HomeMy WebLinkAboutCOM 0340.000 2022-2024 County of Hawaii
'nW e" Office of the County Auditor' . r
County Auditor 120 Pauahi St.,309 _
County of Hawaii Hilo, Hl 96720 s
Office of the County Auditor F 808.961.8905
Ph 808.961.83861
MEMORANDUM
TDepartment and Agency Heads, County of awai`i
Cc: Deanna Sako, Finance Director -•
Lee Lord, Managing Director
From: Tyler J. Benner, County Auditor ' v
Subject: Results of Countywide Monitoring of Fixed Assets
Date: June 23, 2023
County inventory asset management plays a vital role in ensuring local governments"
efficient and effective operation. With numerous assets and resources under their
jurisdiction, departments must maintain accurate records, monitor usage, and track the
condition of their inventory to optimize operations and uphold fiscal responsibility. Proper
inventory asset management enables departments to make informed decisions,
enhances service delivery, maximizes resource utilization, and supports transparency
and accountability.
We have completed our Countywide review of fixed assets and management of inventory
in accordance with our FY2022-2023 Annual Audit Plan. Our review aimed to determine
whether internal controls were adequate to reduce the risk of fraud and misuse, evaluate
the validity and accuracy of inventory management, and identify areas for improvement.
Our procedures included:
• Reviewed the County of HawaiTs Fixed Asset Procedures Manual (effective
0910111983 and revised 0310712023), 2021 and 2022 Fixed Asset Detail Report,
Additions, Transfers, and Disposals forFY202Z and other applicable governance.
• Analyzed asset transactions to determine compliance with applicable inventory
policies, procedures, and laws.
• Evaluated the administration of the Asset Management Program for adequate
internal controls.
• Interviewed staff to assess their understanding of and compliance with applicable
County policies and procedures.
• Identified areas for improvement.
Comm: No. _
Hawaii County is an Equal Opportunity Provider and Employer Ref.To
Ref. tate JUN. 2p
It is important to note that while we reviewed the County's Fixed Asset Inventory listing,
we did not check the County's Building & Improvements Report, Land Report, Street
Roads Report&Materials&Supplies Inventory, or individual department Controlled Asset
details. Further, we did not verify the County's physical inventory but instead focused on
the details as reported in the Fixed Asset Detail Report.
We reviewed all fixed asset transactions across the County's 22 department divisions
totaling $181,852,186.55, including 899 "Addition" transactions, 136 "Transfer"
transactions, and 640 "Disposal" transactions for the period July 1, 2021, to June 30,
2022. Of these transactions, most were documented and reported in accordance with
applicable governance and followed County policies and procedures. Specifically, we
reviewed:
Dept. Dollar Amount
# Department or Agency
Additions Transfers Disposals FY`22 Asset Total
11 County Clerk/Council $5,699.77 $0.00 $11,177.82 $583,095.84
12 Office of Management $0.00 $2,517.46 $1,354.00 $180,657.24
13 County Clerk/Elections $10,471.47 $0.00 $0.00 $382,079.55
14 Finance $722.22 $28,335.26 $47,771.74 $2,638,032.43
15 Corporation Counsel $0.00 $0.00 $24,574.05 $114,091.19
16 Prosecuting Attorney $75,077.79 $0.00 $0.00 $1,423,847.60
17 Planning Department $40,850.17 $0.00 $12,833.55 $1,076,120.86
18 Human Resources $4,225.76 $1,690.92 $2,370.31 $275,956.94
19 Research&Development $1,077.10 $0,00 $163,044.94 $359,815.86
20 Public Works $2,267,364.49 $179,726.29 $1,043,923.82 $37,464,468.78
21 Police Department $642,444.01 $97,588.50 $354,358.88 $15,283,042.98
22 Fire Department $36,572.00 $0.00 $721,432.31 $45,812,637.55
23 Liquor Control $0.00 $0.00 $0.00 $167,986.35
24 Civil Defense $600,243.90 $112,887.88 $15,452.00 $3,469,404.66
25 Aging $0.00 $0.00 $37,116.00 $346,208.95
26 P&R/Parks Division $129,583.49 $0.00 $967,993.69 $12,511,071.55
27 P&R/Recreational Divisions $18,350.00 $0.00 $23,505.10 $1,163,360.48
28 County Auditor $0.00 $0.00 $0.00 $23,809.21
30 Information Technology $0.00 $19,275.86 $19,264.78 $5,918,839.83
40 Mass Transit Agency $0.00 $0.00 $986,397.48 $14,891,743.09
45 Environmental Management $616,006.91 $845.45 $968,937.05 $36,550,300.66
60 Housing&Community Development $301,541.66 $0.00 $62,144.17 $1,215,614.95
Total $4,750,230.74 $442,867.62 $5,463,651.69 $181,852,186.55
Compiled by the Office of the County Auditor
Note:We did not review the Department of Water Supply(a semi-autonomous agency).
We commend the Department of Finance's commitment to having certain internal controls
over fixed assets and inventory management, policies, procedures, and practices. While
fixed asset inventory details reviewed were generally appropriate and accurately
documented county assets, we offer the following observations:
Observation #1 — Non-Compliance with Applicable Governance
The County of HawaiTs Fixed Asset Procedures Manual (eff. 03/07/2023) states, "The
receiving agency shall. The equipment information and the identification number shall be
listed on the Inventory Additions Worksheet with a copy of the Equipment Transfer Form
attached' (page 11). Of the 136 transactions, only 18 items transferred are reflected on
the 2022 Addition Worksheet.
Observation #2-® Insufficient Item Description of Equipment
The County of HawaiTs Fixed Asset Procedures Manual(eff.03/07/2023)states, "Agency
shall report a detailed description of equipment, such as serial numbers, make, model
number, and date acquired when adding to the Inventory Additions Worksheet form"
(page 13). In several instances, description details are not specific. Serial number details
required by policies and procedures were missing from the equipment's description for
items costing over$250.00 on several occasions.
Observation #3— Incomplete Description Detail Listed on Disposal
The County of HawaiTs Fixed Asset Procedures Manual (eff. 03/07/2023) states, "A
police report for lost or stolen items must accompany the Equipment Disposal Form"
(page 18). In three instances, the Disposal Log indicated an asset item was lost or stolen
but failed to list the police report number. The Department of Finance was able to provide
the missing information upon OCA's request.
Observation#4— Multiple Items Assigned to One Asset Number
Although not specifically addressed in the County's policies and procedures, it has
historically been the County's practice to assign one asset number to items purchased in
packs or groups (i.e., foldable chairs, tables, licenses, etc.). We observed some items of
significant value that were erroneously assigned one asset number. The assignment of a
single asset number to multiple items can introduce risks, including increased risk of theft,
inaccurate inventory tracking, reduced visibility into inventory value, and difficulty
quantifying defective items.
Observation #5—Asset Items Not Being Properly Assigned as a Controlled Asset
The County of HawaiTs Fixed Asset Procedures Manual (eff. 03/07/2023) states,
"Exceptions: Controlled Assets — selected personal property items costing more than
$250.00 but less than$1,000.00 shall be controlled as if they were capital assets because
of their sensitive, portable, and theft prone nature. Agencies shall maintain detailed
records of such assets that meet all the requirements set forth in the criteria of equipment
for Estimated Life, Classification, and Accountability. Controlled assets are listed in a
separate inventory classification. These items should not be included in the agency list of
"materials, supplies, and tools"inventory"(page 6). (Note: List of examples provided on
page 6 of the County's policies and procedures.)"
We observed instances of inventory items that qualify for an exception under the
monetary threshold being incorrectly classified as regular assets for inventory purposes.
Conversely, certain items should be closely monitored as controlled assets due to their
portable nature and susceptibility to theft but are instead being capitalized because of
their dollar value.
To further improve the process, we suggest the following:
Observation - Review the process and ensure additions are reliably added to the
addition spreadsheets when assets transfer between departments.
Observation # - Communicate to all departments a reminder that all required elements
of item descriptions must be included in items added to the addition spreadsheets with
examples.
Observation #3 - Communicate to all departments a reminder that all disposals due to
theft and loss should include inventory descriptions referencing the police report with
examples.
Observation#4-Policy and procedures should be reviewed and modified as appropriate
to provide clear guidance to departments to help determine qualifying items and how to
protect county assets managed in bulk from theft and loss.
During interviews we learned the department was aware of this item and is proactively
taking steps to improve controls, we look forward to the successful completion.
Observation #5 - The decentralized nature of controlled assets may introduce control
variances from department to department. Finance should consider reviewing and
updating the policy for relevancy, definitions, and dollar thresholds and collect controlled
asset lists periodically to ensure uniform management and control.
By clarifying and enforcing internal controls in written policies and procedures, the
Department of Finance ensures consistency and compliance throughout the County.
While observations from the current review are not affixed to an audit engagement, we
may conduct a comprehensive inventory audit in the future.
Thank you in advance for your commitment to improving internal controls over the
County's fixed assets procedures. We appreciate your cooperation in providing full, free,
unrestricted access to examine and inspect records, the facility, and the employee tasked
with this function. Don't hesitate to contact me at (808) 961-8386 for any questions or
concerns. Aloha.