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Home My WebLink AboutCOM 0734.002 2012-2014 J Yoshimoto Lane Shibata Chair&Presiding Officer ��<v N Acting Legislative Auditor Council District 2 Lil Business Address 1266 Kamehameha Avenue +,.PO Suite A-8 r+os'MP� Hilo,Hawaii 96720 ( 1OU11ty of Att vali`t OFFICE OF THE LEGISLATIVE AUDITOR 25 Aupuni Street * Hilo,HawaN 96720 * (808)961-8386 * Fax(808)961-8905 website:http.%ihawaiicountvjZov e-mail.publielaoC&co.hawaii.hi.us CONFIDENTIAL IDE11 TIAL - LL March 6, 2014 The Honorable J Yoshimoto, Council Chair and Members of the Hawaii County Council - Hawai`i County Council 25 Aupuni Street Hilo, Hawaii 96720 Dear Chair Yoshimoto and Councilmembers: Re: Internal Control and Business Issues Report for Fiscal Year Ended June 30, 2013 This letter transmits for your review a management letter called Internal Control and Business Issues Report for Fiscal Year Ended June 30, 2013, as prepared by external auditors Accuity LLP dated December 24, 2013. As stated by Accuity LLP,this report as a communication is intended solely for the information and use of the Legislative Auditor, the County Council, and management of the County, and is not intended to be and should not be used by anyone other than these specified parties. Please contact me at 961-8494 for any questions. Thank you. Sincerely, Lane H. Shibata, CGAP Acting Legislative Auditor LHS/map cc with enclosures: Nancy Crawford,Department of Finance Comm. No. -73 . Z Ref. To: —" Ref, Date,�$ ZD� 14 ACcuityLP • CERTIFIED PUBLIC ACCOUNTANTS Ask • • • • • • • County of Hawaii State of• cal'i Internal Control and Business Issues Report June 30, 2013 0 0 Quality Integrity Insight • ACcuoltyLP • CERTIFIED PUBLIC ACCOUNTANTS • • • • • • To the Chair and Members of the County Council County of Hawai'i Hilo, Hawai'i • • In planning and performing our audit of the financial statements of the County of Hawai'i, State of Hawaii, • (the"County') as of and for the year ended June 30, 2013, 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, we considered the County's internal control over financial • reporting ("internal control") as a basis for designing auditing procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the . purpose of expressing an opinion on the effectiveness of the County's internal control. Accordingly, • we do not express an opinion on the effectiveness of the County's internal control. However,we noted certain matters involving internal control and its operation, and are submitting for your consideration our • observations and recommendations designed to help the County improve internal control and achieve • operational efficiencies. . This communication is intended solely for the information and use of the Legislative Auditor, the County Council, and management of the County, and is not intended to be and should not be used by anyone • other than these specified parties. • Very truly yours, • • �c,,e: � C..Lf • • Honolulu, Hawaii • December 24,2013 • • • • • • • • • • • • 999 BISHOP STREET,SUITE 1900 • an independent member of HONOLULU,HALtArr 90813 BAKER T I L LY TELEPHONE:808 5313400 FACSIMILE:808 5313433 • INTERNATIONAL County of Hawaii State of Hawaii Index June 30, 2013 • Page(s) • Prior Year Comments . Recordation of Receivables ..........................................................................................................................1 Internal Controls Over Federal Awards.........................................................................................................1 • Collection of Receivables..........................................................................................................................1-2 County of Hawaii State of Hawaii Prior Year Comments June 30, 2013 1. Recordation of Receivables(Control Deficiency) • During our prior year audit, we noted the increasing trend of real property tax receivables from approximately$9,536,000 at June 30, 2008 to approximately$17,700,000 at June 30, 2012. • Status Unresolved. Although the real property tax receivables balance decreased to approximately • $17,200,000 at June 30, 2013,the receivables balance continues to be significant. As such, • we recommend that the County continue to monitor the timely collection of real property tax receivables and collection efforts. 0 0 2. Internal Controls Over Federal Awards(Control Deficiency) • In prior years, we noted control deficiencies related to federal awards that were not present in 0 all major programs but were common to at least two or more major programs. • • Lack of monitoring over internal controls to assess the quality of internal control performance 0 over time. • • Lack of formal policies and procedures over federal compliance requirements or policies and 0 procedures that are outdated. • We recommended that the County continue to evaluate the internal controls related to federal 0 awards to ensure that controls are adequately designed. 0 Status • Partially resolved. During our testing of the County's major programs for fiscal year 2013, we noted • the County had taken steps to improve controls over federal awards, which primarily involved providing training and other resources to those personnel administering federal awards. However, • we noted a lack of monitoring of the Davis-Bacon Act compliance controls for the Capitalization • Grants for Clean Water State Revolving Funds program and a lack of policies and procedures to comply with reporting requirements under the Federal Funding Accountability and Transparency • Act for programs administered by the Office of Housing. • 3. Collection of Receivables(Control Deficiency) 0 • In prior years, it was noted that the landfill and sewer receivables outstanding for more than • 90 days accounted for a significant portion of the respective balances. • 2012 2011 2010 2009 Landfill receivables 0 90+days $ 1,523,200 $ 1,489,439 $ 1,146,381 $ 1,108,085 • Total receivable 2,321,030 2,930,868 2,208,927 2,193,457 Percentage of total 66% 51% 52% 51% • Sewer receivables • 90+days $ 1,016,823 $ 1,040,849 $ 1,091,996 $ 960,825 Total receivable 1,768,039 1,707,847 1,800,885 1,684,233 0 Percentage of total 58% 61% 61% 57% 0 0 0 1 0 0 County of Hawaii State of Hawaii Prior Year Comments June 30, 2013 • It was recommended that the Department of Environmental Management continue to work with the Department of Finance to improve collection efforts on delinquent accounts. Status • Unresolved. We noted at June 30, 2013 that receivables outstanding greater than 90 days and in total were$1,297,889 and$2,297,667, respectively, for landfill receivables (56% of total) and $982,460 and$1,740,929, respectively, (56%of total) for sewer receivables. 2 W • op William William P.Kenoi Nancy E.Crawford • Mayor Director • •• Deanna S.Sako • .•�•N' Deputy Director • County of Hawaii • • Finance Department 25 Aupuni Street, Room 2103 • Hilo,Hawaii 96720 • (808)961-8234 • Fax(808)961-8569 Date: February 14,2014 • To: Lane Shibata, Acting Legislative Auditor • From: Nancy Crawford,Director • • Subject: Fiscal Year 2013 Preliminary Draft Management Letter • We have reviewed the fiscal year 2013 draft Management Letter concerning the prior year comments. Thank you for the opportunity to respond to the comments regarding • those that were either unresolved or only partially resolved. 1. Recordation of Receivables • The auditors suggest that the County continue to monitor the timely collection of • the real property tax receivables and collection efforts. We recognize the importance of reducing our receivables and we are monitoring our real property • tax receivables and collection efforts. As expected,collections regarding the real • property tax receivables have been hindered over the last few years due to the • declining overall economic environment. 2. Internal Controls over Federal Awards • Please refer to the attached memos from the Administrator of the Office of • Housing and Community Development and from the Director of the Department of Environmental Management. • • 3. Collection of Receivables • Please refer to the attached memo from the Director of the Department of Environmental Management. • • If you have any questions on the above responses,please feel free to contact Deanna • Sako,Deputy Director, or Kay Oshiro, Controller. • • • • • Hmvai'i County is an equal opportunity provider and employer. ,i • os Stephen J.Arnett Willlam P.Kenos Housing Administrator Mayor .: • Susan K.Aldyama Assistant Housing Administrator County of Hawaii Office of Housing and Community Development 50 Wailuku Drive • Hilo,Hawaii 96720 • (808)961-8379 • Fax(808)961-8685 KONA: 74-5044 Ane Keohokalole Highway • Kailua-Kona,Hawaii 96740 • (808)323-4305 Fax(808)323-4301 January 27, 2014 • MEMORANDUM TO: Nancy Crawford Director of Finance • ATTN: Kay Oshiro,Controller FROM: Stephen J.Arnett Housing Admini ator SUBJECT: RESPONSE TO MANAGEMENT LETTER COMMENT • Per your request, please see our response below, which addresses the management letter comment regarding the Office of Housing and Community Development. COMMENT • "...we noted...a lack of policies and procedures to comply with reporting requirements under the • Federal Funding Accountability and Transparency Act for programs administered by the Office of • Housing." RESPONSE Due to miscommunication within our office,there was an inadvertent omission by the Office of • Housing and Community Development to properly report subaward data as required by the Federal • Funding Accountability and Transparency Act. We will commence reporting with the Program Year 2013 awards. Should you need additional information, please contact Tracey Brosnahan at (808)961-8379. Thank you. • EQUAL HOUSING OPPORTUNITY . 9798bteb "HAWAI'I PROVIDER AND EMPLOYER" TUNITY • • William P.Kenos BJ Leithead Todd • Mayor + ' Director • Walter K.NL Lau '• :.w�''. John A.Medeiros • Managing Director Deputy Director (91TUxtfV of fun,, DEPARTMENT OF ENVIRONMENTAL MANAGEMENT . 345 Kekamdo`a Street,Suite 41 •Hilo,Hawaii 96720 (808)961-8083•Fax(808)961-8086 • cohdem@co.hawaii.hi.us . h� :/,1L/www.hawaiicoaR4Y.�v/environmeptal-manaaemenu MEMORANDUM • Date January 21, 2014 To Lane Shibata, Acting Legislative Auditor From BJ Leithead Todd,Director 10w7 • Subject : Fiscal Year 2013 Preliminary Draft Management Letter We are continuing to work with the Department of Finance and the Office of the Corporation • Counsel to improve collection efforts. To further increase our collection efforts,we are working with the Department of Water Supply to allow for the discontinuance of water service for nonpayment of sewer fees. Those changes • will require the approval of the County Council to amend the Hawaii County Code and the approval of the Water Board for changes to the Department of Water Supply's Rules and Regulations. We have continued to enforce our policy and procedures for denying landfill access to delinquent landfill users to prevent additional delinquencies. We have revised our • Solid Waste Facility Disposal Permit and procedures to require a personal guarantor to improve • our ability to collect if the account becomes delinquent. We are also continuing our extensive review of policies and procedures to implement new procedures and changes where necessary to improve collections. As part of that process we are also looking at additional payment options to offer our customers. Our Credit and Collection Clerk has provided more timely and consistent • collection efforts than we have had in past years without the position. While we have been • increasing our collection efforts and have had some success in reducing our accounts receivable, challenging economic times continue to impact the receivable balances. • With regards to Internal Controls over Federal Awards, we acknowledge that Davis-Bacon Act • compliance controls for the Capitalization Grants for Clean Water State Revolving Funds program were not monitored as closely as they should have been. This was primarily due to staffing shortages. We have since taken steps to provide additional assistance when necessary to ensure compliance. cc: Finance Director . County of Hawaii is an Equal Opportunity Provider and Employer. • •