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

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and out (inventory issued to work crews) of their stockroom. In addition, these logs should show the maximum and minimum ordering points as well as the quantity to be ordered. Inventory usage is recorded on the Daily Project and Daily Labor reports, but inventory logs are not consistently maintained for items moving in and out of the baseyard . Inventory purchases and adjustments are not reconciled to what is actually in stock. Furthermore, beginning and ending balances are not reconciled. By not reconciling inventory on hand to items in use, additions, and adjustments, management may not be able to timely detect items that have been lost, missing, or stolen. This practice makes it difficult to maintain a perpetual/continuous inventory system, detect irregularities in inventory shrinkage, or hold any person accountable. Continuous monitoring and reconciliation practices could detect inventory variances and irregularities. Herbicide is the only item that had a continuous in/out log that is consistently reconciled at all baseyards. We reviewed 740.5 gallons of herbicide totaling $32,275 and determined herbicide inventory and inventory records were accurate and complete. We found no exceptions at S. Hilo, N. Kohala, S. Kohala, Puna, and Ka`u Road baseyards. Although the Hamakua and Kona Road baseyards did not report herbicide as MTS inventory in FY 2014-15, they could demonstrate they mitigated the risk of herbicide not being used for personal benefit. Both baseyards recorded all purchases, issues, transfers, performed reconciliations, and safeguarded herbicide as indicated by the supervisor and an overseer initials and date reviewed. In only the instance of herbicide, management established adequate accountability and safeguarding internal controls to ensure herbicide inventory and inventory records were accurate and complete. Monitoring is an integral component of internal controls; unmonitored controls tend to deteriorate over time. When monitoring is designed and implemented appropriately, Departments are more likely to identify and correct problems on a timely basis. Ongoing monitoring can occur in the course of daily operations including regular management and supervisory activities, e.g., comparisons, reconciliations, and other routine actions. A thorough review of the various inventory processes will help ensure the accuracy, completeness, accountability, and safeguards of inventory and inventory records. Regular review and independent monitoring by management could identify systematic problems and provide reasonable assurances for the safeguarding of assets against loss from unauthorized use or disposition while maintaining accountability of its assets. DPW Highway Maintenance Division Inventory Management: Audit Results 112