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Home My WebLink AboutCOM 0346.000 2018-2020 Aaron S.Y.Chung OF Bonnie S.Nims,CLAP Council Chair Legislative Auditor Hawai'i County Council Business Address 120 Pauahi St. Suite 309 Guuf� of Paftlalili Hilo,Hawai'i 96720 OFFICE OF THE LEGISLATIVE AUDITOR 25 Aupuni Street Hilo, hfaivai'i 96720 (808)961-8386 Fax(808)961-8905 June 26, 2019 Aaron S. Y. Chung, Council Chair Members of the Hawai'i County Council Hawai'i County Council 25 Aupuni Street Hilo, Hawai'i 96720 Dear Chair Chung and Council Members, In accordance with Hawai'i County Charter Section 3-18(d)(2), attached is the Office of the Legislative Auditor's Fiscal Year 2019-2020 annual audit plan. This provision requires our Office to transmit an annual auditp Ian to the Hawai'i County Council and the Mayor. The purpose of the audit plan is to identify particular agencies, departments, funds,programs, or other matters we have scheduled for audit in the fiscal year. Our annual audit plan includes four performance audits,three follow up audits, coordination of the financial statement and federal single audit of the County of Hawai'i with a contracted CPA firm. In addition, we will consider County-wide surprise cash counts and ongoing monitoring of County-issued purchasing cards and travel expenditures. Our 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. Futhermore,we would like to acknowledge the professionalism and cooperation extended to our Office by 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. Comm. No. Ref.To- Ref. Date Hawaii County is an Equal Opportunity Provider and Employer Respectfully, Bonnie Nims, CGAP Legislative Auditor cc: Harry Kim, Mayor Wil Okabe, Managing Director Jon Henricks, County Clerk Halvai`i County is an Equal Opportunity Provider and Employer Fiscal 2019-2020 p k1M County,of Ha, { June 26, 2019 Aloha, It is our mission to serve the County Council and citizens of Hawai"i County by promoting accountability, fiscal integrity, and openness in local government. Through performance and financial audits of County agencies and programs, we examine the use of public funds, evaluate operations and activities, and provide findings and recommendations to elected officials and citizens in an objective manner. Our work is intended to assist County government and its management of public resources, delivery of public services, and stewardship of public trust. I am pleased to present the Office of the Legislative Auditor's annual audit plan for fiscal year 2019-2020. 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 four performance audits and three follow up audits. We also coordinate the financial statement and federal single audit of the County of Hawaii with a contracted CPA firm. In addition, we may also consider County- wide surprise cash counts and ongoing monitoring of County- issued purchasing cards and travel expenditures. 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, Bonnie Nims, CGAP Legislative Auditor What is a pellormanceaudit? A performance audit typically examines the effectiveness, economy, or Auditisk efficiency of a government program. They can include analyzing the services of Assessment Criteria an entire department or activity, identifying possible cost savings, identifying the outcomes achieved by a program, or comparing actual department Using a risk-based audit F practices against the practices called for in law or policy. Types of questions approach to identify and we may attempt to answer include: prioritize potential audit topics that pose the greatest potential • Is this program accomplishing its goals and objectives? (Are there risk and liability to the County, ` other ways to achieve this goal?) (Is this goal still relevant?) (How do The Office of the Legislative other counties achieve this goal or fulfill this need?) Auditor considers the fallowing • How well does the program do what it is intended to do? (How risk factors: ti many are served?) (What does it cost per unit?) (How does the County of Hawaii compare to other counties in this regard?) •' Size of,Department or • Is this program complying with all applicable laws and Operat�o "WAt`ea regulations? (Does the program meet all federal grant requirements?) i0ioca11J (Is the program fulfilling any obligations mandated by state or county efb law? ) Performance audits have a broader focus on the organization than more traditional financial audits. Financial audits are conducted to provide an 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 r 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. ` Preparing the it Plan Audits included in the annual audit plan are selected and prioritized using a risk- based approach. Risk assessment is a process used to identify and prioritize audits based upon specific risk factors related to the quality of internal controls a and the estimated potential liability and level of risk exposure to the County of Hawai'i related to various County departments, programs, activities, and contracts. The OLA utilizes several techniques to identify and prioritize audits in the annual plan.These techniques include: • Analysis of operations and internal controls derived from previous audits • 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 ° P • 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 11 J r d r / / / i / Financial audit of In accordance with Hawai'i County Charter Section 10-13, the County's Department of Finance our Office will monitor the conduct of the external auditor, Comprehensive and other departments N&K CPA's Inc. (RFP#3544)who will complete the Annual Financial as required following: Report(CAFR)for • Single Audit of Federal Financial Assistance Programs Fiscal Year Ended for Fiscal Year Ended June 30, 2019. June 30, 2019 • Department of Water Supply • Financial Audit of the Department of Water Supply for Fiscal Year Ended June 30, 2019. • Report for Landfill Financial Assurance; and • Financial Assessment Electronic Submission of Section 8— Housing Choice Vouchers. 11011 / Continuation of the Department of Finance We will evaluate the County's Real Property Tax collection in-process audit of Real Property Tax Division process over delinquent taxes. Real Property Tax (RPTD) Continuation of the Department of Parks& We will evaluate preventative maintenance and repair, in-process audit of Recreation (P&R) identify P&R's approach and strategy for park maintenance; Facilities review and evaluate procedures, practices, and controls of Maintenance P&R's various divisions on a selective basis. Grants County-wide departments We will evaluate the County's Grant Management process Management identified during audit including assessing whether the County has adequate planning internal controls to efficiently and effectively manage grants. This may include: • determining if the County efficiently applies for grants; and/or • determining if the County has established adequate internal controls to effectively manage grants received. Contract County-wide departments We will evaluate the adequacy of the County's monitoring Administration identified during audit procedures and internal controls over contract planning administration. County of Hawaii, Office of the Legislative Auditor P age 12 Continuation of in- Department of Public Works We will follow up on recommendations made in the 2017 process follow-up Highway Division Performance Audit on inventory management. audit of Inventory Management Hiring Practices Department of Human We will follow up on recommendations made in the 2017 Resources Performance Audit on the Department of Human Resources Hiring Practices. Cash Handling Mass Transit Agency We will follow up on recommendations made in the 2018 Performance Audit on Cash Handling at County of Hawai`i's Mass Transit Agency. / / r � Surprise Cash County-wide departments Conduct surprise cash counts of cash and cash equivalents Counts identified during audit to determine if all cash was receipted and deposited timely planning and intact; monitor safeguarding of assets to prevent and detect fraud and misuse. Purchasing Card County-wide departments Review internal controls over pCard use and compliance (pCard) identified during audit with applicable procurement laws and County policies and planning procedures. Travel County-wide departments Review travel authorization; compliance with applicable identified during audit laws and County policies and procedures. planning County of Hawai'i, Office of the Legislative Auditor F' a g e 13