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Home My WebLink AboutCOM 0357.000 2022-2024 County of Hawaii . * �tzfv� Office of the County Auditor ' County Auditor 120 Pauahi St.,309 County of Hawaii Hilo, Hl 96720 Office of the County Auditor F 808.961.8905 y Ph 808.961.8386 MEMORANDUM I ® Honorable Mitchell D. Roth, Mayor and all Department and Agency Heads, County of awai`i co Honorable Heather Kimball, Council Chair f.rr and Members of the Hawaii County Council h From: Tyler J. Benner, County Auditor u J6 Subject: Results of Countywide Monitoring of Purchasing Card Expenditures -.7 Date: May 2, 2023 4 3 3 The County has participated in the Hawaii State Procurement Office's Purchasing Card (pCard) Program since 2003. The pCard, which is similar to a credit card, is designed to 3 be used to streamline the County's small purchase and payment process and should be used by departments and agencies to reduce the number of small dollar purchase orders issued and invoices paid. I To promote accountability and openness in local government, we monitored pCard purchases in accordance with our FY2022-2023 Annual Audit Plan. The purpose of our review was to determine whether internal controls currently in place were adequate to reduce the risk of fraud and misuse, to evaluate the appropriateness of pCard purchases, and to identify areas for improvement. Our procedures included: j • Reviewed pCard and Purchasing Manuals, Past Purchasing Reminders, Updated Procedures Pre-Approved Sole SourcelProcureent Exemptions, Spending Guidelines, and other applicable governance. i • Analyzed pCard transactions to determine compliance with applicable procurement rules, procedures, and laws of the County and State of Hawaii. • Evaluated the administration of the Purchasing Card 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. Ref.To- Hawaii County is an Equal Opportunity Provider and Employer of t? Se I 3 I I We reviewed 3,026 transactions, totaling $741,43 . 7, from June to November 2022, at 20 departments. Of these transactions, nearly all were for a legitimate department purpose, authorized, and followed County policies and procedures. We found: • • • Department or # # Dollar Allowable Authorized Reasonable Agency Cardholders Transactions Amoun 1 Aging 3 34 6,697.78 ,l 2 Civil Defense Agency 7 53 7,927.47 If �I 3 Corporation Counsel 20 57 9,109.70 �f 4 County Auditor 5 31 4,367.34 ** ** ** 5 County Council 13 152 35,289.73 �( (Includes County Clerk) 5a Elections 42 12,600.47 %f 6 Environmental 4 17 1,056.72 Management 6a Solid Waste * 11 11,024.71 If _V 6b Wastewater 15 8,917.21 7 Finance 13 130 24,477.19 8 Fire 29 311 77,906.45 1f If �( 8a Protective Inspection * 14 2,027.08 9 Housing 5 63 23,412.96 Nf 9a Homelessness * 8 3,309.92 3 10 Human Resources 11 68 12,533.21 ,f - 11 Information Technology 6 54 12,733.84 e( Nf 12 Liquor Control 5 48 12,861.24 Nf N 13 Management 5 114 22,261.08 N1 14 Mass Transit Agency 2 94 84,067.68 *** *** *** 15 Parks and Recreation 43 517 117,588.61 ,f 15a Elderly Activities 22 1,999.96 �f 15b Golf Course 8 854.06 if �f 16 Planning 7 79 21,870.12 Nf 17 Police 3 340 94,033.15 17a Animal Control 50 19,271.20 Nf �( 18 Prosecuting Attorney 10 220 33,892.33 �/ f 19 Public Works-Admin 4 17 4,179.02 of 19a Engineering 1 24 5,330.18 ,f �( 19b Highway&Streets 3 26 4,549.82 N 19c Maintenance 18 253 23,725.60 If 19d Traffic 4 16 3,892.11 If 20 Research and Development 4 78 30,057.71 Vf Miscellaneous Accounts 60 7,608.72 Total 225 3026 $741,434.37 Compiled from Eden FRESH Invoice History Reports. Footnote: Currently not set up as a separate group in the County's banking system. For example, Solid Waste and Wastewater are included in Environmental Management's 4 cards.—Government Auditing Standards prohibit audit organizations from self-reviewing their own work. *—Unable to determine based on one or more questionable transactions. We did not review the Department of Water Supply(a semi-autonomous agency). We commend the departments, agencies, and the Department of Finance's commitment to having strong internal controls over pCard policies, procedures, and practices. While pCard transactions reviewed were generally appropriate and for a legitimate department purpose, we offer the following observations: Observation #1 - Outdated Purchasing1 (December ). We found the pCard Manual does not reflect the current vendor contracted by the State Procurement Office to administer this program. Where applicable, we encourage updating written policies and procedures to reflect current processes. By clarifying and enforcing internal controls in written policies and procedures, the County ensures consistency and compliance throughout the organization. Observation #2 - Unclear Public Purpose or Benefit to the County Due to Insufficient urc ase Description and/or Documentation between FRESH System and Hardcopies Submitted. Sections 2.10, 2.13, 4.1-A, B, and C, 7.3, and applicable sections of the pCard Manual require proper description, documentation, authorization, or approval. County departments process their pCard into the financial account system differently; each recording the transaction with varying levels of detail. We observed inconsistent levels of detail and documentation making it difficult to demonstrate a clear public purpose. To mitigate these risks, the County should consider uniform guidance to facilitate a standardized protocol for entering and documenting financial information, such as providing an example of a completed Transaction Summary Report detailing the information required to demonstrate a clear public purpose or benefit to the County. This may include applicable authorization for: out-of-state travel, request for adjustments and exceptions (RAE), request for budget reduction exception by expenditure review committee (ERC), price term agreement, procurement exemption, mayor, council chair, or designee approval, etc. Implementing a standardized protocol for entering transactions ensures compliance with legal and regulatory requirements, increases efficiency, and reduces risk. Observation #3 - Consider Price-Term Agreements for Bulk Items. Sections 12.1-1 and 12.1-2 of the Purchasing Manual, addresses procurement violations. Parceling, the act of intentionally dividing up a larger procurement into smaller procurements to avoid the correct procurement method, is not permitted. Departments and agencies are to consider the known estimated amount 1 quantity of the purchasing items for the entire fiscal year when determining the appropriate method. Based on our review, we did not find any evidence of parceling. However, it is important to note that certain departments may require routine purchases that exceed their decentralized purchasing limits. These trends should be considered when negotiating future price term agreements. It is important to ensure that our purchasing strategies align with operational needs and provide the best value for our County. While these observations are not affixed to an audit engagement, we provide them proactively to you in hopes that process improvement would make an audit unnecessary. ahalo to you and your staff for their diligent work over pCars. As stewards of public money, it is imperative all purchases are made in accordance with applicable rules and procedures, are transparent, and are the best value for the County. In closing, the improper use of government resources or positions is often discovered thanks to employees, we encourage you and your staff to be part of the solution by calling it out. Fraud and waste hotline: (808) 480-8213 Whistleblower hotline: (808) 480-8279 Fax: (808) 961-8905 Email: -X, c n,.:. Mail: Office of the County Auditor, 120 Pauahi St., Hilo, HI96720 We appreciate the courtesies and cooperation of the County departments throughout the course of our review. For any questions or concerns, you are welcome to contact me at (808) 961-8386. Aloha.