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Home My WebLink AboutREP FC 091 05/06/2003 2002-2004REPORT OF THE COMMITTEE ON FINANCE, DA"fE: May 6, 2003 Rc: Comm. No. 207 PLACE: Council Chambers TIME: 1020 a.m. Council Chair and Members Hawaii County Council Hilo. Hawaii 96720 Your Committee on Finance. to which was refen~cd Communication No. 2(17, reports as follows: Communication No. 207, from Legislative ~udihx Constance Kiriu, dated April I I. 2001, transmits the post- audit Fincntciu/ Aur(i/ Repor! nJ~he Cuunrv qJ /lun•ai'i (nr llte Fi.c~~cd Year [incfrvl June 30. 31/01, and alu~ru~,>em<~~~I Leper tl~Ued h9arch '. 1003. as prepared by KPMG I,LP. Phis year's A-9urrugemer~l Leper contains findings and recommendations related t~: Collection of Receivables (Sewer and Landfill) • Timely collection of wastewater and solid waste receivables continues to be a challenge fur the Department of Em ironmental Managcmmu. To address this issue, die County formed an accounts receivable collections committee in 2002, consisting of accounting personnel from the Departmem of Emironmcntal Management. the Department of Public Works, the Department of Finance, and un attorney from die Office of die Corporation Counsel. Despite the effin1s of this committee sewer and landfill receivables outstanding fur more than 60 days still account for a significant portion ofihe respective receivahle halances. KPMG LLP recommends that die Department of F.m ironmental Management continue to work wish the Deparhnent of Finance to develop comprehensive policies and procedures for collecting Counh receivables. The Department of Lnvironmcnlal Management concurs with the recommendations made by KPMG LLP and will he consolidating receivable collections ofthc Solid Waste and Wastewater div isions. This will aid in the cstahlishmcnt of uniform policies and procedure, lur all accounting nuttters. General Fund Financial Situation • Uver the past five tears. the County's General Fund has incurred substantial deficiencies in the amount of revenues and other sources received over cspendiuires and other uses. As a result. the County's unreserved General Fund balance has dramatically decreased over the past live liscal ycan from $16.9 million at June 30, 199R to $1.8 million at June 30. 2002. KPMG LI.P recommends that the County administration and Counh Council continue to work together to improcc the County's financial position and ensure that the County is able to provide necessary services while nmeting its financial obligations. including deht service payments and pension contrihutions. The Department of finance is continuing its rep icw ofihe real property tai s}stem and fees charged fix sevice,. Solid Waste Fund Ueficicncv During KPMG LI.P's re~icw of the Solid Waste Fund, they noted that there has heen a signilicant deliciency of erpendimres Deer revenues over the past live f fiscal years and reconunends that the County evaluate the Icvel of annual General Fund subsidies to the Solid Waste Fund. including the amount of landfill tipping fees charged to landfill users. The Department of I~,nvimnmental Management concurs with the recommendations made by KPMG I.I.P and has set a goal to reduce the general fund subsidy m ~0°/~ within the neat i years. this goal could he met ifthe hill to increase the commercial landfill-tipping fee by $10 each year is appro~cd by Council. PC RI~:POKI NO. 91 Software Implementation • 'fhe County intends to install a comprehensive financial management softy+are package by December 3 I, 200. I~he County expects to select Uie software and award the contract to an outside vendor by July I, ?0(13 to implement this new system. The County has assembled a committee known as the Financial Resource I?nterprise Software fur Hawaii County (FRFSII) fur this project to oversee the implementation ofthe new system. KPMG I,LP recommends that PRFSH, along with the Department of Data Systems. appoint a project manager ro oversee the software implementation process. This project manager should have the appropriate level of authority and should he ultimately responsible for completing the s}stem implementation on time and on budget (byre appointed. [hc project manager should define the County's timetable for implementation and assess the ndcyuacy of the resom'ces allocated to this project To address the concern regarding personnel resources, Data Systems Department will make available two analysts from the Applications Branch (software) and hvo analysis from the PC Branch (hardware) in addition to the three employees already assigned to this project Although Data Systems Department will be working closely with the Finance Department in the design and implementation of I~RESI I, it is the Pinuncc Department that w ill have the ultimate authority in this project. Inventories • During KPMG I,LP's review ofihc County's imcntory_ they noted that there was a lack of adequate segregation of duties at several of the County's inventory storerooms. 'hhey noted that the respective inventory supervisor at the two Public Works divisions (fraflic Lights and Buildings & Construction and Inspection) and at the Police Ucpartment is responsible tiyr replenishing, receiving, and distributing inventory items U> County persomiel. They also noted that this same individual is also responsible fbr performing Uie year-end physical inventory count forlinancialreporting purposes. The custodial and reaxd-keeping functions over the maintenance of inventory should be separated and performed by different individuals to improve the safeguarding and monitoring of inventor} and minimize the potential for misappropriation of inventory assets. They recommended That periodic, unannounced inventory counts be performed by an employee other than the respective department's inventory supervisor Additionally, the County should ensure that the new computer system contains a module for inventors Uiat will enable inventory supervisors to maintain perpetual records oflhcir department"s invenkm balance,. The Finance Department agrees with KPMG IJ.P's recommendations and v. ill assist departments in establishing a spot check procedure. Abandoned Vehicles Significant increase iu the number of abandoned vehicles and related vehicle disposal costs over the past three liscal years- KPMG LLP recommends that the County evaluate the amount of penalties imposed on residents who arc caught abandoning their vehicles in unauthorized locations. In un effort to reduce the number of abandoned vehicles and related costs, the Counh should consider offering a nominal payment to people who bring their vehicles to the impound or scrap metal recovery yard. This may provide an incentive to those individuals who would otherwise abandon their vehicle. Although this would represent an additional charge uv the County, it would he more than offset by reduced vehicle disposal costs. l~hc Department of F.ncironnwntal Management concurs with the recommendations made by KPMG I.I.P and has established a Luk force to analv~c the existing process. look for possible streamlining and to analyze the incentives tie r~sidents~ including abounty program for Icgal vehicles delivered to one ul the ,crap metal yards. Pursuant to Article X, Section IU-13, Hawaii County Charter. die cuunh~ council shall procidc at Irtst once even year for an independent audit of the accounh and evidences of other financial transactions of the counh and of every county agency and executive agency. The audit shall he made by a ccililicd public accountant or firm of certified public accountants designated by the council. FC RGPOK~I~ N(>. 91 KPMG Auditors Ralph Kanetoku and Reid (iushiken gave a presentation revievvingihe scope of the audit services, the results of audit, required communications, compliance matters. the management letter comments, and the new government-reporting model ((iAS6 Statement No. 34). Your Committee nn Finance recommends acceptance of die poll-audit Y'innnciu/.9udi[ Rrpnr7 nj/hr ('Quoit of Nuwui'i.fbr /J~e Fi.ecul Yeur F.ncfeJJunr 30. _'00?. as prepared by KPMG LI.P. smc V14a AO4:,c Ati4 P.A CHUNG X SAFARIK X ARA KAKI X ELARIONOFF X HOL.SCHUH X _ JACOBSON X LEITHEAD-T000 X REYNOLDS X TYLER X Renpecttull~ submitted I°h[{I~. ON FINnNCI~: V~ AnRON S.Y. l'~IUNG. C11A1 PC RI[PUR~I~ NO. I_ nlxlPrF.l>:~~Y_ ~~ 200_