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Home My WebLink AboutCOM 0909.000 2014-2016 Dru Mamo Kanuha Bonnie S.Nims,CGAP Chair&Presiding Officer •?F•"9kg JatY• .•'�, Legislative Auditor ;'�o.• ..• v� Council District 7 = r - �.\,41�%%.- *fil Business Address ,,''',*ry• +:•`;pP`�: 1266 Kamehameha Avenue TE O,_,-- _-- ,,,,_,_ Suite A-8 Hilo,Hawaii 96720 Ixnrnt r of c a ai'i OFFICE OF THE LEGISLATIVE AUDITOR 25 Aupuni Street Hilo, Hawai'i 96720 * (808)961-8386 * Fax(808)961-8905 website:http://hawaiicountv.gov e-mail:publiclao@co.hawaii.hi.us June 8, 2016 ("-; The Honorable Dru Kanuha, Council Chairperson and Members of the Hawai`i County Council Hawai`i County Council 25 Aupuni Street .. : Hilo, Hawaii 96720 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 2016-2017 annual audit plan. This provision requires our Office transmit to the Hawaii 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 Hawaii. Sincerely, - Bonnie S. Nims, CGAP Legislative Auditor cc: William P. Kenoi, Mayor Stewart Maeda, County Clerk Comm. No. clog Ref. To: PC— Ref. L Ref• dote )UN 1 6 ZQ�Y aa Hawaii County is an Equal Opportunity Provider and Employer Fiscal Year 2016-2017 `o;M��°�'H::,; County of Hawaii „..• Office of the Legislative Auditor 411dirt Plan : ., ,.... . . "'"� . . Bonnie Nims, CGAP, Legislative Auditor 4r;of 4.01'.* /( s. it .. '. Table of Contents * • i iw •rr r 1, ANS, a1 Our Audit Authority 1 wr What is a performance audit? 1 111. 1nr Audit Framework 1 F HAWAII COUNTY 0 Overview of Annual Audit Plan 2 mi.- 21' BUILDING 28 miftitit MUT 2016-2017 Planned Audits 4 June 8, 2016 Dear Fellow Citizens, I am pleased to present the fiscal year 2016-2017 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 .rr four performance audits. We also coordinate the financial statement and federal single audit of the County of Hawai'i with a contracted CPA firm. 1 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 a ..r.- _ ... . execute our mission. Respectfully,yy� aria Bonnie S. Nims, CGAP Legislative Auditor County of Hawaii Our Audit Authority The Hawaii Audit Hawai'i 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 Hawaii 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 management. What is a performance audit? 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? (Are business interactions with the there other ways to achieve this goal?) (Is this goal still relevant?) County. (How do other counties achieve this goal or fulfill this need?) Formal Audit Response—We • How well does the program do what it is intended to do? (How give County departments the many are served?) (What does it cost per unit?) (How does the opportunity to formally respond to County of Hawaii compare to other counties in this regard?) all audit findings and • Is this program complying with all applicable laws and recommendations. regulations? (Does the program meet all federal grant requirements?) (Is the program fulfilling any obligations mandated Adherence to Government Audit by state or county law?) Standards—We conduct all audits in accordance with Generally Performance audits have a broader focus on the organization than more Accepted Government Auditing traditional financial audits. Financial audits are conducted to provide an Standards (GAGAS) promulgated opinion about whether an entity's financial statements are fairly presented by the United States Comptroller and in conformity with generally accepted accounting principles. Financial General. 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 • Eliminating the potential for overlapping audits within the Operational Area 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 Hawai'i 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: • Analysis of operations and internal controls derived from previous internal audits formal audit follow-up • 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 Hawai'i, 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. o- 4 County of Hawai'i, Office of the Legislative Auditor Page 13 Fiscal Year 2016-2017 PiPnricira. "Au .Pi*c � Audit Department Planned Audit In accordance with Hawaii County Charter Section 10-13, our Office will monitor the conduct of the external auditor, N&K CPA's Inc. (Contract No. Financial audit of the C.004162)who will complete the following: County's • Department of Finance Comprehensive and other departments • Single Audit of Federal Financial Assistance Annual Financial as required Programs for Fiscal Year Ended June 30, Report(CAFR) for 2016. p Department of Water • Financial Audit of the Department of Water Fiscal Year Ended Supply Supply for Fiscal Year Ended June 30, 2016. June 30, 2016. • Report for Landfill Financial Assurance; and • Financial Assessment Electronic Submission of Section 8—Housing Choice Vouchers. Follow-Up on We will follow up on recommendations made in the Facilities Department of Parks& July 2011 Limited Scope Performance Audit of the Maintenance Recreation 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. County Wide departments We will evaluate internal controls; identify Overtime 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. 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. County-Wide departments We will evaluate internal controls; identify Cash Handling & opportunities to better control cash receipting. We identified during audit Receipting will also determine if all cash was deposited timely planning and intact. We will assess controls in place intended to ensure Department of Human the fair, uniform, and transparent selection of the Hiring Practices best employee for the position and identify Resources opportunities for business process improvements based on industry best practices. County of Hawaii, Office of the Legislative Auditor Page 14 Dru Mamo Kanuha • Bonnie S.Nims,CGAP Chair&Presiding Officer o.a¢i=v:. . Legislative Auditor • Council District 7 •" „��%4• Business Address 1266 Katnehanieha Avenue E OFH►' Suite A-8 Hilo, Halvah 96720 ,iiuufvr of .a 1nti't OFFICE OF THE LEGISLATIVE AUDITOR 25 Aupuni Street Hilo, Hawaii 96720 * (808)961-8386 * Fax(808)961-8905 website:http: -hawaiicountv.gov e-mail:publiclao(a,,co.hawaii.hi.us June 8, 2016 The Honorable Dru Kanuha, Council Chairperson and Members of the Hawai`i County Council Hawai`i County Council 25 Aupuni Street Hilo, Hawai`i 96720 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 2016-2017 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, Bae S. Nims. CGA Legislative Auditor cc: William P. Kenoi, Mayor Stewart Maeda, County Clerk Hawaii County is an Equal Opportunity Provider and Employer