HomeMy WebLinkAbout2015-01 Performance Audit Report: County of Hawai'i's Purchasing Card (pCard) ProgramCounty of HawaiTs
Purchasing Card Program
Report No. 2015-01
July 17, 2015
Office of the Legislative Auditor
County of Hawaii
4TF•OF•HA�S1
Dru Mamo Kanuha
Chair & Presiding Officer
Council District 7
July 17, 2015
JNsy'oF' r'q�.
O.• q
grF•OF�Hp'�P
%L'ouUN of 'Pubiat`i
Bonnie S. Nims, CGAP
Legislative Auditor
Business Address
1266 Kamehameha Avenue
Suite A-8
Hilo, Hawai `i 96720
OFFICE OF THE LEGISLATIVE AUDITOR
25 Aupuni Street Hilo, Hawaii 96720 * (808) 961-8386 * Fax (808) 961-8905
website: hup:11HawaVicounty.Qov e-mail: publiclao(aco.Hawai'i.hi.us
The Honorable Dru Kanuha, Council Chairperson and
Members of the Hawaii County Council
Hawaii County Council
25 Aupuni Street
Hilo, Hawaii 96720
Dear Chair Kanuha and Council Members,
hi accordance with Hawaii County Charter Section 3-18(d)(2), attached is the Office of the Legislative Auditor's
report of our audit of the Purchasing Card (pCard) Program. The purpose of the audit was to determine whether
internal controls currently in place were adequate to reduce the risk of fraud and misuse of purchasing cards, to
evaluate the appropriateness of pCard purchases, and to identify potential areas for improvement.
The County's pCard program includes several industry best practices and internal controls are generally
operational and effective. However, the County management should address gaps in existing policy and improve
program monitoring. While pCard transactions reviewed were generally appropriate and for a legitimate
department purpose, some pCard transactions did not follow county policy, had a questionable public purpose,
and may have violated state law. In addition, reimbursements for personal or miscellaneous purchases were not
always made timely.
If you need any further information, please let me know. We would like to thank the Department of Finance staff,
as well as representatives from other County departments, for their assistance and cooperation during this audit.
We greatly appreciate all of their valuable time and efforts spent on providing us information.
Respectfully,
Bonnie S. Nims, CGAP
Legislative Auditor
cc: William P. Kenoi, Mayor
Stewart Maeda, County Clerk
Deanna Sako, Director, Department of Finance
Gerald Takase, Director, Department of Liquor Control
Walter Lau, Managing Director
Hawai `i County is an Equal Opportunity Provider and Employer
In Brief
Background
In 2001, the State of Hawai`i's State
Procurement Office (SPO) established the
Purchasing Card Program (pCard program) to
improve efficiency, flexibility, and
convenience when buying goods and
services. The County of Hawaii adopted the
State's program in 2003 and it is administered
by the County's Department of Finance and
coordinated with the State Procurement
Office. Both state and county policies limit
types of purchases paid with a pCard.
In calendar year 2014, the County of Hawaii
used approximately 236 purchase cards
spending $1.15 million.
We initially reviewed 570 transactions totaling
$94,036.42 from 2014. During the course of
our audit, we identified transactions that
required us to expand our initial audit testing to
include an additional 362 transactions totaling
$68,576.71 from 2009-2015.
Why we did this audit
This performance audit was undertaken to
evaluate if the program's internal controls
were adequate to reduce the risk of fraud and
misuse of purchasing cards and to identify
potential areas for improvement.
The audit also looked at pCard transactions to
see if they were in compliance with county
and state laws and regulations, county
policies, and industry best practices.
We initiated the audit, as we believe purchase
cards are an inherently high-risk method for
purchasing, due to the highly decentralized
nature of the transactions, the number of
active cardholders, and the amount of annual
activity.
EMM
What we found
The County of Hawai`i's pCard program includes
several industry best practices. This design has
resulted in the program generally being used
appropriately. The majority of the departments we
reviewed clearly demonstrated the legitimate
department purpose of the pCard transactions and
the benefit to the County and taxpayers. However,
our audit did identify 164 transactions totaling
$29,961.41 that did not follow county policy, had a
questionable public purpose, and may have
violated state law. Furthermore, some transactions
were not reimbursed timely. Gaps in existing policy
and procedures should be addressed and program
oversight could be improved to help prevent and
detect any future inappropriate transactions.
Management has generally agreed with the
recommendations in this report. Their complete
response to this audit can be found on pages 18-
22: Management's Comments.
The recommendations identify improvements for
management to increase internal controls for
County -issued purchasing cards. Our audit report
offers recommendations designed to address these
issues through:
• Updating the County Code;
• Treating all employees and departments fairly
and equitably;
• Updating pCard Policy and Procedures;
• Strengthening monitoring practices to ensure
expenditures are for a legitimate public purpose
and demonstrate a clear benefit to the County
and taxpayers;
• Providing on-going training to departments; and
• Using available technology from the card issuer
to improve monitoring practices.
Table of Contents
Introduction...............................................................................................................................1
Background...............................................................................................................................2
AuditObjectives........................................................................................................................4
AuditScope and Methodology.................................................................................................4
Commendations and Noteworthy Achievements...................................................................5
AuditResults.............................................................................................................................6
While most transactions reviewed were generally appropriate, some purchases
did not follow county policy, had a questionable public purpose, and may have
violatedstate law...........................................................................................................6
Some purchases did not follow county policies, had a questionable public
purpose, and may have violated state law...........................................................6
Reimbursements were not always made timely...................................................9
Existing controls are operational and generally effective and opportunities to
strengthen them exist.................................................................................................11
County Purchasing Card Program and Procedures are not entirely consistent
with state law, state purchasing card guidance, and other county policies .........12
Program monitoring could be improved..............................................................12
Purchasing Card Program and Procedures should be clarified and departmental
training should be provided................................................................................13
Use of available technology could improve program monitoring .........................14
Recommendations..................................................................................................................16
Management's Comments......................................................................................................18
AppendixA — Audit Criteria....................................................................................................23
Introduction
The Office of the Legislative Auditor conducted this performance audit of the County's
purchasing card program pursuant to Section 3-18 of the Hawaii County Charter, which outlines
the Office of the Legislative Auditor's primary duties.
Performance audits typically examine the effectiveness, economy, or efficiency of a government
program. They can include analyzing the services of an entire department or activity, identifying
possible cost savings, identifying the outcomes achieved by a program, or comparing actual
department practices against the practices called for in law or policy.
Our objective in performance auditing is to improve public services provided by county
government. We do this by recommending specific actions that will address the issues we raise
and by providing valuable information to the public, the administration, program leadership, the
Hawai"i County Council, and the Mayor.
A performance audit of the County's purchasing card program was included in the fiscal year
2014-2015 annual audit plan based on the results of our countywide risk assessment.
There are inherent risks associated with the implementation of a purchasing card system. When
internal controls are not functioning as designed, the risks related to the program increase,
thereby increasing the risk exposure to the County. The potential for fraudulent use is one such
inherent risk. On a national level, fraudulent use of purchasing cards and fraudulent claims for
travel and entertainment expenses rank among the most commonly occurring types of
employee fraud. Due to this potential risk, the Office of the Legislative Auditor determined that a
thorough examination of purchasing card policies, procedures, and processes was warranted.
Purchasing Card Program :: Introduction 11
Background
What is a pCard?
A purchasing card (pCard) is similar to a credit card. It is owned by the County and issued to
County employees to make official purchases. The Purchasing Card Program (pCard program),
established by the State of Hawai`i's State Procurement Office (SPO), offers benefits to the
State and counties including improving efficiency, flexibility, and convenience when buying
official goods and services.
The County of Hawaii adopted the State's program in 2003 and it is administered by the
County's Department of Finance in coordination with the State Procurement Office. The
County's pCard is a MasterCard issued by First Hawaiian Bank and in 2014, there were
approximately 236 County pCard cardholders. Cardholders are required to sign and abide by a
Cardholder Agreement approved by the Purchasing Card Administrator' and if the pCard is
used for unlawful or improper purposes, the cardholder may be subject to disciplinary action, up
to and including termination, for that misconduct.
Why use a pCard?
The pCard program was established to reduce the administrative burden associated with
issuing purchase orders and processing invoices for payment without sacrificing controls over
safeguarding of assets and preventing and detecting errors and fraud.
Specifically, the pCard program is designed to:
➢ Improve management controls;
➢ Increase purchasing efficiency; and
➢ Allow payment to vendors by the card issuer generally within two days of the purchase.
What can be purchased using a pCard?
A purchase may be made using a pCard if the expenditure is budgeted, for a legitimate
department purpose, appropriately authorized, within the pCard limits, and is made in
accordance with the County's Small Purchase Guidelines. County policy also establishes
restrictions on what cardholders can buy with these cards. Examples of restricted purchases
include:
• Any purchase over the established limit for the pCard
• Liquor, unless specifically authorized
• Cash
• Goods and services for personal use, unless specifically authorized
' A Purchasing Card Administrator is defined by the Purchasing Card Program and Procedures October 2013 as the
County Director of Finance or their designee and is authorized to approve or certify Cardholder Agreements, pCard
application, credit card changes, and cancellations. This individual may also be the Department pCard Coordinator.
Purchasing Card Program :: Background 12
The Purchasing Card Administrator may grant exceptions on a limited basis upon showing
sufficient justification.
How much did the County of Hawaii buy with the pCard?
The County purchased more than $1.15 million in goods and services with the pCards in the
calendar year 2014.
Purchasing Card Program :: Background 13
Audit Objectives
The Office of the Legislative Auditor's fiscal year 2014-2015 annual audit plan included a
performance audit of the County's Purchasing Card (pCard) program. The objectives of the
audit were to evaluate the appropriateness of pCard purchases and the adequacy of the
program administration and oversight, including internal controls to safeguard the County from
fraud, waste, and abuse.
Audit Scope and Methodology
To accomplish our objectives, we:
• Developed an understanding of the policies and procedures, processes, and document
flows;
• Corroborated information through interviews with appropriate personnel, reviewing
documentation, and performing tests of documentation and controls;
• Compared Purchasing Card Program and Procedures (Department of Finance October
2013), practices and performance measures with Government Finance Officers
Association (GFOA) recommended industry best practices;
• Assessed compliance with the County's Purchasing Card Program and Procedures,
policies and procedures, applicable purchasing guidelines, rules, laws, regulations, code
and charter provisions;
• Analyzed pCard data ;2
• Judgmentally selected transactions for evaluation using a risk-based approach focusing
on unusual vendors or transaction descriptions, unexpected high dollar amount, and
cardholder position. Our selection covered a broad range of County departments with
the exception of the Department of Water Supply (a semi -autonomous agency); and
• Reviewed additional documentation (i.e., inventory logs, department purchase request
forms, attendee sign -in sheets, etc.) as needed.
During the course of our audit, we identified transactions that required us to expand our initial
audit testing. Specifically, we reviewed the Mayor's Office's pCard transactions from January
2009 through May 2015 and one cardholder from the Department of Liquor Control's
transactions from January 2011 through May 2015.
In addition, we examined all Hawai"i County Council and their District staff's pCards for calendar
year 2014. We did not identify any transactions indicating a need for further testing.
Z Data was extracted from the County of HawaiTs Eden FRESH accounting system and compared to First Hawaiian
Bank credit card statements.
Purchasing Card Program :: Objectives, Scope, & Methodology 14
We performed data reliability testing of the transactional data obtained from First Hawaiian
Bank, which we relied on in this report. We evaluated the internal controls related to our audit
objectives, including the adequacy of program oversight.
We conducted this performance audit in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions
based on our audit objectives. We believe the evidence obtained provides a reasonable basis
for our findings and conclusions based on our audit objectives. Our conclusions on the
effectiveness of these controls are detailed within this report.
We thank the Department of Finance staff, as well as representatives from other County
departments, for their assistance and cooperation during this audit. Management generally
agreed with the recommendations in this report. Their complete response to this audit can be
found on pages 18-22: Management's Comments
Commendations & Noteworthy Achievements
Several departments exceled in their pCard expenditure documentation. Transactions tested for
these departments clearly demonstrated compliance with county policies and procedures, the
legitimate department purpose, and had a clear benefit to the County and taxpayers.
Furthermore, these departments included necessary information for us to effectively evaluate
the pCard transactions.
These departments were:
• Civil Defense
• Environmental Management
• Human Resources including the Health and Safety Division
• Prosecuting Attorney
• Office of the County Clerk including the Elections Division
• Hawai"i County Council
Purchasing Card Program :: Commendations & Noteworthy Achievements 15
Audit Results
While most transactions reviewed were generally appropriate,
some purchases did not follow county policy, had a questionable
public purpose, and may have violated state law.
The purpose of the County's Purchasing Card (pCard) Program is to establish an efficient, cost-
effective method of purchasing and paying for small -dollar transactions. County policies and
other documents define the pCard Program and establish the rules and guidance employees
must follow in order to retain the privilege of having and using County pCards.
In 2014, the County spent approximately $1.15 million using its pCards. We initially reviewed
570 transactions totaling $94,036.42 from 2014. During the course of our audit, we identified
transactions that required us to expand our initial audit testing to include an additional 362
transactions totaling $68,576.71 from 2009-2015. Of these transactions, most were for a
legitimate department purpose, were authorized by the department, and generally followed
county policies and guidelines. Audit testing included the following risk areas where no
exceptions were found:
• Cash Advances — The Purchasing Card Program and Procedures prohibits using
pCards for cash advances. Audit testing did not identify any cash advances.
• Split Purchases — Splitting orders or costs to circumvent the transaction limit is
prohibited. No split transactions without documented approval were identified.
• Restricted Purchases - The Purchasing Card Program and Procedures specifically
restricts using pCards for printing, County storeroom supplies, and safety equipment
without prior approval from the Purchasing Division. Audit testing did not identify any of
these purchases that did not obtain adequate prior approval.
We commend the Department of Finance on the effectiveness of the controls that have been
implemented. However, audit work did identify some instances of non-compliance.
Some purchases did not follow county policies, had a questionable public
purpose, and may have violated state law.
The Hawai"i State Constitution, the Hawai"i Revised Statutes (HRS), the Hawai"i County
Charter, the Hawai"i County Code, and the various county policies all require that public funds
be used for a public purpose. (See Appendix A for details.) While the majority of the
transactions tested from 2009-2015 were appropriate, we found 164 transactions totaling
Purchasing Card Program :: Audit Results 16
$29,961.41 that, in our opinion, violated county policies, had a questionable public purpose, and
may have violated state law.
Transactions which violated county policies, had a questionable public purpose, and
may have violated state law
Mayor's Office
Dept. of Liquor
Total
#
Amount
#
Amount
#
Amount
Personal Purchases
26
$ 3,689.34
19
$ 6,278.00
45
$ 9,967.34
Miscellaneous Reimbursed
Purchases
116
$ 17,723.04
116
$ 17,723.04
Other Questionable
Purchases
3
$ 2,271.03
3
$ 2,271.03
Total
145
$ 23,683.41
19
$6,278.00
164
$ 29,961.41
Personal Purchases
We noted 45 transactions totaling $9,967.34 that were clearly identified in the accounting
system transaction description as a personal charge. Although the County was fully
reimbursed for these purchases, the associated costs were initially charged against the
County's pCard. Use of the pCard for personal purchases is not in accordance with the
Hawai'i State Constitution, Article 7, Section 4 that requires public money to be used for
a public purpose. In addition, both the State and County pCard policy strictly prohibit
personal use of the pCard.
Miscellaneous Reimbursed Purchases
The audit identified 116 transactions totaling $17,723.04 that did not have a transaction
description or were described in the accounting system as "Miscellaneous - County to be
reimbursed" or a variation of this phrase. Detailed itemized receipts or other supporting
documentation was not provided since the transaction was reimbursed by the
cardholder. Common business practice, as well as the State and County's pCard policy
requires original, detailed, and itemized receipts to support transactions. As a result, the
County did not clearly demonstrate whether the transaction was for a legitimate
department purpose and we could not determine if the transactions complied with the
State Constitution requiring public funds be used for a public purpose. We did perform a
review of the vendor name but without receipts or other supporting documentation,
again, we could not determine a clear benefit to the County. These vendors included but
were not limited to Bike Works, Mid Pacific Wheels, Evergreen Restaurant, Honolulu
Elks Club, and Hawaiian South Shore. Although the County was fully reimbursed for
these purchases, the associated costs were initially charged against the County's pCard.
Other Questionable Purchases
We noted three transactions totaling $2,271.03 that were of questionable public purpose
or public benefit and did not follow County policy.
Purchasing Card Program :: Audit Results 17
Other Questionable Transactions
Purchase
Amount
Airfare for Basic Image's youth representative to
participate in Surfing America USA Championship
competition
$ 1,270.60
Helicopter ride for an affiliate of the US Conference
of Mayors and family
$ 652.40
Alcohol purchased for the Hawai'i State Legislators
as a gift (omiyage)
$ 348.03
Total
$2,271.03
Airfare for Youth Representative
The County paid $1,270.60 in airfare for a non -County employee to attend the Surfing
America USA Championship competition in California. The Mayor's Office stated that the
non -County employee was a "youth ambassador" who participated in the competition.
However, the Mayor's Office could not demonstrate how the youth ambassador was
selected or that there was any official recognition upon return. Therefore, we were
unable to determine a clear public purpose or benefit to the county.
In addition, the ticket was purchased one day prior to travel through a web -based airline
ticket provider. The County's Purchasing Manual Section 5.1.5 requires County
departments to obtain three written quotes for the purchase of airfare greater than
$1,000. The Mayor's department was unable to demonstrate it had complied with this
policy by obtaining three quotes.
Furthermore, County policy (Memorandum 04-9 (May 25, 2004)) requires any County
department, agency, or office who anticipates incurring an expenditure requiring
approval as required by Section 2-98 of the County Code to complete a Request for
Adjustments and Exceptions (RAE) form which is then approved by the Director of
Finance. Section 2-98(b) of the County Code allows the mayor or council chairperson to
disallow or authorize certain expenses. In addition, the County's Purchasing Manual
Section 5.1.6 requires purchases of goods and services that are unique and not typical
to the general purpose of the department, to complete an RAE and obtain written
approval from the Director of Finance. Although the Mayor's Office indicated they had
received verbal approval from the Mayor, the required form or written approval by the
Finance Director was not provided.
Helicopter Ride
The County paid $652.40 for a four -passenger volcanos and waterfalls helicopter tour for
an affiliate of the US Conference of Mayors (USCM) and his family. While a County
benefit may be derived from providing this ride to an affiliate of the USCM, the benefit of
the cost of the family, as well as public perception from a reasonable person standpoint,
is questionable.
The required RAE form and written approval by the Finance Director was not provided.
Purchasing Card Program :: Audit Results 18
Alcohol Purchase
Several bottles of wine totaling $348.03 were purchased for the Hawai"i State
Legislators to be given as gifts (omiyage) during the April 2014 Legislative Hearings.
Although omiyage is an allowable purchase, the County provided other gifts to the
Legislators including cookies and coffee. According to the County's Purchasing Card
Program and Procedures, use of the pCard for the purchase of liquor is prohibited
unless specifically authorized. It is unclear what type of authorization was required or
obtained in this situation.
In addition, since both the State and County are drug and alcohol free work
environments, from a reasonable person standpoint, this transaction does not appear
appropriate.
Furthermore, the State Procurement Office (SPO) stated that although the purchase of
alcohol is not explicitly prohibited in the State pCard policy, it is implied and treated as a
given prohibited item. We believe the State guidelines are a sound point of reference
and we question whether these items have a clear public purpose or benefit.
While the Department of Finance reviews all pCard transactions for procurement compliance,
appropriate documentation, and authorization, it appears the Mayor's Office was not always
held to the same requirements as other departments. We recognize the Mayor's Office has
duties and responsibilities that are not standard, and in fact, are often extraordinary in nature.
However, there is no written statute to exempt any employee and/or department from following
state law and county policies and procedures. In addition, the County Code Article 15, Section
2-83 requires fair treatment of County employees and officers. The same policies and
processes should be applied to all cardholders. Only then can the rules be enforced without
confusion. By not strictly enforcing County and State purchasing requirements, the County
unnecessarily increases the risk that fraud or abuse may occur. Moreover, without adequate
supporting documentation, the County is unable to demonstrate an expenditure is for a
legitimate public purpose.
As employees become aware of control weaknesses, such as approved personal expenses or
allowing unsupported and unauthorized exceptions, employees predisposed to misusing the
card may be more likely to attempt to process improper purchases. Failure to address these
control issues could lead to the erosion and weakening of the control system and increase the
County's exposure to fraud, waste, and abuse.
Reimbursements were not always made timely.
As described above, some employee's pCard purchases were identified in the accounting
system as "personal" and "Miscellaneous - County to be reimbursed". In most cases, a
Purchasing Card Program:: Audit Results 19
Treasury Deposit Slip was included in the transaction's supporting documentation to confirm the
reimbursement. Some reimbursements were not made timely:
Days For Reimbursement For Personal & Miscellaneous
Purchases
Days from
transaction to
reimbursement
# of
transactions
% of
transactions
Amount
% of
Amount
<_ 30
52
33%
$ 13,333.09
49%
<_ 100
50
31%
$ 6,426.82
23%
<_ 500
48
30%
$ 6,574.78
24%
<_ 1,000
9
6%
$ 1,121.95
4%
Total
159
$ 27,456.64
Our audit also identified four miscellaneous or personal transactions totaling $282.95 that were
not reimbursed until our audit brought this information to management's attention.
The Department of Finance stated that interest was paid on the reimbursements; we did not
review or assess the accuracy, reasonableness, or completeness of these calculations.
Since occasional accidents and errors do occur, department pCard coordinators are responsible
to take the necessary steps to recover or dispute the cost of any inadvertent, improper, or
erroneous charges. The County's pCard Program and Procedures requires notices of disputed
items must be made within 60 days of the cycle in which the item first appears on the cardholder
statement. However, these procedures do not address the timeliness of reimbursements of
erroneous personal purchases, thereby facilitating the non -intentional, potentially interest free
loan or lending of credit. Lending of credit is when a borrower receives something of value now
and agrees to repay the lender at some date in the future, generally with interest. Lending of
credit to employees for personal use of purchasing cards is inconsistent with of Article 7,
Section 4 of the Hawai"i State Constitution, which states: "No tax shall be levied or appropriation
of public money or property made, nor shall the public credit be used, directly or indirectly,
except for a public purpose...." [emphasis added]
Purchasing Card Program :: Audit Results 110
Existing controls are operational and generally effective and
opportunities to strengthen them exist.
The County of HawaiTs Purchasing Card (pCard) program has implemented several best
practices for internal controls. Internal controls are
broadly defined as a process effected by management
Internal Controls are that is designed to provide reasonable assurance on the
generally adequate effectiveness and efficiency of operations, reliability of
financial reporting, and compliance with applicable laws
and regulations. Internal controls can help achieve
performance targets and prevent loss of resources.
Audit testing of internal control procedures included the following risk areas where we found no
exceptions:
Separation of Duties — This is a control to ensure that no single person has full control
of a transaction. Audit work found that the departments tested had adequate separation
of duties.
• Purchasing Card Limits — Any purchase over the established limit for the pCard is
restricted. Testing did not identify any transactions that exceeded the cardholder
purchasing card limits without documented approval from the Finance Director.
• Restricted Purchases — Each pCard has a magnetic strip programmed with descriptive
categories of valid or restricted merchants (merchant category codes, or MCC's). For
example, some of these merchant types include bank charges, cash advances, drinking
places (bars and taverns), and laundry and cleaning services. We did not identify any
transactions that violated the County's pre-set blocked MCC's. In addition, there were
no documented instances where the Finance Director or designee overrode a blocked
MCC request
We again commend the Department of Finance on the effectiveness of the controls that have
been implemented. However, audit work did identify areas where the Department of Finance
could enhance its controls to further encourage compliance and dissuade misuse or fraudulent
use of pCards in the future.
Purchasing Card Program :: Audit Results 111
County Purchasing Card Program and Procedures are not entirely consistent with
state law, state purchasing card guidance, and other county policies.
The pCard program is administered by the County of Hawai'i Department of Finance, in
coordination with the State Procurement Office (SPO). Under the Hawaii Revised Statutes
(HRS) chapters 103D and 103F, the SPO develops rules, as well as policies and procedures, to
implement the procurement law for both state and county 11
governments.3 The purpose of these rules is to promote
economy, efficiency, and effectiveness in the procurement County policies are not
of goods and services, and construction for the State and entirely consistent with
counties. (HAR 3-120-1)4. state guidance
The SPO website (http://spo.Hawai"i.gov/) provides various
pieces of guidance including procurement circulars and the State of Hawaii Purchasing Card
Program and Procedures. In the State's Program and Procedures, purchases for "goods and
services for personal use" are specifically restricted. Whereas the County's Purchasing Card
Program and Procedures and the Cardholder Agreement does restrict purchases for goods and
services for personal use, it includes the language "unless specifically authorized". By including
this caveat, there is an increased risk a cardholder may use the card inappropriately.
Furthermore, this exception is in violation of the Hawaii State Constitution, Article 7, Section 4
and the Hawaii Revised Statutes (HRS) Section 103D-101 which requires that public money be
used for a public purpose.
The County's Purchasing Card Program and Procedures also restricts the purchase of liquor.
However, again it includes the language "unless specifically authorized". By including this
caveat, there is an increased risk of a violation of the County's Alcohol -Free Workplace Policy.
Since we work for the taxpayers, the County should also consider the public perception of
allowing the purchase of alcohol using public money.
Program monitoring could be improved.
To comply with the monthly pCard reconciliation deadline, the Department of Finance
Purchasing and Accounts Payable (AP) Divisions currently has approximately 12 to 16 hours to
review 100 percent of the County's pCard transactions each month. The Department of
Finance reviews each transaction for compliance with procurement rules, account payable
requirements, and accounting codes. If errors are identified, transactions are returned to the
department for review, clarification, or correction. However, the Department of Finance relies
on the individual departments to determine if the transaction is appropriately authorized and is
for a legitimate department purpose. In addition, County departments are not consistently
3 State Procurement Office Executive Overview January 2013
4 http://spo.hawaii.gov/wp-content/uploads/2013/11/3-1201.pdf
Purchasing Card Program :: Audit Results 112
Additional monitoring of the
transaction's appropriateness would
better ensure transactions are for a
clear public purpose
describing the legitimate department
purpose in the transaction description to
clearly demonstration the benefits to the
County or its taxpayers.
Monitoring is an integral component of
internal controls; unmonitored controls tend
to deteriorate over time. When monitoring is
designed and implemented appropriately,
organizations are more likely to identify and correct problems on a timely basis. Ongoing
monitoring can occur in the course of daily operations including regular management and
supervisory activities.
While the County's Department of Finance does review all transactions for procurement and
accounting rules, additional monitoring of the transaction's appropriateness could be performed
to better ensure transactions are for a legitimate department purpose and clear benefit to the
County and taxpayers. Furthermore, providing consolidated clear guidance to all County
departments on appropriate information to be included in the transaction description would
better enable the AP Division to monitor these transactions.
Purchasing Card Program and Procedures should be clarified and departmental
training should be provided.
The Government Finance Officers Association (GFOA) establishes best practices for
Purchasing Card Programs. These best practices include written policies and procedures for
internal staff as well as ongoing training of cardholders and supervisors. To maintain
appropriate controls and comply with best practices, the County of Hawai"i's Department of
Finance established "Purchasing Card Program and
Procedures" which provides guidance including what
constitutes an authorized pCard purchase, restrictions
for pCard use, and responsibilities for the pCard
Administrator, department pCard coordinators, and
cardholders. The County's Purchasing Division
disseminates pCard information through purchasing
reminders emails, word-of-mouth, and conducting
Purchasing Manual training sessions and other training
sessions throughout the year.
Lack of on-going training and
clarity in County policy may cause
some departments to use pCards in
a manner that could be
inappropriate
The County last updated the Purchasing Card Program and Procedures in 2013 but did not
incorporate additional guidance provided to County employees. For example:
Purchasing Card Program :: Audit Results 113
• Spending Guidelines (Memorandum 08-12 dated December 15, 2008) details specific
restricted purchases including bottled water and water service, brief cases, cell phone
plans, gifts ("omiyage"), department shirts, and flowers.
• Request for Adjustments and Exceptions (RAEs) (Memorandum 04-9 dated May 25,
2004) establishes a method of requesting adjustments and exceptions to specific
purchases and transactions.
• Purchase of Alcohol (Memorandum 99-09 dated July 19, 1999) prohibits the purchase of
alcohol for consumption by employees or for functions involving the County with the
exception of "when such purchase is necessary for the entertainment of dignitaries by
the Mayor, the Chairman of the County Council, or their authorized representative. Any
such exceptions shall have the Mayor's written approval or the approval of the Chairman
of the County Council, whichever is appropriate."
• FRESH Account Payable Tidbits (October 9, 2012) describes how to process pCard
transactions.
To ensure all county policies and procedures are followed; the cardholder and/or the pCard
coordinators must review numerous pieces of guidance. There is currently no consolidated
source that includes all current and applicable pCard rules.
Each County departments process their pCards into the financial accounting system differently;
each recording the transaction in varying levels of detail. By having to rely on multiple pieces of
guidance and a lack of consistent detailed training, the risk that unauthorized transactions may
occur or county policies and procedures are not followed greatly increases. Since it is the
Department of Finance's intent to use the Purchasing Card Program and Procedures as its
official pCard policies and procedures, it must make this clear to cardholders, update it annually,
and provide on-going training to supervisors, cardholders, and department pCard Coordinators.
As of June 2015, the Department of Finance indicated they are taking the necessary actions to
improve the oversight of purchasing cards by providing training to departments, including the
Mayor's Office. We have not corroborated this information, nor have we reviewed the training
material.
Use of available technology could improve program monitoring.
Better use of
technology could
improve monitoring of
pCard transactions
Technology is a key element to helping the County more
effectively target potential card misuse and streamline
the monitoring process. In conjunction with the pCard
issuer, the County should have access to a variety of
standard reports that provide the transaction detail that
may highlight anomalies in pCard purchases including:
• Split transactions (i.e., two or more transactions
Purchasing Card Program :: Audit Results 114
which show the following similarities: same date, same supplier, same cardholder and
same amounts)
• Unusual increases in the cardholder's average spend and/or highest spend amount
• Purchase amounts over transaction limits
• Purchase amounts within one to three percent below purchase limits
• Purchases with unauthorized suppliers
• Purchases from suppliers with un -blocked MCCs on a "watch list'5
CentreSuite is First Hawaiian Bank's (the County's card issuer) application designed to
streamline the accounting code allocation and simplify the submission, review, and approval
process for employee expenses.' The County should consider incorporating First Hawaiian
Bank's CentreSuite application into the County's accounting database, including uploading and
downloading pCard data. This would allow the County to follow best practices for monitoring,
including the use of software to complete transaction data analysis, test controls, and report the
results.
s Auditing and Compliance Strategies for a Solid Purchasing Card Program, JP Morgan
6 https://www.fhb.com/en/online-services/banking/other-online-business-services/centresuite/
Purchasing Card Program :: Audit Results 115
Audit Recommendations
The County of HawaiTs Purchasing Card (pCard) program was designed based on several
industry best practices. This design has resulted in the program generally being used
appropriately and achieving its objectives. However, gaps in existing policy should be
addressed and program oversight could be improved.
The following recommendations address each of these areas.
Clarify County Code
We recommend that the Hawai"i County Council consider revising the language of the
County Code, Article 16, Section 2-98. Adjustments and exceptions, to clarify that
authorized exceptions for travel and other expenses are still required to follow state law
requiring public funds to be used for a public purpose.
Fair and Equitable Treatment
We recommend that County Management, including the Department of Finance,
comply with County Code Article 15, Section 2-83 and treat all employees and
departments in a fair and equitable manner and hold them consistently to the same laws,
policies, and procedures.
Update Policies and Procedures
We recommend the Department of Finance complete an annual comprehensive review
and clarify the Purchasing Card Program and Procedures Manual to ensure that it is
consistent with state law and other applicable county guidance including but not limited
to:
o Remove the caveat "unless specifically authorized" on personal purchases and
liquor.
o Clarify policy on specific types of allowable and unallowable purchases.
o Clarify policy on the timeliness of reimbursements.
o Provide clear guidance on documenting the legitimate department purpose in the
transaction description.
Strengthen Monitoring
We recommend the Department of Finance, in addition to their current review
procedures, complete a periodic review and/or perform additional monitoring of pCard
transactions to ensure expenditures are for a legitimate department purpose and have a
clear benefit to the County.
Purchasing Card Program :: Audit Recommendations 116
Provide Training
We recommend the Department of Finance provide on-going training to each
department, including pCard Coordinators, cardholders, and supervisors.
Use of Available Technology
We recommend Department of Finance consider incorporating the First Hawaiian Bank
CentreSuite pCard application into the FRESH Invoice database, including uploading
and downloading pCard data, to improve monitoring of pCard transactions.
Purchasing Card Program :: Audit Recommendations 117
Management's Comments
MAY OF
�;`"' '•.,, Water K.M. Lau
�'4• Managing ➢irerlor
William P. Kenoi
Mnrnr - • Randall M. Kurohara
�i'�: ?rte°;N� OrPunMrrnnging nrrrrror
Tf OF'N'
County of Hawaii
Office of the Mayor
25 Aupuni Skccl, Suit"' 2603 • Hik,, Hawaii 967211 • (HOS)961-N211 • Fuz (.8081 96 1-6553
KONA: 74-5044 Ane Kcohokalolc Hwy., Bldg. C • Kailua-Kona. Hawaii 96741)
(808)323-4444 • Fax {80813234440
July 15, 2015
Ms. Bonnie Nims, CGAP
Legislative Auditor
Office of the Legislative Auditor
25 Aupuni Street
Hilo, Hawaii 96720
Dear Ms, Nims
The Office of the Mayor commends the Office of the Legislative Auditor on its report on
the County of Hawai'i's Purchasing Card (pCard) Program. We would like to thank the
Legislative Auditor and her hardworking staff for putting together this report. Our office
worked cooperatively with the Legislative Auditor's staff to ensure that we responded to
requests for information in a timely manner.
While we do not agree with all of the assertions and conclusions contained in the report,
we fully support the audit recommendations and are working towards implementation of
all the recommendations with the Department of Finance. We believe the
recommendations contained in the report will ensure that we improve the administration
and oversight of the pCard Program.
We thank Legislative Auditor Bonnie Nims and her staff for the professionalism with
which they conducted this review of the pCard Program. Their efforts will help to
improve the efficiency and accountability of county government.
Respectfully submitted,
"`xx. )--
Walter K.M. Lau
Managing Director
County of Hawai' i
Coumy of Huwai'i is un Fyu at Opportunity Provider and Employer.
Purchasing Card Program :: Management's Comments 118
William P. Kenoi Deanna S. Sako
Mayor_"' !. Director
Lisa K. Miura
' Deputy Director
6V:
County of Hawaii
Finance Department
25 Aupuni Street, Suite 2103 • Hilo, Hawaii 96720
(808) 961-8234 + Fax (808)961-8569
July 15, 201.5
TO: Bonnie Nims, Legislative Auditor
FROM:Deanna Sako, Director of Finance
RE: Response to County of Hawaii's Purchasing Card Program Performance Audit Report No. 2015-01
Thank you for the opportunity to provide our response to the audit recommendations.
Recommendation: Fair and Equitable Treatment — We recommend that County Management, including
the Department of Finance, comply with County Code Article 15, Section 2-83 and treat all employees
and departments in a fair and equitable manner and hold them consistently to the same laws, policies,
and procedures.
Response: The Department of Finance has started to require that the Mayor's office also follow the
policies and procedures currently in place. We will continue to enforce the rules fairly among all
departments.
Recommendation; Update Policies and Procedures — We recommend the Department of Finance
complete an annual comprehensive review and clarify the Purchasing Card Program and Procedures
Manual to ensure that it is consistent with state law and other applicable County guidance including but
not limited to:
• Remove the caveat "unless specifically authorized" on personal purchases and liquor.
• Clarify policy on specific types of allowable and unallowable purchases.
• Clarify policy on the timeliness of reimbursements.
• Provide clear guidance on documenting the legitimate department purpose in the transaction
description.
Response: While we do periodically review our policies and procedures, we will work on consolidating
our guidance to make it easier for the users and clarify where appropriate.
Recommendation: Strengthen Monitoring — We recommend the Department of Finance, in addition to
their current review procedures, complete a periodic review and/or perform additional monitoring of
pCard transactions to ensure expenditures are for a legitimate department purpose and have a clear
benefit to the County.
Response: While this review is performed periodically, we will continue our efforts in this area.
Hawaii County is an Equal Opportunity Employer and Provider
Purchasing Card Program :: Management's Comments 119
Recommendation: Provide Training — We recommend the Department of Finance provide on-going
training to each department, including pCard Coordinators, cardholders, and supervisors.
Response: We currently provide training, but will increase our focus in this area. As noted in the audit
report, most departments are very good at following the procedures,
Recommendation: Use of Available Technology -- We recommend Department of Finance consider
incorporating the First Hawaiian Bank CentreSuite pCard application into the FRESH Invoice database,
including uploading and downloading pCard data, to improve monitoring of pCard transactions.
Response: We have been in discussions with first Hawaiian Bank to provide a file to be imported into
our FRESH systern to help increase efficiency.
If you have any questions, please feel free to contact me
Purchasing Card Program :: Management's Comments 120
County of Hawaii
Department of Liquor Control
Hilo Lagoon Centre, 101 Aupuni Street, Unit 230, Hilo, Hawai'i 967204261
(808) 961-8218 • After Hours (808)932-2939 • Fax (808) 961-8684
E -Mail cohdlc@hawaiicounty.gov
June 25, 2015
Bonnie S. Nims, Legislative Auditor
County of Hawai'i
25 Aupuni Street
Hilo, Hawaii 96720
Dear Ms. Nims:
Gerald A. Takase
Director
Thank you for the opportunity to provide a written response to the Pcard audit
conducted by the Legislative Auditor's Office.
Let me provide responses by categories as that may be the most efficient way to deal
with them. In each of these cases, my Pcard is registered with the various vendors through
their corporate programs, express rental programs, or loyalty programs. When making
reservations, the payment defaults to the Pcard.
Hawaiian Air Corporate Program — The Hawaiian Air Corporate Program allows the
registered business the benefit of ticket discounts, no change fees, free standby, two free
bags, as well as mileage points for the office. These amenities are quite handy and saves this
office money, especially the discounts, change fees, and standbys.
The corporate program was set up with one Pcard as the primary credit card to
which all charges are automatically made.
In order to stay in good standing, the airlines requires a minimum amount of
business per year, which we struggle to make since we are a small office. Therefore, in
trying to keep our corporate account active and to try and boost the office mileage
totals, I try to book all of my Hawaiian flights through the corporate program.
Because of the recent events, I have removed my Pcard from the corporate
account and now all transactions will be charged to my personal charge card.
Hawaii County is an Equal Opportunity Provider and Employer
Purchasing Card Program :: Management's Comments 121
♦Y7�Yl.
William P. Kenci
:Mayor
Walter KA, Lau
Managing Director
Of M
County of Hawaii
Department of Liquor Control
Hilo Lagoon Centre, 101 Aupuni Street, Unit 230, Hilo, Hawai'i 967204261
(808) 961-8218 • After Hours (808)932-2939 • Fax (808) 961-8684
E -Mail cohdlc@hawaiicounty.gov
June 25, 2015
Bonnie S. Nims, Legislative Auditor
County of Hawai'i
25 Aupuni Street
Hilo, Hawaii 96720
Dear Ms. Nims:
Gerald A. Takase
Director
Thank you for the opportunity to provide a written response to the Pcard audit
conducted by the Legislative Auditor's Office.
Let me provide responses by categories as that may be the most efficient way to deal
with them. In each of these cases, my Pcard is registered with the various vendors through
their corporate programs, express rental programs, or loyalty programs. When making
reservations, the payment defaults to the Pcard.
Hawaiian Air Corporate Program — The Hawaiian Air Corporate Program allows the
registered business the benefit of ticket discounts, no change fees, free standby, two free
bags, as well as mileage points for the office. These amenities are quite handy and saves this
office money, especially the discounts, change fees, and standbys.
The corporate program was set up with one Pcard as the primary credit card to
which all charges are automatically made.
In order to stay in good standing, the airlines requires a minimum amount of
business per year, which we struggle to make since we are a small office. Therefore, in
trying to keep our corporate account active and to try and boost the office mileage
totals, I try to book all of my Hawaiian flights through the corporate program.
Because of the recent events, I have removed my Pcard from the corporate
account and now all transactions will be charged to my personal charge card.
Hawaii County is an Equal Opportunity Provider and Employer
Purchasing Card Program :: Management's Comments 121
Bonnie S. Nims, Legislative Auditor
Page -2-
January 25, 2015
Enterprise Rent-A-Car — The Pcard is listed under my express account, so charges are
automatically charged to that card. The partial reimbursements is not that uncommon for
rental cards or hotels when we have some business and some private travel mixed (staying
over the weekend). Thus reimbursements are made for the personal travel portions.
Dollar Rent-A-Car/National Rent-A-Car -- Again, the Pcard is the registered card with
both of these rental car agencies, and it becomes the default card to which charges are made.
Marriott Hotels -- Again, the Pcard is the registered card and it becomes the default
card to which charges are made.
In all cases, the personal charges are reimbursed within the billing period of the credit
card so no fees or interest are charged to the County.
I have tried to charge these accounts to my personal credit cards, rather than the Pcard,
to avoid these problems going forward. However, this has created the secondary problem of
creating more paper work for our accountant to reimburse my charges on my personal credit
cards for office charges.
I hope this explanation clarifies these matters. Should you have further questions,
please feel free to call.
GT:de
Sincerely,
4ELDTAKASE
4
Director
Purchasing Card Program :: Management's Comments 122
Appendix A: Audit Criteria
Hawai"i State Constitution, Article 7, Section 4 requires that public money be used for a
public purpose:
APPROPRIATIONS FOR PRIVATE PURPOSES PROHIBITED
Section 4. No tax shall be levied or appropriation of public money or property made, nor
shall the public credit be used, directly or indirectly, except for a public purpose.
[emphasis added] No grant shall be made in violation of Section 4 of Article I of this
constitution. No grant of public money or property shall be made except pursuant to
standards provided by law.
Hawai"i Revised Statutes (HRS) Section 103D-101 establishes the requirements of ethical
public procurement including acting as a "fiduciary and trustee of public moneys" as well as
acting only in the public interest:
(a) All public employees shall conduct and participate in public procurement in an ethical
manner. In conducting and participating in procurement, public employees shall:
(1) Act as a fiduciary and trustee of public moneys...
(3) Act only in the public interest;
(4) Abide by the statutes and administrative rules relating to public
procurement...
(7) Avoid the intent or appearances of unethical behavior...
Hawai"i Administrative Rules Section 3-131-1.02 describes the requirements of ethical
procurement:
Procurement code of ethics. (a) Public employees shall act in good faith to discharge
their duties to ensure the fair and equitable treatment of all persons who deal with
government procurement; to foster public confidence in the integrity of the procurement
process; and to ensure the appropriate application of purchasing ethics. Any person
employed by a governmental body who, when engaging in procurement, shall be bound
by this code of ethics, including but not limited to the following:
(1) Avoid the intent and appearance of unethical behavior or practices;
(2) Diligently follow the procurement laws, rules, and procedures...
(6) Ensure that all persons are afforded equal opportunity to compete in a fair
and open environment...
Purchasing Card Program ::Audit Criteria 123
The Hawai"i County Charter, Article XIV, Section 14-4 describes the code of ethics and
conduct of officers and employees:
Conduct of Employees.
Officers and employees of the county while discharging their duties and dealing with the
public shall adhere to the following precepts:
(a) All public property and equipment are to be treated as a public trust and are
not to be used in a proprietary manner or for personal purposes without
proper consent...
The Hawai"i County Code, as amended states in part:
Article 15. Code of Ethics, Section 2-79. Purpose.
The purpose of this article are to:
(1) Prescribe standards of conduct for the guidance of County officers and
employees;
(2) Prohibit certain conduct involving County officers and employees;
Article 15. Code of Ethics, Section 2-83. Fair treatment
(a) Officers and employees of the County, while discharging their duties and dealing with
the public, shall adhere to the following precepts:
(1) All property and equipment are to be treated as a public trust and are not to
be used in a proprietary manner or for personal purposes without proper
consent.
(b) No officer or employee shall use or attempt to use the officer's or employee's official
position to secure or grant unwarranted privileges, exemptions, advantages,
contracts, or treatment, for oneself or others; including but limited to the following:
(5) Using County property or personnel for other than a public activity or purpose.
Article 16. Travel and Other Expenses, Section 2-98. Adjustments and exceptions.
(b) The mayor or council chairman, for their respective branches of government, may
disallow any unauthorized, improper, or unreasonable expense. The mayor or
council chairman may also authorize expenses in excess of the established limits
or may authorize meals with business meetings, awards and recognition events,
and entertainment of important persons, or may approve exceptions with good
cause to any provision relating to travel and expenses.
(c) The mayor may delegate the authority granted under this section to any
department or agency head within the executive branch.
(d) Meals may also be provided to employees who do not otherwise qualify under this
section or under any negotiated employee contract while attending workshops,
conferences, or training sessions at the request or direction of the department
head and to the benefit of the County.
Purchasing Card Program ::Audit Criteria 124
County of Hawai"i Purchasing Card Program and Procedures (October 2013) states in part:
DEFINITIONS
Documentation: A merchant produced or other document that records the relevant
information for items purchased including quantities, description, individual costs, total
cost, merchant's name and address, (i.e., sales slips, invoices, merchant receipts,
telephone order records, packing slips, confirmation records, Transaction Summaries,
etc.). The original sales slips, invoices, and merchant receipts, must be attached to the
respective Transaction Summaries.
AUTHORIZED PCARD PURCHASES
pCard purchases may be made by a department if all of the following apply:
• The expenditure is budgeted, is for a legitimate department purpose, and is
appropriately authorized;
• The expenditure is within the pCard limits; and
• Made in accordance with the County's Small Purchase Guidelines contained in
the Purchasing Manual...
RESTRICTED PURCHASES AND BLOCKED MCCS
The following is a list of restricted purchases and Blocked Merchant Category Codes. At
the request of the Department to the Purchasing Card Administrator, additional
categories of merchants can be selected so that some or all of the Department's pCards
will not work at those establishments.
Restricted Purchases:
1. Any purchase over the established limit for the pCard.
2. Liquor, unless specifically authorized
3. Cash
4. Good and services for personal use, unless specifically authorized
5. Others as determined by the Purchasing Card Administrator
Examples of Blocked Merchant Category Codes:
1. Financial services
2. Fines
3. Dating and Escort Services
Exceptions may be granted by the Purchasing Card Administrator on a limited basis
upon a showing of sufficient justification.
Purchasing Card Program ::Audit Criteria 125
The Cardholder is responsible for:
5. Obtaining purchase Documentation (sales receipt, itemized packing slip, service
receipt, confirmation record, etc.) from the merchant for every pCard transaction
to support the purchase. If someone other than the Cardholder receives the
shipment or service, obtaining the supporting Documentation.
13. Not misusing the pCard. Failure to comply with the Purchasing Card Program
and Procedures and the Department's policies and procedures may result in the
revocation of pCard privileges. If the pCard is used for unlawful or improper
purposes, the employee may also be subject to disciplinary action, up to and
including termination, for that misconduct.
14. Not using the pCard, for personal use.
15. If the pCard is inadvertently used for personal purchase (i.e., a wrong card is
used at a restaurant and the mistake is not noticed until after departing the
restaurant), a full report must be submitted to the Director of Finance explaining
the mistake, along with proper reimbursement.
County of Hawai"i Purchasing Manual (v.09.02.14) states in part:
5.1.5 Small purchasing procedures require the lowest quote that meets the quote's
requirements be selected, unless sufficient justification exists to accept the next
lowest quote, and so forth as necessary. Such justification as delivery time,
warranty, quality of product, etc. may be considered in the selection, which
SHALL be documented in the file as being in the best interest of the County of
Hawaii.
Exceptions:
Air Travel: Departments or agencies are required to obtain, with or without
the assistance of a travel agent, three (3) written quotes for the purchase of
airfare greater than $1,000.00. The three (3) written quotes must be obtained
within a three (3) day period. If an employee takes personal travel before,
after or during the official County business trip, the employee must obtain a
fourth quote (personal travel) and pay the difference between the lowest
official County business trip cost and the personal travel costs. The fourth
quote must also be obtained within the three (3) day period when the other
quotes were obtained. Copies of the written quotes must be scanned and
attached to the Eden invoice for payment.
As purchases $2,500.00 or greater requires HCE compliance, the Purchasing
Division will maintain a list of compliant travel agents for use.
5.1.6 If the purchase of a good or service is unique, that being not typically within the
scope of work / services provided by the department or agency, a Request for
Adjustments and Exceptions (RAE) is required to be approved and attached to
the Eden requisition or invoice. An example would include food or refreshments
for employees / volunteers. RAE forms can be obtained from the Finance
Department intranet page, and are to be submitted to the Finance Department
Purchasing Card Program ::Audit Criteria 126
Administration for approval. Approved RAE's greater in amount than $1,000.00
shall require written quotes or bids in accordance with established purchasing
policies. RAE's approval numbers, not a copy of the form, are to be included on
the Eden requisition or invoice for processing.
REFERENCE: HRS103D-305, HAR 3-122 Subchapter 8
"Mayor's Policy" on the Purchase of Alcohol (Memorandum No. 99-09 (July 19, 1999))
states in part:
This is a reminder that the County of Hawaii does not purchase alcohol for consumption
by employees or for functions involving the County. This includes alcohol purchases to
accompany meals, and alcohol to be dispensed from "hospitality rooms" at conferences.
Besides being an inappropriate use of public funds, there are liability issues involved.
The sole exception is when such purchase is necessary for the entertainment of
dignitaries by the Mayor, the Chairman of the County Council, or their authorized
representative. Any such exception shall have the Mayor's written approval or the
approval of the Chairman of the County Council, whichever is appropriate.
Procedures Manual: Request for Adjustments and Exceptions (Memorandum No. 04-9
(May 25, 2004)) states in part:
Purpose
The purpose of the Request for Adjustments and Exceptions form (F-109) is to
establish a uniform method of requesting adjustments and exceptions to items described
in Section 2-98 of the Hawaii County Code.
Use
The Request for Adjustments and Exceptions form is used whenever a county
department, agency, or office anticipates incurring or has incurred expenditures requiring
approval as described in Section 2-98. Ideally, it should be completed and authorized
prior to incurring the actual expenditure(s). This form is available electronically and may
be obtained from the Director of Finance.
Purchasing Card Program ::Audit Criteria 127