HomeMy WebLinkAboutCOM 0522.033 2000-2002
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I~WAII COUNTY ECONOMIC OPI'OItTUNITY COUNCIL
47 Rainbow Drive
Hilo, I-lawaii 96720-2013
Telephone: (808) 961-2681 _
F R€~iV~i~
Fax: (808) 935-9213
April 3, 2002 ~a~~n~y C:~~
The Honorable Curtis Tyler
Hawaii County Council Office
25 Aupuni Street
Hilo, Hawaii 96720
SUBJECT: HAWAII COUNTY COUNCIL SPECIAL MEETING - 04/01/02
Dear Councilman Tyler:
Pursuant to your request at the Hawaii County Council Special meeting on April 1, 2002, the Hawaii
County Economic Opportunity Council (HCEOC) is forwarding to you the Audit Report for fiscal year
ended September 30, 2000. The audit report for year ended September 30, 200] is presently being
prepared by a contracted Certified Public Accountant and a copy will be available to you upon
completion.
Also at the meeting, you inquired about the $44,621 increase in personnel cost in comparison to the
current and projected budget for FY 2002-2003. The growth in the aforementioned personnel cost
reflects a 5% pay increase.
As you know, the mission of HCEOC's Transportation Program is to provide specialized transportation
services to low-income individuals, elderly, disabled and pre-school children. In order to obtain a
Commercial Driver License, drivers are required to meet stringent health and safety licensing standards.
Furthermore, our drivers face a pay disparity among their peers from the private sectors, thus impossible
to compete, solicit and retain qualified drivers from the labor market. As of date, NCEOC employs a total
of 25 bus drivers for the County of I-lawaii. The salaries of our drivers are notably conservative when
factoring in health care cost and basic living expenses. A breakdown of our driver's monthly salary is as
follows:
1 -driver employed as of l 2/ 11 /73 earns $ l ,906.00
1 -driver employed as of 02/] 0/76 earns $1,823.00
1 -driver employed as of OS/31 /88 earns $1,666.00
3 -drivers have earnings ranging from $1,508.00 to $1,578.00
The remaining 19 drivers earn a monthly salary of $l,l X5.00 to $1,448.00. Please note that the total
monthly salary reported represents the monthly gross earnings and not indicative of the net pay.
Thank you for the opportunity to address your concerns and for the many years of continued support of
HCEOC Transportation Program.
Sincerely,
a~u.e.
Comm, No, ~ , ,
Toshie Miyasaki - ~
Fiscal Officer File No. -
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HAWAII COUNTY ECONO11111C OPPORTUNITY COUNCIL
HILO, HAWAII
Financial Statements and Supplementary Data
And Comments on Internal Control and Compliance
Year ended September 30, 2000
(With Independent Auditor's Reports)
OC i 1 6
~~w~n ~®uN~r1r ~c®NO~ec ®~~®~°rurvrr~r c®un~ci~
Year enclecl September 30, 2000
Yable of Contents
Pa es
Independent Auditor's Report -Unqualified Opinion on Financial
Statements and Supplementary Schedule of Expenditures of
Federal Awards 1
financial Statements:
Statements of Financial Position 2
Statements of Activities 3
Statements of Functional Expenses 4
Statement of Cash Flows 5
Notes to Financial Statements 6
Supplementary ®ata:
Schedule of Expenditures of Federal Awards 9
Schedule of Findings and Questioned Costs 10
Report on Compliance and on Internal Control over Financial
Reporting Based on an Audit of Financial Statements
Performed in Accordance with Government Auditing Standards 11
Report on Compliance with Requirements Applicable to Each
Major Program and on Internal Control over Compliance in
Accordance with OMB Circular A-133 12
Prior Year Management Letter Comments e Follow Up 14
J~NIvTI~~R ~®SSERT
CERTIFIED I~U~LIC ACCOUNTANT
An Accounting Corporation
688 Kinoole Street, Suite 201 • Hilo, Hawaii 96720 • Phone (808) 969.3115 Fax (808) 969.7$63
UNQUALIFIED OPINION ON FINANCIAL STATEMENTS AND SUPPLEMENTARY SCHEDULE OF
EXPENDITURES OF FEDERAL AWARDS -NOT-FOR-PROFIT ORGANIZATION
Independent,Auditor's Report
To the Board of Directors
Hawaii County Economic Opportunity Council:
We have audited the accompanying statement of financial position of Hawaii County Economic
Opportunity Council as of September 30, 2000, and the related statements of activities, functional
expenses, and cash flows for the year then ended. These financial statements are the responsibility of
Hawaii County Economic Opportunity Council's management. Our responsibility is to express an opinion
on these financial statements based on our audit. Information for the year ended September 30, 1999, is
presented for comparative purposes only and was extracted from the financial statements for that year,
on which we expressed an unqualified opinion in our report dated September 15, 2000.
We conducted our audit in accordance with generally accepted auditing standards and the standards
applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller
General of the United States. Those standards require that we plan and perform the audi*, to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and the significant
estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of Hawaii County Economic Opportunity Council as of September 30, 2000, and the
changes in its net assets and its cash flows for the year then ended in conformity with generally accepted
accounting principles.
In accordance with Government Auditing Standards, we have also issued my report dated July 31, 2001
on my consideration of Hawaii County Economic Opportunity Council's internal control over financial
reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and
grants.
Our audit was performed for the purpose of forming an opinion on the basic financial statements of
Hawaii County Economic Opportunity Council taken as a whole. The accompanying schedule of
expenditures of federal awards is presented for purposes of additional analysis as required by the U:S.
Office of Management and Sudget Circular A-133, Audits of States, Loca! Governments, and Non-Protrt
Organizations, and is not a required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a
whole.
July 31, 2001
~IAWAII COUNTY ECONOMIC OPPORTUNITY COUNCIL
Statements of Financial Position
September 30, 2000 and 1999
2000 1999
Assets
Current assets:
Cash $ 31,162 $ 183,901
Grant receivables from
governmental agencies 697,330 325,468
Other receivables 64,593 61,678
Prepaid expenses 17,582 30,415
'Total current assets 810,667 601,462
Property and Equipment:
Vehicles 1,122,575 1,035,063
Furniture and Equipment 597,194 543,727
Building 77,800 77,800
Leasehold improvements 2,604,510 2,604,510
Land 35,000 35,000
4,437,079 4,296,100
Accumulated depreciation (1,294,665) (1,085,509)
fiotal property and equipment 3,142,414 3,210,591
Construction in progress 32,700
Security deposits 18,039 17,696
fiotal Assets 4,003,820 3,829,749
Liabilities and Net Assets
Current liabilities:
Accounts payable 255,052 147,246
Accrued liabilities 268,947 266,864
Due to grantors 27,630
Notes payable to banks 1,669
Deferred revenue 56,024 86,960
fiotal current liabilities 580,023 530,369
Net assets
Unrestricted 3,423,797 3,299,380
Total Liabilities and Net Assets $ 4,003,820 $ 3,829,749
See accompanying notes to financial statements.
2
1•Ie~,VIPs411 COUNTY ECONOMIC OPIa01$TUNI1`Y COUNCIL
Statements of Activities
Year ended September 30, 2000
with comparative totals for the year ended September 30, 1999
2000 lggg
Public Support and Revenues:
Public support:
Federal grants $ 4,803,243 $ 3,779,375
State grants 802,452 864,173
County grants 297,462 332,434
Foundations/donations 3,140 15,465
In-kind contributions 546,036 552,778
Total public support 6,452,333 5,544,225
Revenues:
Program income 599,569 504,662
Medicaid/ Medicare 188,292 173,940
Interest income 2,631 2,841
Refunds 61,067 65,482
Other income 46,221 59,445
Total revenues 897,780 806,370
Total public support and revenue 7,350,113 6,350,595
Expenses:
Program services 6,286,153 5,312,650
Supporting services 939,543 790,632
Total Expenses 7,225,696 6,103,282
Change in net assets 124,417 247,313
Net assets, beginning of year 3,299,380 3,052,067
Net assets, end of year $ 3,423,797 $ 3,299,380
See accompanying notes to financla! staterreents.
3
hiA10VAll COUNTY ECONOMIC OPPORTUNITY COUNCIL.
Statements of Functional Expenses
Year ended September 30, 2000
with comparative totals for the year ended September 30, 1999
Program Supporting Total
Services Services 2000 1999
Salaries and wages $ 2,983,075 $ 646,661 $ 3,629,736 $ 2,807,270
Fringe benefits 374,159 82,133 456,292 462,188
Payroll taxes 427,102 93,754 520,856 410,029
Materials and supplies 808,133 16,500 824,633 661,432
Contractual services 107,715 40,000 147,715 137,840
In-kind expenses 546,036 546,036 552,778
Vehicle expenses 261,045 2,640 263,685 259,696
Travel 69,095 15,065 84,160 39,313
Conference and meetings 62,160 3,272 65,432 29,512
Telephone 55,413 6,157 61,570 51,124
Equipment rental
and maintenance 18,773 2,165 20,938 26,861
Insurance 59,681 6,631 66,312 61,302
Occupancy 178,711 16,711 195,422 182,717
Postage 5,536 1,215 6,751 7,566
Other 60,655 6,630 67,285 82,242
Interest expense 9 9 924
Rehabiliation loans 59,709 59,709 124,941
Total expenses
before depreciation 6,076,998 939,543 7,016,541 5,897,735
Depreciation expense 209,155 209,155 205,547
Total expenses $ 6,286,153 $ 939,543 $ 7,225,696 $ 6,103,282
See accompanying notes to financial statements.
4
FIs4WAll EC®N®I~II~ APP®I~~'UNI°fl( C®UNCIL
Statement of Cash Flows
Year ended September 30, 2000
Cash flows from operating activities:
Increase in net assets $ 124,417
Adjustments to reconcile change in net assets to
net cash provided by operating activities:
Depreciation 209,155
Increase in receivables (374,777)
Decrease in prepaids and deposits 12,490
Increase in accounts payable and accrued liabilities 82,259
Decrease in deferred revenue (30,936)
Net cash provided by operating activities 22,608
Cash flows from financing activities:
Sank loan proceeds -
Loan repayments (1,669)
Net cash used by financing activities: (1,669)
Cash flows from investing activities:
Construction in progress (32,700)
Purchases of property and equipment (140,978)
Net cash used by investing activities (173,678)
Net decrease in cash (152,739)
Cash at beginning of year 183,901
Cash at end of year $ 31,162
Supplemental Disclosure of Cash Flow Information
There were no noncash financing or investing activities for the year
ended September 30, 2000.
See accompanying notes to financial statements.
5
HAWAII COUNTY ECONOMIC OPPORTUNITY COUNCIL
Notes to Financial Statements
September 30, 2000
(1~ Organization and Summary of Significant Accounting Policies
Organization
The Hawaii County Economic Opportunity Council (HCEOC) was incorporated in the State of
Hawaii on May 27, 1965. HCEOC is a Community Action Agency that provides services for low-
income, elderly and handicapped individuals in Hawaii County. The operations of HCEOC are
funded primarily through grants and contracts from federal, state and county governmental
agencies. These grants and contracts comprise approximately 83 percent of HCEOC's total
support and revenue.
Financial Statement Presentation
The accompanying financial statements of HCEOC are presented in accordance with the
standards of accounting and financial reporting prescribed for not-for-profit organizations. In
accordance with these standards, the accounting policies applicable to not-for-profit
organizations are used by HCEOC. HCEOC reports its financial position and activities according
to three classes of net assets: unrestricted, temporarily restricted, and permanently restricted net
assets. All grants, and other support received during the year with performance restrictions
imposed by the donors are recognized as revenue in the period received when performance
requirements are satisfied. As of September 30, 2000, none of the net assets of HCEOC are
subject to donors imposed passage of time restrictions and are therefore classified as
unrestricted net assets.
Property and Etc uipment
Land and building consists of property contributed to HCEOC. The property has been recorded
at fair value based on the assessed value for real property tax purpose. Subsequent
improvements to the building that prolong its useful life have been added to the basis at cost.
Leasehold improvements include the cost of the human service complex that serves as the
HCEOC main facility. (see note 4). Vehicles and equipment are stated at cost at the date of
acquisition or at fair market vague at the time of donation. Major renewals and betterments are
included in the equipment fund while repairs and maintenance that do not improve or extend the
lives of assets are charged to expense.
Depreciation on all property and equipment is calculated by on the straight-line basis over the
estimated useful lives of the respective assets.
®eferred Grant Revenue
The HCEOC received cash payments in advance of incurred expenses for certain programs
funded by governmental sources. These advance payments are reflected as deferred revenue
in the accompanying financial statements.
6
HAWAII COUNTY ECONOMIC OPPORTUNITY COUNCIL
Notes to Financial Statements, Continued
Contributions
In accordance with SFAS No. 116, contributions received are recorded as unrestricted,
temporarily restricted, or permanently restricted support, depending on the existence and/ or
nature of any donor restrictions. As of September 30, 2000, HCEOC had no donor imposed
restricted or temporarily restricted contributions.
Income Taxes
HCEOC is classified as atax-exempt organization under Section 501 (c)(3) of the Internal
Revenue Code and is exempt from Federal and State income taxes.
Contributed Services
Contributed services do not meet the criteria set forth in SFAS No. 116 for recognition in the
financial statements and, therefore have not been recorded. However, a number of volunteers
have donated their time to the Head Start program and an estimate of the value of these
donated hours are reported to the Department of Human Services and are included in HCEOC's
20% matching fund requirement for federal Head Start funds.
Comparative Financial Information
The information shown for 1999 in the accompanying financial statements is included to provide
a basis for comparison with 2000 and represents summarized totals only.
Estimates
The preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
~2) Note Payable to dank
HCEOC completed repaymen4 on the balance of its unsecured promissory note with the Bank of
Hawaii in November 1999. Interest expense for the year totaled $9, computed at 1.5 percent
over the bank's base rate. At September 30, 2000, HCEOC had no outstanding loan balances
with the Sank of Hawaii.
(3) Pension Plan
HCEOC has anon-contributory defined contribution pension plan covering most of the full time
personnel. Employee eligibility to participate is based on age and length of service
requirements. The annual contribution to the plan is based on 7 percen4 of employee
compensation. Pension expense was $160,724 for the year ended September 30, 2000.
7
HAWAII COUNTY ECONOMIC OPPORTUNITY COUNCIL
Notes to Financial Statements, Continued
~4) Lease Obli4ations
HCEOC entered into a 55 year lease commitment with the Department of Land and Natural
Resources beginning June 24, 1994 for a portion of a parcel of land situated at Piihonua, South
Hilo, Hawaii, designated by Tax Map Key No. 2-3-32:1. The human services complex, was
constructed on this parcel in fiscal years 1995 and 1996 using State of Hawaii, Capital
Improvement Project funding passed through to HCEOC. The lease calls for an annual rental
fee of $8,348 through June 23, 2014 at which time the fee will be renegotiated. HCEOC records
the leasehold facility on its books and depreciates the facility over the useful life of the building.
HCEOC has two agricultural lease commitments with the Department of Land and Natural
Resources. A direct lease of unencumbered State land, identified as TMK 2-5-06:1 is comprised
of approximately 59.143 acres. The lease expires in 2001 with a token lease payment of $1 over
the life of the lease. The second direct lease is comprised of approximately 400 acres, identified
as TMK (3) 2-4-8-22. The lease term is for fifty-five years and expires in 2039. The fair market
value of these leases is not readily determinable.
HCEOC also rents space on a month-to-month basis at various sites county wide for use as
offices and program work centers. The monthly minimum lease obligations for these facilities
are $ 1,787.
(5) Donated Facilities
HCEOC used administrative offices and classroom facilities free of charge at several locations.
The use of such facilities is recorded on the financial statements based on the estimated annual
rental value of such facilities. The annual rent value for the twelve months ended September 30,
2000 is $546,036.
8
I~AeWAII C®UNTIt' ~G®N®MIC ~PP~I~~UNITY C®l1NCl~
Schedule of Expenditure of Federal Awards
For the Year Ended September 30, 2000
Federal
Federal Grantor /Pass-through Grantor /Program Title CFDA Grantors
Number Number Expenditures
De ap rtment of Health and Human Services
Direct Programs:
Head Start 93.600 09CH7023 $ 2,047,437
Urban & Rural Economic Development 93.570 90EE0346/01 108,168
Job Opportunities for Low Income 93.570 90E00073/01 49,538
Passed through State of Hawaii:
Office of Community Services:
Community Services Slock Grant 93.569 OCS-POS-00-61 450,296
Low Income Home Energy Assistance Prog. 93.568 HS-99-LIHEAP-7460 18,156
Community Food & Nutrition 93.571 OCS-POS-0059 9,225
The Emergency Food Assistance Program 10.569 N/A 640
Passed through County of Hawaii:
Office of Aging:
Nutrition Transportation 93.044 N/A 155,710
Department of Labor
Direct Programs:
Title II -Welfare-To-Work 17.253 Y-7228-9-00-81-60 1,471,356
Passed through State of Hawaii:
Department of Labor & Industrial Relations:
Welfare-To-Work 17.253 NIA 153,476
Department of Agriculture
Passed through State of Hawaii:
Department of Education:
National School Lunch Program 10.555 2101-6 161,817
Department of Enerpv
Passed through State of Hawaii:
Office of Community Services:
Weatherization Assistance Program
For Low Income Homeowners 81.042 OCS-POS-99-52 28,995
Department of Housing & Urban Development
Passed through County of Hawaii
Office of Housing & Community Development:
Housing Preservation Grant
for Low Income Persons 10.433 98024 50,396
HOME Rehabilitation Loan Program 92.508 NIA 47,977
Department of Transportation
Passed through State of Hawaii:
Department of Transportation:
Federal Transportation Admin. Grant 20.507 HI-16-0025 47,770
Passed thro~h KEO
HCAPDA Dialog on Poverty 93.570 OCS-90EQ0017 2,286
Total expenditures of federal funds $ 4,803,243
9
HAWAII COUNTY ECONOMIC OPPORTUNITY COUNCIL
Schedule of Findings and Questioned Costs
For the Year Ended September 30, 2000
A. Summary of Audit Results
1. The auditor's report, issued July 31, 2001, expresses an unqualified opinion on the
financial statement of Hawaii County Economic Opportunity Council for the year ended
September 30, 2000.
2. No material weaknesses were identified during fhe audit of the financial statements.
3. No instances of noncompliance material to the financial statements of Hawaii County
Economic Opportunity Council were disclosed during the audit.
4. No material weaknesses were identified during the audit of the major financial award
programs.
5. The auditor's report on compliance for the major federal award programs for Hawaii
County Economic Opportunity Council expresses art unqualified opinion.
6. There were no audit findings relative to the major federal award programs for Hawaii
County Economic Opportunity Council.
7. The three programs tested as major programs are as follows:
(1}The Head Start Program, CFDA No. 93.600, a direct contract with the U.S.
Department of Health and Human Services;
(2) The Community Services flock Grant, CFDA No. 93.589, a U.S. Department of
Human Services grant passed through the State of Hawaii Office of Community Services;
and
(3) The Welfare-To-Work Program, CFDA No. 17.253, a cluster comprised of a direct
contract with the U.S. Department of Labor and an contract passed through the State of
Hawaii Department of Labor.
8. The threshold for distinguishing Type A and B programs was $300,000. HCEOC has
three type A programs. Under the risk based approach three programs were selected as
high risk. There were no type B programs identified as high risk for inclusion as a major
program.
9. Hawaii County Economic Opportunity Council was determined to be a low-risk auditee.
B. Findings Financial Statements Audit
NONE
C. Findings and Questioned Costs -Major Federal Award Programs Audit
NONE
10
I,. Goss~~~
CERTIFIED ~i.7RLIC ACCOUNTANT
An Accounting Corporation
688 Kinoole Street, Suite 201 • Hilo, Hawaii 96720 • Phone (808) 969-3115 Fax (808) 969.7463
REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING
BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH
GOVERNPVIENT AUDITING STANDARDS
To the Board of Directors
Hawaii County Economic Opportunity Council:
We have audited the financial statements of Hawaii County Economic Opportunity Council as of
and for the year ended September 30, 2000, and have issued our report thereon dated July 31,
2001. We conducted our audit in accordance with generally accepted auditing standards and the
standards applicable to financial audits contained in Governmenf Auditing Standards, issued by
the Comptroller General of the United States.
Compliance
As part of obtaining reasonable assurance about whether Hawaii County Economic Opportunity
Council's financial statements are free of material misstatement, we performed tests of its
compliance with certain provisions of laws, regulations, contracts, and grants, noncompliance
with which could have a direct and material effect on the determination of financial statement
amounts. However, providing an opinion on compliance with those provisions was not an
objective of our audit, and accordingly, we do not express such an opinion. The results of our
tests disclosed no instances of noncompliance that are required to be reported under
Government Auditing Standards.
Internal Control Over Financial Reportin~c
In planning and performing our audit, we considered Hawaii County Economic Opportunity
Council's internal control over financial reporting in order to determine our auditing procedures
for the purpose of expressing our opinion on the financial statements and not to provide
assurance on the internal control over financial reporting. Our consideration of the internal
control over financial reporting would not necessarily disclose all matters in the internal control
over financial reporting that might be material weaknesses. A material weakness is a condition
in which the design or operation of one or more of the internal control components does not
reduce to a relatively low level the risk that misstatements in amounts that would be material in
relation to the financial statements being audited may occur and not be detected within a timely
period by employees in the normal course of performing their assigned functions. We noted no
matters involving the internal control over financial reporting and its operation that we consider
to be material weaknesses.
This report is intended for the information of the audit committee, management, and federal
awarding agencies and pass-through entities. However, this report is a matter of public record
and its distribution is not limited.
~
July 31, 2001
11
J~~~~ I~. Goss~~~
~EI2TI~FIED ~LJBI,IC ACCOUNTANT
An Accounting Corporation
688 Kinoole Street, Suite 201 • Hilo, Hawaii 96720 • Phone (808) 969.3115 Fax (808) 969.1463
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM
ANDON INTERNAL CONTROL OVER COMPLIANCE iN ACCORANCE WITH OMB CIRCULAR A-133
To the Board of Directors
Hawaii County Economic Opportunity Council:
Compliance
We have audited the compliance of Hawaii County Economic Opportunity Council with the types of
compliance requirements described in the U. S. Office of Management and Budget (OMB) Circular A-133
Compliance Supplement that are applicable to each of its major federal programs for the year ended
September 30, 2000. Hawaii County Economic Opportunity Council's major federal programs are
identified in the summary of auditor's results section of the accompanying schedule of findings and
questioned costs. Compliance with the requirements of laws, regulations, contracts, and grants
applicable to each of its major federal programs is the responsibility of Hawaii County Economic
Opportunity Council's management. Our responsibility is to express an opinion on Hawaii County
Economic Opportunity Council's compliance based on our audit.
We conducted our audit of compliance in accordance with general accepted auditing standards; the
standards applicable to financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local
Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we
plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types
of compliance requirements referred to above that could have a direct and material effect on a major
federal program occurred. An audit includes examining, on a test basis, evidence about Hawaii County
Economic Opportunity Council's compliance with those requirements and performing such other
procedures, as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion. Our audit does not provide a legal determination of Hawaii County
Economic Opportunity Council's compliance with those requirements.
In our opinion, Hawaii County Economic Opportunity Council complied, in all material respects, with the
requirements referred to above that are applicable to each of its major federal programs for the year
ended September 30, 2000.
Internal Control Over Compliance
The management of Hawaii County Economic Opportunity Council is responsible for establishing and
maintaining effective internal control over compliance with the requirements of laws, regulations,
contracts, and grants applicable to federal programs. In planning and performing our audit, we
considered Hawaii County Economic Opportunity Council's internal control over compliance with
requirements that could have a direct and material effect on a major federal program in order to
determine our auditing procedures for the purpose of expressing our opinion on compliance and to test
and report on the internal control over compliance in accordance with OMB Circular A-133.
Our consideration of the internal control over compliance would not necessarily disclose all matters in the
internal control that might be materia! weaknesses. A material weakness is a condition in which the
design or operation of one or more of the internal control components does not reduce to a relatively low
level the risk that noncompliance with applicable requirements of laws, regulations, contracts, and grants
that would be material in relation to a major federal program being audited may occur and not be
12
REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM
AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-
133
(Continued)
detected within a timely period by employees in the normal course of performing their assigned
functions. We noted no matters involving the internal control over compliance and its operation we
consider to be material weaknesses.
This report is intended for the information of the audit committee, management, and federal awarding
agencies and pass-through entities. However, this report is a matter of public record and its distribution
is not limited.
July 31, 2001
13
- J~~~~ L. Goss~~a~
CERTTFIEI~ I~UBLIC ACCOUNTANT
An Accounting Corporation
688 Kinoole Street, Suite 201 • Hilo, Hawau 96720 • Phone (808) 969.3115 Fax (808) 969.7463
Frior Year Management Letter Comments
A Follow Up
August 31, 2001
To The t3oard of Directors
Hawaii County Economic Opportunity Council
{n planning and performing our audit of the financial statements of Hawaii County Economic
Opportunity Council for the year ended September 30, 2000, we considered the Organization's
internal controls in order to determine my auditing procedures for the purposes of expressing an
opinion on the financial statements and not to provide assurance on internal control.
As part of our audit, we reviewed the status of the prior year managemen4 letter comments, dated
September 15, 2000, for the fiscal year ended September 30, 1999. We are reporting on the
status of those recommendations through this communication. This letter does not affect our
report dated July 31, 2001 on the financial statements of Hawaii County Economic Opportunity
Counc1.
We have already discussed this letter with the Executive Director and Fiscal Officer, and we will
be pleased to discuss these comments in further detail at your convenience, or the assist you in
implementing the recommendations. Our comments are summarized as follows:
General Excise Tax
Condition: While testing transactions related to the gift shop and open market operations during
our audit for the year ended September 30, 1999, we noted that HCEOC is not paying state
general excise tax on these sales. Although various program income generated through the
program have been exempted from the GET through a letter ruling, a G-6 request for
determination had not been submitted for items being sold through the gift shop and open market.
Recommended action: HCEOC needs to prepare and submit a State of Hawaii form G-6 to the
Department of Taxation requesting a letter determination for exemption of the general excise tax
with respect to the gift shop and open market sales.
Current status: HCEOC has submitted a State of Hawaii form G-6 to the Department of Taxation
requesting a letter determination for exemption of the general excise tax with respect to these
sales. A letter ruling from the Departmen4 of Taxation is pending.
Due Date of Annual Audit Report
The annual audit reports need to be submitted nine months after the close of the fiscal year in
accordance with OME Circular A-133. The small size of the fiscal office staff, coupled with the
additions! reporting requirements for the federal Welfare-To-Work project, prevented the audit
from being initiated in a timely manner. The audit agreement called for initiation of the annual
audit in November 1999 in order to deliver the audit reports in a timely manner. HCEOC was not
able to prepare agreed upon schedules for the auditors until January and February 2000.
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recommended action: The Organization needs to hire and train additional personnel for the
fiscal office operations. This would help to ensure that work is completed in a timely manner. It
would also provide for improved segregation of functions and allow for cross training with respect
to various functions.
Status: Additional fiscal office personnel were hired subsequent to this recommendation and
various functions among staff have been reassigned. However, this action did not occur early
enough in the year to enable the staff to complete all auditor requested schedules in November
2000 for the current audit year. The additional fiscal staff were in training and stretched to the
limit in the daily processing of accounting data. Abetter result is anticipated for the closing of
fiscal year ending September 30, 2001. It may necessitate that the auditors assist in preparing
some of the schedules previously prepared by HCEOC fiscal staff and this will likely result in an
increase in audit charges. but the necessity of an extension for the repor4 deadline can be
prevented.
We want to thank the fiscal office staff and other operational staff that provided assistance to us
during the audit process.
Sincerely,
Jennifer L. Gossert
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