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HomeMy WebLinkAboutRES 131 Draft 01 1996-1998 . . Ch \ lQ.;V\L\.cGL COUNTY OF HAWAII 'STATE OF HAWAII RESOLUTION NO. i at 97 A RESOLUTION ESTABLISHING A POLICY FOR THE COUNCIL OF THE COUNTY OF HAWAII RELATING TO THE COUNCIL'S INDEPENDENT AUDIT, THE MANDATORY PROGRAM REVIEW, AND AN EXPANDED RESEARCH AND SPECIAL STUDIES PROGRAM WHEREAS, the examination of executive agencies is an indispensable tool of a legislative body at all levels of government to fulfill its oversight responsibility over the activities of the executive branch; and WHEREAS, the Council wishes to formalize and strengthen its independent audit program and program review process by the establishment of a policy relating to the Council's independent audit, mandatory program review, and expanded research and special studies program. NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE COUNTY OF HA W All that it hereby establishes the following policy relating to Council program reviews: "POLICY COUNCIL INDEPENDENT AUDIT, MANDATORY PROGRAM REVIEWS AND EXPANDED RESEARCH AND STUDIES PROGRAM 1. Definitions As used herein: "Audit" means a methodical examination of utilization of resources, concluding in a written report of findings. "Financial audit" means an examination leading to the expression of an opinion on: (1) The fairness of presentation of the audited entity's basic financial statements in conformity with generally accepted accounting principles; and (2) The audited entity's compliance with various finance-related legal and contractual provisions used to assure acceptable governmental organizational performance and effective management stewardship. "Performance review" means an examination intended to assess: . . (1) The economy and efficiency of the affected agency's operations; and (2) Program effectiveness - the extent to which program objectives are being attained. II. There is established a Council policy relating to a Council program review. This policy sets forth guidelines governing all activities relating to the independent audit, the mandatory program review and an expanded research and special study program. The program shall consist of four primary components: A. Comprehensive Annual Financial Audit B. Annual Budget Program Review C. Performance Review - Broad Scope D. Performance Review - Limited Scope III. Comprehensive Annual Financial Audit A. Pursuant to Section 10-13 of the Hawaii County Charter, an annual independent financial audit of the County shall be comprehensive and shall be conducted by a certified public accountant or a firm of certified public accountants. B. In addition to the annual independent financial audit of the County operations and funds, the audit shall include the single audit of all federal funds and an audit of the Department of Water Supply. C. The procedures under which an auditor is engaged and such audit is conducted shall be in accordance with the State Procurement Code. D. Funding for necessary consultant services shall be based on appropriations provided for Council audit activities. IV. Annual Budget Program Review A. Pursuant to Section 3-16 of the County Charter, the Council shall conduct a program review at least once every four years at which time the Council may decide to terminate or continue a program. The Council by rule has established that such a program review will occur during the annual budget period. B. The program review shall consist of 2 . . (1) Any information required by the Council, including a list of the agency's/department's goals, objectives and work data submitted with the agency' s/ department's budget; the submittal of a program questionnaire, which provides a narrative of the agency's/department's program and changing goals and objectives. (2) Meetings by the Council or an appropriately designated Committee to review the agency/department submittals. (4) The formulation of recommendations pertaining to any agency/department. (5) Expanded research of a program may be requested by resolution as a result of the findings of the Council. V. Performance Review - Broad Scope A. A broad scope performance review means an investigation addressing essential County operations and major issues of governance and policy. Such investigations or audits are typified by a focus on large organizations, large amounts of public funds, or complex systems. As such, they are time consuming and expensive to conduct. It is expected that no more than one or two broad-scope reviews would be conducted in any year. Further, consultants with technical or specialized expertise must usually be contracted. B. A broad scope performance review shall be authorized by adoption of a Council resolution, with a preliminary scope of work, assigning the engagement of a consultant, management of the contract, and overall supervision of the review to the Office of the Legislative Auditor. C. Unless time limitations so preclude, consultants shall be selected by request for proposals prepared in response to a scope of work as set forth in the Council resolution and as may be further detailed. D. Funding for consultant services shall be based on appropriations provided for Council performance review activities. VI. Performance Review - Limited Scope A. A limited scope performance review means an investigation of County operations or issues which can be accomplished by existing Legislative Auditor's Office staff, supplemented when needed with the limited engagement of outside consultants possessing expertise not available in the Office. The limited scope review is principally distinguished from the broad scope review in requiring less time and money, which is made possible by its narrower subject focus. 3 . . B. A limited scope review shall be authorized by adoption of a Council resolution, which includes a preliminary scope of work. The scope of work may include any subject matter under consideration in any Council committee. C. Consultants required for a limited scope review shall be selected through the procurement process. D. Funding for consultant services; when required for a limited scope review, shall be based on appropriations approved for Council expanded research and special studies activities. VII. Administration and General Policies. A. The Legislative Auditor's Office shall be responsible for the impartial conduct 'of Council reviews on behalf of the Council. B. The County Administration shall be notified in writing prior to the initiation of any review. C. Any drafts of any performance review report shall not be released to any person except to County agencies requested to provide responses thereto. The Legislative Auditor's Office shall establish procedures to maintain confidentiality of preliminary report results. D. Once completed, the report shall be submitted to the County Council and shall be a matter of public record." BE IT FURTHER RESOLVED that the Council shall provide the Legislative Auditor's Office with the resources necessary to implement the Council's Audit Program, Program Review and Expanded Research and Special Studies Program as further set forth in the attached Memorandum of Understanding. 4 . . BE IT FURTHER RESOLVED that the Clerk is requested to transmit a copy of this resolution to the Legislative Auditor. Att COUNTY COUNCa County of Hawaii Hilo, Hawaii ROLL CALL VOTE I hereby certify that the foregoing RESOLUTION was by the vote indicated to the right hereof adopted by the COUNCIL of the County of Hawaii on AYES NOES ADS EX ARAKAKI CHUNG LEITBEAD-TODD RAY REYNOLDS SANTANGELO SMITH TYLER YAGONG Rderen~ C-407/FC t3l D7 ATTEST: COUNTY CLERK C~ & PRESIDING OFFIC~R RESOLUTION NO. . . MEMORANDUM OF UNDERSTANDING COUNTY COUNCIL & LEGISLATIVE AUDITOR'S OFFICE INDEPENDENT AUDIT, PROGRAM REVIEW EXPANDED RESEARCH AND SPECIAL STUDIES PROGRAM PRIORITIES With the discussion surrounding 'program reviews', the Legislative Auditor's Office will adjust priorities and assignments to accommodate research and project teams. The priority by which the Legislative Auditor's Office will provide its services will be as follows with the exception of legislative assistants who service committees and will conduct committee research. 1. Council (requests by resolution or by motion) 2. Standing Committees 3. Chair of the council acting in an official capacity. 4. Chair of a standing committee acting in an official capacity. S. Individual Council Members requesting services on a matter pending before a standing committee or council. 7. Individual council members requesting services on a new matter or a draft bill or resolution for a proposed new law or policy. 8. Ad hoc and other special committees, workshops and conferences established for the purpose of gathering information on a matter pending before the councilor for formulating new laws and policies. 9. Executive branch. 10. Other public agencies. POLICIES & PROCEDURES Policies of the Council and of the Legislative Auditor's Office are set forth in the attached resolution and will be guided further by Internal Control Procedures Manual of . . the Legislative Auditor's Office. An overview of the Internal Control Procedures is presented below. OVERVIEW OF INTERNAL CONTROL PROCEDURES Upon Council approval of the initiating document, the Legislative Auditor assigns one or more staff members to the project. Throughout the course of an expanded research report or special study, the staff will maintain an objective, independent, and professional attitude. Staff will exercise due professional care. They do not, in their contacts outside the office, express agreement or disagreement with the opinions of officials or positions taken by the agency, nor do they advise agency staff or comment on the quality of agency work. They do not urge Council approval or rejection of pending research proposals. During the expanded research report or special study, staff will not release information they have developed or collected. No information about the study is given to any person or agency until it has been completed and the report distributed, except with the approval of the Legislative Auditor. All correspondence drafted by staff, including informal written requests for information, is reviewed and approved by the Legislative Auditor before being finalized. All correspondence shall be signed by the Legislative Auditor or the appropriate Council Member. An expanded research program or special study process may be comprised of four main phases as shown below. The process is different than the larger, more comprehensive types of audits. Phase 1: PrQject Formulation and Planning Pre-authorization: An expanded research or special study request is initiated by Council Member(s) and approved by resolution. The scope should be included in the resolution or drafted for subsequent approval. Post-authorization: If consultants are to be contracted, staff drafts research or special study specifications, bid documents, contract and its execution. If Legislative Auditor's Office is to conduct the research program, staff drafts work plan and its execution. Phase 2: Fieldwork and Revort Develovment - Staff conducts field work as laid out in work plan. A report outline is prepared and a preliminary draft is prepared. . . Preliminary draft is transmitted to the affected agency and Mayor for written comments and any comments received are included in final report. After final revisions are made, a final draft is submitted to the Council. Phase 3: Production and Distribution Final review is made by the Legislative Auditor before printing. Distribution plan is prepared and transmittal letters are drafted. The report is printed and distributed. Phase 4: Proiect Closure - Working papers are organized and filed in the Legislative Auditor's general files. ACCOUNTABILITY & GUIDE TO GENERAL STANDARDS The Office of the Legislative Auditor's Office will adhere to the following four general standards that cover (1) independence and objectivity, (2) due professional care, (3) quality control and (4) staff qualifications, In matters relating to audits and expanded research reviews, the Office should be free from personal and external impairments to independence, should be organizationally independent and should maintain an independent attitude. Persons assigned to a project are responsible for maintaining independence of mind so that opinions, conclusions, judgments, and recommendations are impartial and also viewed as impartial by knowledgeable third parties. Factors which may compromise independence are organizational, external and personal. Under the current structure, it will not be possible to maintain independence. However, as much as professionally possible, staff will be expected to follow internal personnel policies and procedures on standards of conduct. Exercising due professional care means using judgment in establishing the scope of an assignment, selecting the methodology, selecting tests and procedures and evaluating and reporting results. Staff must base findings and conclusions on an objective evaluation of sufficient, competent and relevant evidence. The Legislative Auditor's Office should have an appropriate internal quality control system in place. Staff assigned to conduct research investigations should collectively possess adequate professional proficiency for the tasks required. To ensure that work is performed by capable and knowledgeable staff, personnel policies should be developed to recruit, train and retain qualified staff. Assignments should match qualified staff members and also 3 . . offer opportunities for training and professional growth. Staff should be expected to possess or acquire knowledge of the methods and techniques of investigation, report writing, auditing and interviewinr,. There should also be a familiarity with government organizations, programs, activi: ;e~ and functions. Development should include skills for specialized tasks, such as statistical sampling, use of questionnaires, and proficiency in accounting princ;=-les and standards. Job descriptions will be developed for .:-l}~se positions which have none. PERSONNEL It is proposed that the following positions be dedicated to conduct expanded research or special study requests: Position No. Class/Grade 0033 0032 0038 0009 2503 FPRA LA02 LA02 LROI Legislative Analyst If an expanded research or special study is requested by the Council by resolution, it will be taken as the highest priority item for assigned members of the project team. Other activities, such as individual drafting requests, constituent requests and HSAC support, will be completed as time allows. While it is recognized that other matters will be requested of and assigned to these staff members, it is anticipated that the expanded research and special studies will absorb approximately 80-90% of a person's time. As more work is requested, the allotted time can be expected to increase. This presents a situation where the work currently performed by these people will have to be reassigned to committee legislative assistants, council aides or new positions will have to be added. Should certain personnel be unsuited to conduct the expanded research reviews or special studies, it may be necessary to make adjusts through reassignment or replacement. In order to accomplish the above, the Office must be assured that it can maintain internal controls and a sense of independence in conducting its activities. Furthermore, the rest of the Legislative Auditor's Office and the Clerk's Office will need to examine its own mechanisms and measures of accountability since the investigations and r~search conducted will be a reflection on the entire legislative branch. 4