2017-01 Performance Audit Report: Inventory Management at County of Hawai'i's Department of Public Works Highway Maintenace Division

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Audit Objectives The Office of the Legislative Auditor's Fiscal Year 2015-2016 Annual Audit Plan included a performance audit of inventory management of the Department of Public Works (DPW). The objectives of the audit were to evaluate inventory and inventory records. We also assessed the adequacy of the inventory system administration and oversight as well as internal controls to safeguard the County from fraud, waste, and abuse. Audit Scope and Methodology To accomplish our objectives, we: • Developed an understanding of the inventory policies and procedures, processes, practices, and document flows; • Corroborated information through interviews with appropriate personnel, reviewed documentation, and performed tests of documentation and controls; • Compared the County's Inventory Procedures Manual (January 1983), practices, and performance measures against best practices; • Assessed compliance with the County's Inventory Procedures, applicable inventory guidelines, laws, rules, regulations, code and charter provisions; • Analyzed inventory data from fiscal year 2013 through 2015; • Judgmentally selected inventory for evaluation using a risk-based approach focusing on items easily stolen or used for personal benefit; • Reviewed additional inventory related documentation (e.g., fixed asset detail report by fund, materials, tools, and supplies (MTS) lists, equipment additions, transfers, and disposals lists, etc.) as needed; and • Was mindful of potential fraud, waste, and abuse during the audit. During the course of the audit, we reviewed and evaluated internal control procedures and we judgmentally selected inventory (including both controlled assets and MTS) with a book value under $1,000 deemed sensitive, portable, and prone to theft at the Department of Public Works Highway Maintenance Division from July 1, 2014 to December 31, 2015. We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives. Our conclusions on the effectiveness of these controls are detailed within this report. DPW Highway Maintenance Division Inventory Management: Objectives, Scope & Methodology 17