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Home My WebLink AboutCOM 0922.003 2016-2018 Valerie T.Poindexter ~-•'•., Bonnie S. Nims,CGAP - J�tY▪••F"'gci''r �o. Legislative Auditor Chair&Presiding Officer ; 9, Council District 1 : • -_--= Business Address ,: 120 Pauahi Si. F▪OF HP Suite 309 Hilo, Hawaii 96720 (fount of 4thia i`r OFFICE OF THE LEGISLATIVE AUDITOR 25 Aupuni Street Hilo, Hawaii 96720 * (808)961-8386 * Fax(808)961-8905 ^' C) website: httpa.'hawaiicountv.gov e-mail:publiclaonhawaiicountv.gov c =4::) May 16, 2018 TO: Valerie T. Poindexter, Chairpersonrri And Members of the County Council rzE FROM: Bonnie S. Nims Legislative Auditor RE: N&K CPAS, Inc. Attachment to CAFR for the Finance Committee Meeting In compliance with professional standards, please find the attached Governance Letter from N&K CPAs Inc. that communicates information related to their financial audit of the County of Hawaii. In the meantime, please feel free to contact.me at 961-8490 should you requires further information. Attachment cc w/o attachments: N&K CPAs Inc. Department of Finance BSN/Ihs Comm. No. R 2.2,•3 Ref. To: P/Fe- Ref. C-Ref. Date MAY 21 2018 Hawaii County is an Equal Opportunity Provider and Employer AMERICAN SAVINGS BANK TOWER 1001 BISHOP STREET,SUITE 1700 N&K CPAs, Inc. HONOLULU, HAWAII 96813-3696 ACCOUNTANTS I CONSULTANTS T(808) 524-2255 F (808) 523-2090 To the Members of the County Council County of Hawai'i, State of Hawai'i We have audited the financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the County of Hawai'i, State of Hawai'i (County), as of and for the fiscal year ended June 30, 2017. Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards, Government Auditing Standards and the Uniform Guidance, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our letter to you dated July 31, 2017. Professional standards also require that we communicate to you the following information related to our audit. Significant Audit Findings Qualitative Aspects of Accounting Practices Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by County are described in Note 1 to the financial statements. As described in Note 1 to the financial statements, the County adopted the provisions of Governmental Accounting Standards Board (GASB) Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68 and GASB Statement No. 82, Pension Issues. We noted no transactions entered into by the County during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimate(s) affecting the County's financial statements were: • Estimate of the useful lives of the County's capital assets used to compute depreciation expense • Estimate of the liability for postretirement benefits other than pensions. • Estimate of the liability for the County's net pension liability • Estimate of the loss reserves for claims and judgements • Estimate of the landfill closure and postclosure cost liability Management's estimate of the depreciation recorded on capital assets is based in part on the estimated useful lives of those capital assets. We evaluated the key factors and assumptions used to develop the estimated useful lives used to depreciate the County's capital assets in determining that it is reasonable in relation to the financial statements taken as a whole. Management's estimate of the liability for postretirement benefits other than pensions was determined using an actuarial valuation study performed by a third-party specialist. We evaluated the key factors N&K CPAs, Inc. ACCOUNTANTS I CONSULTANTS and assumptions used to compute the liability for postretirement benefits other than pensions in determining that it is reasonable in relation to the financial statements taken as a whole. The collective net pension liability, deferred inflows of resources, and deferred outflows of resources III • of the cost-sharing multiple employer defined pension plan administered by the State of Hawai'i's Employee Retirement System was determined by an actuarial valuation. The County's proportionate share of the collective net pension liability, deferred inflows of resources, and deferred outflows of resources was based on the County's contributions to the pension plan relative to the contributions of duringthe measurement period. We evaluated the keyfactors and all participating employers assumptions used to compute the County's net pension liability in determining that it is reasonable in relation to the financial statements taken as a whole. Management's estimate of the loss reserves for claims and judgements is based on an assessment by the County's legal counsel and an analysis of workers' compensation liability insurance claims. We evaluated the key factors and assumptions used to compute the loss reserve in determining that it is reasonable in relation to the financial statements taken as a whole. Management's estimate of the landfill closure and postclosure cost liability was determined by the County's engineers based on analysis performed by a third party contractor. We evaluated the key factors and assumptions used to develop the liability in determining that it is reasonable in relation to the financial statements taken as a whole. The financial statement disclosures are neutral, consistent, and clear. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. The attached schedule summarizes uncorrected misstatements of the financial statements. Management has determined that their effects are immaterial, both individually and in the aggregate, to the financial statements taken as a whole. Disagreements with Management For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated December 28, 2017. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the County's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the County's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Other Matters We applied certain limited procedures to management's discussion and analysis, schedule of funding progress for the Hawaii Employer Union Health Benefit Trust Fund, schedule of the County's proportionate share of the net pension liability, schedule of the employer pension contributions, and schedule of changes in total pension liability, which are required supplementary information (RSI) that supplements the basic financial statements. Our procedures consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We did not audit the RSI and do not express an opinion or provide any assurance on the RSI. We were engaged to report on the combining and individual nonmajor fund financial statements and budgetary comparison schedules, which accompany the financial statements but are not RSI. With respect to this supplementary information, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. We are not engaged to report on the introductory section and statistical section, which accompany the financial statements but are not RSI. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it. Restriction on Use This information is intended solely for the information and use of the County Council and management of the County of Hawai'i, and is not intended to be, and should not be, used by anyone other than these specified parties. n(4, ,k• CM1 , 2,c. Honolulu, Hawaii January 18, 2018