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HomeMy WebLinkAboutCOM 0342.000 2014-2016 Dru Mamo Kanuha Bonnie S.Nims,CGAP Chair&Presiding Officer =�o��'? ' ~1h�•, Legislative Auditor Council District 7 Lill I. Business Address ar4T f 4:HO''�P`` 1266 Kamehameha Avenue ...... Suite Suite A-8 Hilo,Hawaii 96720 C ounf of %Avai`t OFFICE OF THE LEGISLATIVE AUDITOR 25 Aupuni Street Hilo,Hawai`i 96720 * (808)961-8386 * Fax(808)961-8905 website:htp: hawaiicountv.gov e-mail:publiclao(&,co.hawaii.hi.us June 8, 2015 o n CD The Honorable Dru Kanuha, Council Chairperson and Members of the Hawai`i County Council co Hawai`i County Council 25 Aupuni Street — =' Hilo, Hawai`i 96720 3 — Dear Chair Kanuha and Council Members: In accordance with Hawai`i County Charter Section 3-18(d)(2), attached is the Office of Legislative Auditor's Fiscal Year 2015-2016 annual audit plan. This provision requires our Office transmit to the Hawai`i County Council and the mayor, for information only, an annual audit plan. The purpose of the audit plan is to identify particular agencies, departments, funds, programs, or other matters the Auditor has scheduled for audit in the fiscal year. Our annual audit plan facilitates an efficient allocation of limited audit resources on a risk-basis; provides a flexible mechanism for managing competing audit needs; eliminates the potential overlapping of audits with other audit organizations, and provides a sound foundation for obtaining sufficient budgetary funds required to execute our mission. Our Office is committed to maintaining a collaborative partnership with the County Council and the Mayor's Office. Furthermore, we would like to acknowledge the professionalism and cooperation extended to our Office by the County agencies and departments in the past and we look forward to the upcoming year of audit coverage and services to the County of Hawai`i. Sincerely, Bonnie S.Nims, CGAP Legislative Auditor cc: William P. Kenoi, Mayor Stewart Maeda, County Clerk Comm. No. Ref. To: Ref, Dote ON 0 13 2015 Hawaii County is an Equal Opportunity Provider and Employer Fiscal Year 2015-2016 -ce.-./V°FM;,;•; County of Hawaii Office of the Legislative Auditor Allaill ► " Bonnie Nims, CGAP, Legislative Auditor ki . $ ,0. p( Table of Contentsi, 1 4 asr. a t F Our Audit Authority 1 raw What is a performance audit'? 1 -i IV . N Audit Framework 1 E HAWAII COUNTY •ii Overview of Annual Audit Plan 2 ''''‘-'171-' BUILDING 9;iF 2015-2016 Planned Audits 4 1 June 8, 2015 Dear Fellow Citizens, I am pleased to present the fiscal year 2015-2016 audit plan for the County of Hawaii Office of the Legislative Auditor. The purpose of the audit plan is to identify particular County agencies, departments, funds, programs, or other matters we have scheduled for audit in the fiscal year. Our annual audit plan includes two follow up audits and six performance audits. We also coordinate the financial statement .�.;. ,..,.,..., ,. and federal single audit of the County of Hawaii with a contracted 1 CPA firm. This audit plan facilitates an efficient allocation of limited audit resources on a risk-basis; provides a flexible mechanism for , managing competing audit needs; eliminates the potential overlapping of audits with other audit organizations, and provides a sound foundation for obtaining sufficient budgetary funds required to execute our mission. Respectfully, .6a"1au� /1.1171,0 Bonnie S. Nims, CGAP Legislative Auditor County of Hawaii Our Audit Authority The Hawaii Audit Hawaii County Charter Section 3-18 establishes an independent audit function within the Legislative Branch through the Office of the Legislative Framework Auditor(OLA). It is our mission to serve the Council and citizens of Hawai'i County by promoting accountability, fiscal integrity, and openness in local Several key components are the government. cornerstone for our audit framework. These elements Through performance and/or financial audits of County agencies and provide the Auditor with programs, the Office of the Legislative Auditor examines the use of public independence and result in a high funds, evaluates operations and activities, and provides findings and impact potential to the County. recommendations to elected officials and citizens in an objective manner. Our work is intended to assist County government in its management of Appointed Auditor—The County public resources, delivery of public services, and stewardship of public of Hawaii has an appointed trust. Auditor who is independent from elected officials and operational What is a performance audit? management. Comprehensive Access—The Performance audits typically examine the effectiveness, economy, or County Charter authorize the efficiency of a government program. They can include analyzing the Auditor to have access to all services of an entire department or activity, identifying possible cost officers, employees, records, and savings, identifying the outcomes achieved by a program, or comparing property maintained by the County actual department practices against the practices called for in law or policy. and to all external entities, records, Types of questions we may attempt to answer include: and personnel related to their • Is this program accomplishing its goals and objectives? business interactions with the (Are there other ways to achieve this goal?) (Is this goal still County. relevant?) (How do other counties achieve this goal or fulfill this need?) Formal Audit Response—We give County departments the • How well does the program do what it is intended to do? opportunity to formally respond to (How many are served?) (What does it cost per unit?) (How all audit findings and does the County of Hawaii compare to other counties in this recommendations. regard?) • Is this program complying with all applicable laws and Adherence to Government Audit regulations? (Does the program meet all federal grant Standards—We conduct all audits requirements?) (Is the program fulfilling any obligations in accordance with Generally mandated by state or county law?) Accepted Government Auditing Standards (GAGAS) promulgated Performance audits have a broader focus on the organization than more by the United States Comptroller traditional financial audits. Financial audits are conducted to provide an General. opinion about whether an entity's financial statements are fairly presented and in conformity with generally accepted accounting principles. Financial audits do not focus on an entity's performance per se, but rather whether it has taken appropriate actions to control and safeguard its finances and accurately report on its financial conditions. Our objective is to improve public services. We do this by recommending specific actions that will address the issues we raise, and by providing valuable information to the public, program leadership, the Mayor, and the county council. County of Hawaii, Office of the Legislative Auditor Page 11 Overview of the Annual Audit Plan The Office of the Legislative Auditor utilizes professional standards Audit Plan Risk and guidelines developed by the Institute of Internal Auditors for the development of the annual audit plan. These guidelines recognize Assessment Criteria that an annual audit plan and work schedule benefit the organization by: Using a risk-based audit approach • Establishing which agencies, programs, contracts, or other to identify and prioritize potential areas will be prioritized for audits on an annual basis audit topics that pose the greatest potential risk and liability to the • Permitting an efficient allocation of limited audit resources County, The Office of the • Providing a flexible basis for managing audit personnel Legislative auditor considers the following risk factors: • Projecting an estimated timetable for initiating and completing audits for the year • Size of Department or Operational Area • Eliminating the potential for overlapping audits within the Division and with other audit organizations • Compliance and Regulations • Providing an identifiable basis for the role of the Office and • Public Sensitivity justification for obtaining budgetary funds • Complexity of Transactions • Management Accountability • Quality of Known Internal Control System Preparing the Annual Audit Plan • Age of Program or Operation • Audit History Audits included in the annual audit plan are selected and prioritized using a risk-based approach. Risk assessment is a process used to • Public Health and Safety identify and prioritize audits based upon specific risk factors related • Critical Infrastructure to the quality of internal controls and the estimated potential liability • Emerging Risk Areas and level of risk exposure to the County of Hawaii related to various County departments, programs, activities, and contracts. • Inherent Risk Areas The OLA utilizes several techniques to identify and prioritize audits • Departmental Requests in the annual plan. These techniques include: • Aof opas els derived from previousnalysis internaleraudits tionformaand intauditrnal follow-upcontrol • Assessment of operations and controls derived from previous external audits including information in the County's Comprehensive Annual Financial Reports (CAFRs) and Single Audit Reports • Input from elected officials, operational management, peer audit groups, and members of the public • Benchmarking against the audit priorities of other governmental entities • Consideration of current local events, financial conditions, and public policy issues County of Hawaii, Office of the Legislative Auditor Page 12 Examples of Audit Types Audit Plan Principles The following are examples of the audit types considered in the OLA's annual audit plan. These include audits that examine: In order to provide guidance and a framework for the development of • Organizational units within a County agency such as a the annual audit plan, the Office of division or a department the Legislative Auditor recognizes • Individual County programs and activities the following and observes basic audit plan principles: • Transaction cycles or processes that"horizontally"cross multiple County functions or departments, such as contract • Audit resources are limited, procurement and purchasing, grants, human resources, thus prohibiting 100 percent information technology, etc. audit coverage each year. • Individual financial statement accounts and transactional • The audit plan is a flexible and areas such as capital assets, leave liability, accounts dynamic tool that can be payable, and payroll amended throughout the year • Contracts and agreements the County has entered into to reflect changing County with a third party risks and priorities. When we evaluate potential audits from a variety of perspectives, • The audit plan gives we can ensure that there is widespread audit coverage in terms of consideration to work both the types of audits performed, as defined in Generally performed by other auditors. Accepted Government Auditing Standards, and in terms of the • The audit plan recognizes that County's vast array of departments, programs, activities, and there are inherent risks and contracts. limitations associated with any method or system of prioritizing audits. As a result, risk factors are periodically evaluated and modified, as necessary. County of Hawaii, Office of the Legislative Auditor Page 13 Fiscal Year 2015-2016 Plqnnceri A I gri. Audit Department Planned Audit Financial audit of the • Department of Finance In accordance with Hawai'i County Charter Section County's and other departments 10-13, our Office will monitor the conduct of the Comprehensive as required external auditor, N&K CPA's Inc. (Contract No. Annual Financial • Department of Water C.004162)who will complete the following: Report(CAFR) for Supply • Single Audit of Federal Financial Assistance Fiscal Year Ended Programs for Fiscal Year Ended June 30, June 30, 2015. 2015. • Financial Audit of the Department of Water Supply for Fiscal Year Ended June 30, 2015. • Report for Landfill Financial Assurance; and • Financial Assessment Electronic Submission of Section 8— Housing Choice Vouchers. Follow-Up on Department of Parks & We will follow up on recommendations made in the Facilities Recreation July 2011 Limited Scope Performance Audit of the Maintenance Department of Parks and Recreation's Facilities Asset Management. Follow-Up on Department of Finance and We will follow up on recommendations made in the Purchasing Cards other departments as 2015 Performance Audit on the Purchasing Card required Program. Cash Receipting Department of Parks& We will assess internal controls over cash receipting Recreation, Selected to ensure adequate safeguarding of assets to Locations prevent and detect fraud and misuse. We will also assess that all cash receipts were deposited timely and intact. Overtime County-Wide departments We will assess internal controls; identify identified during audit opportunities to better control overtime planning expenditures. We may also assess whether it is less expensive to pay overtime or fill new positions. Optimization of Department of Finance We will assess how effective the County is at Purchasing Card maximizing pCard rebates. Rebates Inventory Public Works We will assess if the County has adequate controls Management to ensure accuracy and completeness of inventory records, accountability for inventory transactions, and safeguarding of inventory. Delinquent Property Department of Finance, We will determine how effective is the Real Property Tax Real Property Tax Division Tax Division (RPTD) at collecting delinquent taxes. Fair Share Planning Department We plan to determine if the county is collecting and Contributions administering the developer's fair share contributions appropriately and in accordance with state and county law. County of Hawaii, Office of the Legislative Auditor Page 14