HomeMy WebLinkAboutCOM 0196.000 2002-2004 N~V or N,t
AL KONISHI ~ CONS'FANCE R. KIRIU
('aunty Clerk Leg(s/ative dudi(ar
JAY MENDS :;;~,,,.,r~
r OI NI
Deputy County Clerk -
County ojKawai `i
Office of the County Clerk
2J Aupuni Street
Milo, &nvaii 96720 -
l'elephone: (AOH/ 96i-82.15 Fncsimi[e B08J 9(>1-89C
A pri I I , 2003
TO: Council Members
FROM: Constance Kiriu RECEfV!?y
Legislative Auditor rlme_ BY_~~~_r-
Dgts~___^i n 1
Coun
RE: Single Audit Report for fiscal Year Ending June 30, 2002 fy Coundl
A copy of the Single Audi! Repor! of the Cot~nh~ o~Hmrai'r /in- Fiscal Ycrm Ending June 30, ?1102, is
distributed for your information and review. "Fhe Single Audit Report was prepared by KPMG LLP as part
of the Council's overall audit contract and is not required by the Hawaii County Chatter.
The Single Audit Report is prepared for federal awarded programs to meet reporting and auditing
requirements. Specifically, sub-recipients in receipt of a minimum threshold amount of funds are audited
for the purpose of identifying material weakness of internal controls and testing compliance with certain
provisions of laws, regulations, contracts and grants, which could have a direct and material effect on the
financial statement amounts. A list of all county programs that have received federal funds can be found on
pages H-19 ("Schedule of Expenditures of Federal Awards'). Another separate memorandum received nn
March 2A, 2003 from the Controller Deanna Sako submitting a "Corrective Action Plad' and a "Summary
Schedule of Prior Audit Findings' is included with the Singly Audit Rcrart.
Finding 02-01 of the schedule of findings and questioned costs, the County did not maintain adequate
documentation on file to support the utility rates used for calendar year 2002. ~fhe County was not able to
provide support for utility allowances provided to tenants, landlords, and granting agencies.
Finding 02-02 of the schedule of findings and questioned costs, the County did not review two recipient
expenditure registers and corrzsponding reimbursement requests in July 2001, prior to submission [o the
pass-through agency. The County would not be.able to detect noncompliance with applicable laws and
regulations.
The auditors found [hat, except for the noncompliance in the preceding paragraphs, the County complied in
all material respects with the requirements applicable to each of its major federal programs for the year
ended June 30, 2002.
hhe external auditors will be scheduled at a future Finance Committee meeting to answer any questions
you may have. We will also request Housing Administrator Edwin Taira to attend the meeting. A
Enclosures f'AIDZII. N0. ~
P51e No. ~a/p
Ref. To: FG
Ref. Date APR 1 203
Ub'N'SC1s OF THE LEGISLATIVE AUI)1'fUtc
HAWAII COUNTY BUILDIN(}
25 AUPUNI STREET
HILO. HAWAII 9672(1
COUNTY OF HAWAII
STATE OF HAWAII
Single Audit of Federal Financial Assistance Programs
Year ended June 30, 2002
C-!9~/FC
CORRECTIVE ACTION PLAN
Department of Housing and Urban Development
Section 8 -Housing Choice Vouchers
CFDA No. 14.871
Federal Award No. HI08-V002
Finding 02-O1 Documentation of Annual Utility Rates Analysis
Recommendation: While performing the calendaz year 2003 utility allowance rates analysis,
the County reviewed and included adequate supporting documentation to verify that the 2002
utility allowance rates used were appropriate. We also noted that the 2003 analysis included
adequate supporting documentation. We recommend that the County continue to include
adequate supporting documentation in its files.
Administration's Comment: The County acknowledges the importance of maintaining
adequate supporting documentation in its files. The County will continue to maintain such
documentation.
Anticipated Completion Date: This will be an ongoing effort.
Contact Persons: Edwin S. Taira, Housing Administrator
Office of Housing and Community Development
1
Department of Labor
Passed through the State Department of Labor and Industrial Relations
Workforce Investment Act Cluster
FDA No. 17.258 and 17.260
Federal Award No. AA-10589.00-50
Finding 02-02 Subrecipient Monitoring
Recommendation: Subsequent to July 2001, the County implemented monitoring
procedures over all its subrecipients. We recommend that the County review the two
Subrecipient expenditure registers and corresponding reimbursement requests described
above and continue to monitor all subrecipients to ensure compliance with laws and
regulations.
Administration's Comment: The County will review the two Subrecipient expenditure
registers and corresponding reimbursement requests in question and continue to review
expenditures prior to submission for federal reimbursement.
Anticipated Completion Date: This will be an ongoing effort.
Contact Persons: Edwin S. Taira, Housing Administrator
Office of Housing and Community Development
SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS
Department of Labor
Workforce Investment Act
Finding Ol-Ol: We recommend that the County perform subrecipient monitoring
procedures to determine whether or not there is compliance with provisions of the
Workforce Investment Act and applicable laws and regulations similaz to those
performed on its other subrecipients.
Corrective action taken: Procedures have been implemented to improve
monitoring activities of subrecipient agreements. All subrecipients were
monitored during the current year. Monitoring will continue on a semi-
azmual basis.
Contact person: Edwin S. Taira
Housing Administrator
Department of Housing and Urbau Development
Section 8 Cluster
Finding 01-02: We recommend that County supervisors perform reviews of tenant files
for new participants in the Section 8 program as stipulated by County policies and
procedures.
Corrected: The supervisors continue to perform reviews of tenant files on a
monthly basis for new participants in the Section 8 program as stipulated
by County policies and procedures. This will be an ongoing effort. No
such instances were noted in the current yeaz. The comment is no longer
applicable.
Contact persons: Edwin S. Taira
Housing Administrator
Department of Housing and Urban Development
Section 8 -Rental Certificate Program
Finding 01-03: We recommend that the County review the information reported to the
grantor prior to submission.
Corrected: Procedures have been implemented to ensure the proper review of
information reported to the grantor prior to submission. This will be an
ongoing effort. No such instances were noted in the current year. The
comment is no longer applicable.
Contact person: Edwin S. Taira
Housing Administrator
COUNTY OF HAWAII
STATE OF HAWAII
Single Audit of Federal Financial Assistance Programs
Year ended June 30, 2002
Table of Contents
Page
I. INTRODUCTION
Audit Objectives I
Scope of Audi[ 2
Organization of Report 2
II. COMPLIANCE AND INTERNAL CONTROL OVER FINANCIAL REPORTING
Report on Compliance and on Internal Control over Financial Reporting Based
on an Audit of Financial Statements Performed in Accordance with
Government Auditing Standards 4
III. COMPLIANCE AND INTERNAL CONTROL OVER FEDERAL AWARDS
Report on Compliance with Requirements Applicable to Each Major
Program and on Internal Control over Compliance in Accordance with
OMB Circular A-133 6
Schedule of Expenditures of Federal Awazds 8
Notes to Schedule of Expenditures of Federal Awards 20
Schedule of Findings and Questioned Costs 21
SECTION I -INTRODUCTION
P 0. Box 4150
Honolulu, HI 96812-4150
March 7, 2003
To the Members of the
County Council of Hawaii
County of Hawaii
Hilo, Hawaii:
We have completed our audit of the basic financial statements of the County of Hawaii, State of Hawaii
(County), as of and for the year ended June 30, 2002. We have also audited the County's compliance with
requirements applicable to its major federal financial assistance programs. We submit herewith our reports
on compliance and on internal control over financial reporting and over federal awards, a schedule of
expenditures of federal awards, and a schedule of findings and questioned costs.
The audit objectives and scope of the audit were as follows:
AUDIT OBJECTIVES
1. To provide a basis for an opinion on the fairness of the County's basic financial statements.
2. To review the County's compliance with those provisions of-laws, regulations, contracts, and
grants which could have a direct and material effect on the determination of financial
statement amounts.
3. To review the County's system of internal control over financing reporting.
4. To opine on [he County's compliance with applicable laws, regulations, contracts, and grants
that could have a direct and material effect on each major federal financial assistance program.
5. To review internal control over compliance with requirements of regulations, contracts, and
grants that could have a direct and material effect on each major federal financial assistance
program.
6. To determine the current status of [he audit recommendations included in [he prior year's
management letter and independent auditors' report on compliance and on internal control
over financial reporting.
1
M[MrTiiV iI1Plrya lnL'in~. ~uiel~i '`I~~r P.'n.ia~il
To the Members of the
County Council of Hawaii
County of Hawaii
Hilo, Hawaii
March 7, 2003
SCOPE OF AUDIT
I . We performed an audit of the County's basic financial statements as of and for the year ended
June 30, 2002 in accordance with auditing standards generally accepted in the United States of
America, as adopted by the American Institute of Certified Public Accountants, and the
standards applicable to governmental financial audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States.
2. As part of the audit of the County's basic financial statements, we performed tests of the
County's compliance with certain provisions of laws, regulations, contracts, and grants. We
also considered the County's internal control over financial reporting in order to determine our
auditing procedures for the purpose of expressing our opinion on the basic financial
statements.
3. We performed an audit of the County's federal financial assistance programs for the year
ended June 30, 2002 in accordance with auditing standards generally accepted in the United
States of America, as adopted by the American Institute of Certified Public Accountants, the
standards applicable to financial audits contained in Government Auditing Standards, issued
by the Comptroller General of the United States, certain provisions of OMB Circular A-133
and the applicable sections described in the OMB's CircularA-133 Compliance Supplement.
ORGANIZATION OF RF,PORT
Our report is organized into three sections as follows:
I. Section 1, entitled "introduction," describes the objectives and scope of our audit and the
organization and contents of this repoR.
2. Section II, entitled "Compliance and Intemal Control Over Financial Reporting," contains our
report on the County's compliance and Intemal control over financial reporting based upon our
audit of the County's basic financial statements.
3. Section lit, entitled "Compliance and Internal Control Over Federal Awards," contains our
report on the County's compliance and internal control over federal awards in accordance with
OMB Circular A-133, a schedule of expenditures of federal awards, and a .schedule of findings
and questioned costs.
To the Members of the
County Council of Hawaii
County of Hawaii
Hilo, Hawaii
March 7, 2003
Our report on the basic financial statements of the County as of and for the year ended June 30, 2002 is
included under a separate cover. A separate letter containing our observations regarding the County's
system of internal control dated March 7, 2003 has also been issued to the County Council.
We would like to take this opportunity to express our appreciation to the personnel of the County of
Hawaii for the cooperation and assistance extended to us during our audit. We will he pleased to discuss
any questions that you or your associates may have regarding our recommendations.
Very truly yours,
K`~'w(G u~
3
SECTION ll -COMPLIANCE AND INTERNAL CONTROL
OVER FINANCIAL REPORTING
P O. Box 4150
Honolulu, HI 96812-4150
Report on Compliance and on Internal Control
over Financial Reporting Based on an
Audit of Financial Statements Performed in
Accordance with Government Auditing Standards
To the Members of the
County Council of Hawaii
County of Hawaii
Hilo, Hawaii:
We have audited the basic financial statements of the County of Hawaii, State of Hawaii (County), as of
and for the year ended June 30, 2002, and have issued our report thereon dated March 7, 2003. Our report
refers to the County's adoption of Governmental Accounting Standards Board (GASB) Statement No. 34,
Basic Financial Statements -and Management's Discussion and Analysis - fear State and Local
Governments, GASB Statement No. 37, Basic Financial Statements -and Management's Discussion and
Analysis -for State and Local Governments: Omnibus, GASB Statement No. 38, Certain Financial
Statement Note Disclosures, and Interpretation No. 6, Recognition and Measurement c jCertain Liabilities
and Expenditures in Governmental Fund Financial Statements, effective July 1, 2001. We conducted our
audit in accordance with auditing standards generally accepted in the United States of America and the
standards applicable to financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United Stales.
Compliance
As part of obtaining reasonable assurance about whether the County's basic 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 Reporting
In planning and performing our audit, we considered the County's internal control over financial reporting
in order to determine our auditing procedures for the purpose of expressing our opinion on the basic
financial statements and not to provide assurance on internal control over financial reporting. Our
consideration of internal control over financial reporting would not necessarily disclose all matters in
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 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 basic
tnancial statements being audited may occur and not be detected within a timely period by employees in
4
the normal course of performing their assigned functions. We noted no matters involving internal control
over financial reporting and its operation that we consider to be material weaknesses. However, we noted
other matters involving internal control over financial reporting, which we have reported to management of
the County in a separate letter dated March 7, 2003.
This report is intended solely for the information and use of the County Administration, the County
Council, federal awarding agencies, and pass-through entities, and is not intended to be and should not be
used by anyone other than these specified parties.
~w(G LLB
March 7, 2003
5
SECTION 111 -COMPLIANCE AND INTERNAL CONTROL
OVER FEDERAL AWARDS
P O. Box 4150
Honolulu, HI 96812-4150
Report on Compliance with Requirements Applicable to Each Major Program and on
Internal Control over Compliance in Accordance with OMB Circular A-133
To the Members of the
County Council of Hawaii
County of Hawaii
Hilo, Hawaii:
Compliance
We have audited the compliance of the County of Hawaii, State of Hawaii (County), with the types of
compliance requirements described in the US Office ojManagen:ent and Budget (OMB) CircularA-133
Compliance Supplement that are applicable to each of its major federal programs for the year ended
June 30, 2002. The County's major federal programs are identified in the summary of auditors' 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 the County's management. Our responsibility is to express an opinion on the County's
compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted in the
United States of America; [he 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 Circulaz 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 the
County'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 on the County's compliance with those requirements.
[n our opinion, the County 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 June 30, 2002. However, the results
of our auditing procedures also disclosed instances of noncompliance with those requirements, which are
required to be reported in accordance with OMB Circular A-133 and which are described in the
accompanying schedule of findings and questioned costs as Findings 02-01 and 02-02.
6
aV\I(i Ill~knM1~i.,Ll na~i~i ~ sib. r ~aiiii i.
Internal Control over Compliance
The management of the County is responsible for establishing and maintaining effective internal control
over compliance with [he requirements of laws, regulations, contracts, and grants applicable to federal
programs. In planning and performing our audit, we considered the County'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 [o
test and report on internal control over compliance in accordance with OMB Circular A-133.
Our consideration of internal control over compliance would not necessarily disclose all matters in internal
control that might be material weaknesses. A material weakness is a condition in which the design or
operation of one or more internal control components does not reduce to a relatively low level the risk that
noncompliance with applicable requirements of laws, regulations, contracts, and grants [hat would be
material in relation to a major federal program 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 internal control over compliance and its operation that we consider to be material weaknesses.
Schedule of Expenditures of Federal Awards
We have audited the basic financial statements of the County as of and for the year ended June 30, 2002,
and have issued our report thereon dated March 7, 2003. Our report refers to the County's adoption of
Governmental Accounting Standards Board (GASB) Statement No. 34, Basic Financial Statements -and
Management's Discussion and Analysis -for State and Local Governments, GASB Statement No. 37,
Basic Financial Smlements - and Management's Discussion and Analysis -for .State and Local
Governments: Omnibus, GASB Statement No. 38, Certain Financial .Statement Note Disclosures, and
Interpretation No. 6, 12ecognition and Measurement of Certain Liabilities and Expenditures in
Governmental Fund Financial Statements, effective July 1, 2001. Our audit was performed for the purpose
of forming an opinion on the basic tinancial statements taken as a whole. The accompanying schedule of
expenditures of federal awards is presented for purposes of additional analysis as required by OMB
Circular A-133 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.
'T'his report is intended solely for the information and use of the County Administration, the County
Council, federal awarding agencies, and pass-through entities, and is not intended to be and should not be
used by anyone other than these specified parties.
March 7, 2003
7
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COUNTY OF HAWAII
STATE OF HAWAII
Notes to Schedule of Expenditures of Federal Awards
Year ended June 30, 2002
(1) Basis of Presentation
The accompanying schedule of expenditures of federal awards (schedule) includes the federal grant activity
of the County of Hawaii, State of Hawaii (County). Such schedule is presented on the modified accrual
basis of accounting, which is described in note I to the County's basic financial statements. The
information in this schedule is presented in accordance with the requirements of OMB Circular A-133,
Audits of States, Local Governments, and Not-Profrt Organizations.
(2) Subrecipients
Of the federal expenditures presented in this schedule, the County provided federal awards to Subrecipients
as follows:
Amount
CFDA Provided to
Program Title Number Subrecipients
Rural Housing Preservation Grants 10.433 $ 86,396
Economic Development -Technical Assistance 11.303 10,000
Community Development Block Grant/Small Cities Program 14.219 98,086
HOME Investment Partnership Program 14.239 521,136
Title V -Delinquency Prevention Program 16.548 10,965
Crime Victim Assistance 16.575 45,968
Workforce Investment Act (WIA):
WIA Adult Program 17.258 1,042,078
WIA Youth Activities 17.259 750,107
WIA Dislocated Workers 17.260 994,292
Title Ill, Part B -Grants for Supportive Services and
Senior Centers 93.044 260,686
(3) HOME Iuvestment Partnership Program
Included in the HOME Investment Partnership Program's federal expenditures recorded under grant
number M98-SG 150102 is an adjustment of $260,066 requested by the Department of Housing and Urban
Development to properly reconcile prior period expenditures. Prior to the adjustment, the HOME
Investment Partnership program had current year federal expenditures totaling $15,000.
20
COUNTY OF HAWAII
STATE OF HAWAII
Schedule of Findings and Questioned Costs
Year ended June 30, 2002
(1) Summary of Auditors' Results
(a) The type of report issued on the basic financial statements: UnqualiTied opinion
(b) Reportable conditions in internal control were disclosed by the audit of the basic financial statements:
None noted Material weaknesses: None noted
(c) Noncompliance which is material to the basic financial statements: None noted
(d) Reportable conditions in internal control over major programs: None noted Material weaknesses:
None noted
(e) The type of report issued on compliance for major programs: Unquali5ed opinion
(t) Any audit findings which are required to he reported under section. 510(a) of OMB Circular A-133:
Yes
(g) Major programs:
Department of Housing and Urban Development:
14.871 -Section 8 -Housing Choice Vouchers
Department of Labor:
Workforce Investment Act (WIA) Cluster:
17.258 -WIA Adult Program
17.259 -WIA Youth Activities
17.260 -WIA Dislocated Workers
Department of Transportation:
20.205 -Highway Planning and Construction
(h) Dollar threshold used to distinguish between Type A and Type B programs: 3% of total federal
awards expended or $1,342,964
(i) Auditee qualified as a low-risk auditee under Section .530 of OMB Circular A-133: No
2 I (Continued)
COUNTY OF HAWAII
STATE OF HAWAII
Schedule of Findings and Questioned Costs
Year ended June 30, 2002
(2) Findings and Questioned Costs Relating to Federal Awards
Department of Housing and Urban Development
Section 8 -Housing Choice Vouchers
CFDA No. 14.871
Federal Award No. H[08-V002
Findine 02-O1 Documentation of Annual Utili[v Rates Analysis
Condition: During our testwork on allowability, we noted that the County did not maintain adequate
documentation on file to support the utility rates used for calendar year 2002. There was no analyses
performed to validate that utility rates had not changed more than 10% from calendar year 2001.
Documentation consisted of a note prepared by the County Section R Manager stating that the utility
schedule was to remain in effect through December 31, 2002.
Criteria: Under Section 8 Management Assessment Program Certification, Public Housing Agencies are
required to maintain an up-to-date utility schedule by analyzing data obtained from utility companies within
the last 12 months.
Effect: The County was unable to provide support for utility allowances provided to tenants, landlords, and
granting agencies.
Cause: The County Section 8 Manager was not aware of the necessity to include the support for the utility
allowance rate analysis.
Questioned Cost: $0
Recommendation: While performing the calendar year 2003 utility allowance rates analysis, the County
reviewed and included adequate supporting documentation to verify that the 2002 utility allowance rates
used were appropriate. We also noted that the 2003 analysis included adequate supporting documentation.
We recommend that the County continue to include adequate supporting documentation in its files.
22 (Continued)
COUNTY OF HAWAII
STATE OF HAWAII
Schedule of Findings and Questioned Costs
Year ended June 30, 2002
Department of Labor
Passed through the State Department of Labor and Industrial Relations
Workforce Investment Act Cluster
CFDA No. 17.258 & 17.260
Federal Award No. AA-10589.00-50
Findine 02-02 Subrecioient Monitorine
Condition: During our tes[work of subrecipient monitoring and allowability, we noted that the County did
not review two subrecipient expenditure registers and corresponding reimbursement requests in July 2001,
prior to submission to the pass-through agency.
Criteria: Recipients of program funds must monitor the conduct of its subrecipients to ensure compliance
with provisions of applicable laws and regulations.
Effect: The County would not be able to detect noncompliance with applicable laws and regulations.
Cause: The County did not have adequate personnel resources to properly monitor all of its subrecipients in
a complete and timely manner.
Questioned Cost: $225,000
Recommendation: Subsequent to July 2001, the County implemented monitoring procedures over all its
subrecipients. We recommend that the County review the two subrecipient expenditure registers and
corresponding reimbursement requests described above and continue to monitor all subrecipients to ensure
compliance with laws and regulations.
23