° While the Legislative Auditor would review the working papers and continually monitor staff progress during the engagements, supervision was not County of Hawaii Office of the Legislative Auditor December 12,2013 Page 3 documented in any of the working papers of the three audits completed during the review period. We recommend the Office of the Legislative Auditor document the supervision provided during audit engagements. • GAS 6.69 requires auditors to"perform and document an overall assessment of the collective evidence used to support findings and conclusions, including the results of any specific assessments conducted to conclude on the validity and reliability of specific evidence." For the three audits completed during the audit period, none contained documentation of an overall assessment. We recommend the Office of the Legislative Auditor document its overall assessment of the collective evidence used to support finding and conclusions. • GAS 7.13 requires"in reporting audit methodology, auditors should explain how the completed audit work supports the audit objectives, including the evidence gathering and analysis techniques, in sufficient detail to allow knowledgeable users of their reports to understand how the auditors addressed the audit objectives." For the three audits completed during the review period, the audit reports did not detail how the work performed supported the audit objectives. We recommend the Office of the Legislative Auditor expand the methodology section of its audit reports to include how the work supports the audit objectives. • GAS 7.30 requires"when auditors comply with all applicable GAGAS requirements, they should use . . . an unmodified GAGAS compliance statement, in the audit report to indicate that they performed the audit in accordance with GAGAS." For the three audits completed during the review period, GAGAS compliance was not cited in one report and the standardized language GAGAS compliance statement was modified in the other two. We recommend when the Office of the Legislative Auditor complies with all the applicable GAGAS compliance requirements, it use the standardized language of the unmodified GAGAS compliance statement. We extend our thanks to you, your staff and the other county officials we met for the hospitality and cooperation extended to us during our review. Sincerely, /Ivy Gary S. C pman, CIA, CGAP, CFE Mary Jo Emanuele, CIA, CGFM Senior Auditor Audit Manager City of Tampa, Florida City of Kansas City, Missouri J Yoshimoto 4 MsY •w Lane Shibata Chair&Presiding Officer oQ••• '•••!!rte', Acting Legislative Auditor Council District 2 . :44 f..0it: Business Address 1266 Kamehameha Avenue Suite A-8 +r'r�;oi_N►'' Hilo,Hawaii 96720 Crattifyr of .ttGxrtt`i OFFICE OF THE LEGISLATIVE AUDITOR 25 Aupuni Street * Hilo,Hawaii 96720 * (808)961-8386 * Fax(808)961-8905 website:http.Aiawaiicountv.gov e-mail:publiclao @co.hawaii.hi.us December 12, 2013 Mr. Gary S. Chapman Senior Auditor Internal Audit Department City of Tampa 306 E. Jackson Street, 5N Tampa, Florida 33602 Ms. Mary Jo Emanuele Audit Manager City Auditor's Office City of Kansas City 414 East 12th Street, Room 2103 Kansas City, Missouri 64106 Dear ALGA Peer Review Team: Thank you for your external quality control review report dated December 12, 2013. We are pleased with your opinion that the Office of the Legislative Auditor's first peer review was found to be in full compliance with Government Auditing Standards during the period of July 1, 2009, through June 30, 2012. We have reviewed the recommendations in your management letter. We appreciate your constructive feedback, your thoughtful comments about the areas where you found our office to excel, and your suggestions to further enhance our operations and procedures. Our office is committed to continuously improving our audit processes. On behalf of my staff and myself, I thank you very much for the professionalism,time, and effort you both devoted to help us become a more efficient and effective audit organization. We will share your report with our Hawai`i County Council, and will make it available to the public on our website. Sincerely, . ,,.,,,, ii:17;4,4 Lane H. Shibata Acting Legislative Auditor Hawai'i County is an Equal Opportunity Provider and Employer , ociAT/04, 04, The Association of Local Government Auditors 1 r ,ifimu 0 CI 0 Awards this -fr00/1141E14 ' ; 1:11 ri. 0 ' ::: 04,-N 4,„,,,,, 11 1 i , to 1 il Office of the Legislative Auditor County of Hawaii 1 , I Recognizing that the organization's internal quality control system was suitably designed and operating effectively to provide reasonable assurance of compliance with Government Auditing Standards for audit and attestation engagements during the period July 1 2009, through June 30, 2012. ,., , i 1 Gary S.Ct4-lan . 4411eWM Bill Greene ALGA Peer eview Committee Chair ALGA President 1