HomeMy WebLinkAbout2015-COH - Single Audit of Federal Financial Assistance ProgramsCOUNTY OF HAWAII
STATE OF HAWAII
SINGLE AUDIT OF FEDERAL FINANCIAL ASSISTANCE PROGRAMS
Fiscal Year Ended June 30, 2015
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ACCOUNTANTS I CONSULTANTS
AMERICAN SAVINGS BANK TOWER I 1001 BISHOP STREET, SUITE 17001 HONOLULU, HAWAII 96813-3696
T (808) 524-2255 F (808) 523-2090 1 nkcpa.com
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N&K CPAs, Inc.
ACCOUNTANTS 1 CONSULTANTS
March 28, 2016
To the Chair and Members of the County Council
County of Hawaii
AMERICAN SAVINGS BANK TOWER
1001 BISHOP STREET, SUITE 1700
HONOLULU, HAWAII 96813-3696
T (808) 524-2255 F (808) 523-2090
We have completed our financial audit of the basic financial statements of the County of
Hawaii, State of Hawaii (the County), as of and for the fiscal year ended June 30, 2015.
Our report containing our opinions on those basic financial statements is included in the
County's Comprehensive Annual Financial Report. We submit herein our reports on the
County's internal control over financial reporting and compliance, the County's compliance
with requirements that could have a direct and material effect on each of its major federal
programs, and our report on the schedule of expenditures of federal awards.
OBJECTIVES OF THE AUDIT
The primary purpose of our audit was to form opinions on the fairness of the presentation
of the County's basic financial statements as of and for the fiscal year ended June 30,
2015, and to comply with the requirements of the Office of Management and Budget
(OMB) Circular A-133, Audits of States, Local Governments, and Non -Profit Organizations,
which establishes audit requirements for state and local governments that receive federal
financial assistance. More specifically, the objectives of the audit were as follows:
1. To provide opinions on the fairness of the presentation of the County's
financial statements.
2. To determine whether expenditures and other disbursements have been
made and all revenues and other receipts to which the County is entitled
have been collected and accounted for in accordance with the laws, rules and
regulations, administrative directives, policies and procedures of the County,
the State of Hawaii and the federal government (where applicable).
3. To determine whether the County has established sufficient internal controls
to properly manage federal financial assistance programs and to comply with
the applicable laws and regulations.
4. To determine whether the County has complied with the laws and regulations
that may have a material effect on the financial statements and on its major
federal financial assistance programs.
2
N&K CPAs, Inc.
ACCOUNTANTS CONSULTANTS
SCOPE OF THE AUDIT
Our audit was performed in accordance with auditing standards generally accepted in the
United States of America as prescribed by the American Institute of Certified Public
Accountants; Government Auditing Standards, issued by the Comptroller General of the
United States; and the provisions of OMB Circular A-133. The scope of our audit included
an examination of the transactions and accounting records of the County for the fiscal year
ended June 30, 2015.
ORGANIZATION OF THE REPORT
This report is presented in five parts as follows:
• Part I - Our report on internal control over financial reporting and on
compliance and other matters.
Part II - Our report on compliance with requirements that could have a
direct and material effect on each major program and on internal
control over compliance, and report on the schedule of
expenditures of federal awards.
• Part III - The schedule of findings and questioned costs.
• Part IV - The summary schedule of prior audit findings.
• Part V - The corrective action plan.
We wish to express our sincere appreciation for the excellent cooperation and assistance
extended by the staff of the County.
Sincerely,
N&K CPAs, INC.
Chad Funasaki
Principal
3
COUNTY OF HAWAII, STATE OF HAWAII
TABLE OF CONTENTS
PART I REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING AND ON COMPLIANCE AND OTHER MATTERS
Report on Internal Control over Financial Reporting and on
Compliance and Other Matters Based on an Audit of Financial
Statements Performed in Accordance with Government Auditing
Standards
PART II REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL
PROGRAM; REPORT ON INTERNAL CONTROL OVER
COMPLIANCE; AND REPORT ON THE SCHEDULE OF
EXPENDITURES OF FEDERAL AWARDS REQUIRED BY OMB
CIRCULAR A-133
Report on Compliance on Each Major Federal Program; Report on
Internal Control over Compliance; and Report on the Schedule of
Expenditures of Federal Awards Required by OMB Circular A-133
Schedule of Expenditures of Federal Awards
Notes to Schedule of Expenditures of Federal Awards
Page
6-7
9-11
12-23
24
PART III SCHEDULE OF FINDINGS AND QUESTIONED COSTS 26 - 28
PART IV SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS
Status Report 30 - 31
PART V CORRECTIVE ACTION PLAN
Response of County of Hawaii 33
4
PART I
REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING AND ON COMPLIANCE AND OTHER MATTERS
5
N&K CPAs, Inc.
ACCOUNTANTS 1 CONSULTANTS
AMERICAN SAVINGS BANK TOWER
1001 BISHOP STREET, SUITE 1700
HONOLULU, HAWAII 96813-3696
T (808) 524-2255 F (808) 523-2090
REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS
BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN
ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
INDEPENDENT AUDITOR'S REPORT
To the Chair and Members of the County Council
County of Hawaii
We have audited, in accordance with the auditing standards generally accepted in the
United States of America and the standards applicable to financial audits contained in
Government Auditing Standards issued by the Comptroller General of the United
States, 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 Hawaii, State of Hawaii (the County), as of
and for the fiscal year ended June 30, 2015, and the related notes to the financial
statements, which collectively comprise the County's basic financial statements and
have issued our report thereon dated December 28, 2015.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the
County's internal control over financial reporting (internal control) to determine the audit
procedures that are appropriate in the circumstances for the purpose of expressing our
opinions on the financial statements, but not for the purpose of expressing an opinion
on the effectiveness of the County's internal control. Accordingly, we do not express an
opinion on the effectiveness of the County's internal control.
A deficiency in internal control exists when the design or operation of a control does not
allow management or employees, in the normal course of performing their assigned
functions, to prevent, or detect and correct, misstatements on a timely basis. A material
weakness is a deficiency, or a combination of deficiencies, in internal control such that
there is a reasonable possibility that a material misstatement of the entity's financial
statements will not be prevented, or detected and corrected on a timely basis. A
significant deficiency is a deficiency, or a combination of deficiencies, in internal control
that is less severe than a material weakness, yet important enough to merit attention by
those charged with governance.
6
N&K CPAs, Inc.
ACCOUNTANTS CONSULTANTS
Our consideration of internal control was for the limited purpose described in the first
paragraph of this section and was not designed to identify all deficiencies in internal
control that might be material weaknesses or significant deficiencies and therefore,
material weaknesses or significant deficiencies may exist that were not identified. Given
these limitations, during our audit we did not identify any deficiencies in internal control
that we consider to be material weaknesses. We did identify certain deficiencies in
internal control, described in the accompanying schedule of findings and questioned
costs as items 2015-001 and 2015-002 that we consider to be significant deficiencies.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the County's financial
statements are free from material misstatement, we performed tests of its compliance
with certain provisions of laws, regulations, contracts, and grant agreements,
noncompliance with which could have a direct and material effect on the determination
of financial statement amounts. However, providing an opinion on compliance with
those provisions was not an objective of our audit, and accordingly, we do not express
such an opinion. The results of our tests disclosed no instances of noncompliance or
other matters that are required to be reported under Government Auditing Standards.
County's Response to Findings
The County's response to the findings identified in our audit is described in Part V,
Corrective Action Plan, of this report. The County's response was not subjected to the
auditing procedures applied in the audit of the financial statements and, accordingly, we
express no opinion on it.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal
control and compliance and the results of that testing, and not to provide an opinion on
the effectiveness of the entity's internal control or on compliance. This report is an
integral part of an audit performed in accordance with Government Auditing Standards
in considering the entity's internal control and compliance. Accordingly, this
communication is not suitable for any other purpose.
Honolulu, Hawaii
December 28, 2015
2 ,c.
7
PART II
REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL
PROGRAM; REPORT ON INTERNAL CONTROL OVER COMPLIANCE;
AND REPORT ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
REQUIRED BY OMB CIRCULAR A-133
8
evA
N&K CPAs, Inc.
ACCOUNTANTS 1 CONSULTANTS
AMERICAN SAVINGS BANK TOWER
1001 BISHOP STREET, SUITE 1700
HONOLULU, HAWAII 96813-3696
T (808) 524-2255 F (808) 523-2090
REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM;
REPORT ON INTERNAL CONTROL OVER COMPLIANCE; AND
REPORT ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
REQUIRED BY OMB CIRCULAR A-133
INDEPENDENT AUDITOR'S REPORT
To the Chair and Members of the County Council
County of Hawaii
Report on Compliance for Each Major Federal Program
We have audited the County of Hawaii, State of Hawai°i's (the County) compliance with
the types of compliance requirements described in the OMB Compliance Supplement
that could have a direct and material effect on each of the County's major federal
programs for the fiscal year ended June 30, 2015. The County's major federal programs
are identified in the summary of auditor's results section of the accompanying schedule
of findings and questioned costs.
Management's Responsibility
The County's management is responsible for compliance with the requirements of laws,
regulations, contracts, and grants applicable to its federal programs.
Auditor's Responsibility
Our responsibility is to express an opinion on compliance for each of the County's major
federal programs based on our audit of the types of compliance requirements referred
to above. We conducted our audit of compliance in accordance with auditing standards
generally accepted in the United States of America; the standards applicable to financial
audits contained in Government Auditing Standards, issued by the Comptroller General
of the United States; and OMB Circular A-133, Audits of States, Local Governments,
and Non -Profit Organizations. Those standards and OMB Circular A-133 require that we
plan and perform the audit to obtain reasonable assurance about whether
noncompliance with the types of compliance requirements referred to above that could
have a direct and material effect on a major federal program occurred. An audit includes
examining, on a test basis, evidence about the County's compliance with those
requirements and performing such other procedures as we considered necessary in the
circumstances.
9
N&K CPAs, Inc.
ACCOUNTANTS CONSULTANTS
We believe that our audit provides a reasonable basis for our opinion on compliance for
each major federal program. However, our audit does not provide a legal determination
of the County's compliance.
Opinion on Each Major Federal Program
In our opinion, the County complied, in all material respects, with the compliance
requirements referred to above that could have a direct and material effect on each of
its major federal programs for the fiscal year ended June 30, 2015.
Report on Internal Control Over Compliance
Management of the County is responsible for establishing and maintaining effective
internal control over compliance with the types of compliance requirements referred to
above. In planning and performing our audit of compliance, we considered the County's
internal control over compliance with the types of requirements that could have a direct
and material effect on each major federal program to determine the auditing procedures
that are appropriate in the circumstances for the purpose of expressing an opinion on
compliance for each major federal program and to test and report on internal control
over compliance in accordance with OMB Circular A-133, but not for the purpose of
expressing an opinion on the effectiveness of internal control over compliance.
Accordingly, we do not express an opinion on the effectiveness of the County's internal
control over compliance.
A deficiency in internal control over compliance exists when the design or operation of a
control over compliance does not allow management or employees, in the normal
course of performing their assigned functions, to prevent, or detect and correct,
noncompliance with a type of compliance requirement of a federal program on a timely
basis. A material weakness in internal control over compliance is a deficiency, or a
combination of deficiencies, in internal control over compliance, such that there is a
reasonable possibility that material noncompliance with a type of compliance
requirement of a federal program will not be prevented, or detected and corrected, on a
timely basis. A significant deficiency in internal control over compliance is a deficiency,
or a combination of deficiencies, in internal control over compliance with a type of
compliance requirement of a federal program that is less severe than a material
weakness in internal control over compliance, yet important enough to merit attention by
those charged with governance.
Our consideration of internal control over compliance was for the limited purpose
described in the first paragraph of this section and was not designed to identify all
deficiencies in internal control over compliance that might be material weaknesses or
significant deficiencies. We did not identify any deficiencies in internal control over
compliance that we consider to be material weaknesses. However, material
weaknesses may exist that have not been identified.
10
N&K CPAs, Inc.
ACCOUNTANTS CONSULTANTS
The purpose of this report on internal control over compliance is solely to describe the
scope of our testing of internal control over compliance and the results of that testing based
on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any
other purpose.
Report on Schedule of Expenditures of Federal Awards Required by OMB Circular
A-133
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 as of and for the fiscal year ended
June 30, 2015, and the related notes to the financial statements, which collectively
comprise the County's basic financial statements. We issued our report thereon dated
December 28, 2015, which contained unmodified opinions on those financial
statements. Our audit was conducted for the purpose of forming opinions on the
financial statements that collectively comprise the County's basic financial statements.
We have not performed any procedures with respect to the audited basic financial
statements subsequent to December 28, 2015. The accompanying schedule of
expenditures of federal awards is presented for purposes of additional analysis as
required by OMB Circular A-133 and is not a required part of the basic financial
statements. Such information is the responsibility of management and was derived from
and relates directly to the underlying accounting and other records used to prepare the
basic financial statements. The information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and certain additional
procedures, including comparing and reconciling such information directly to the
underlying accounting and other records used to prepare the basic financial statements
or to the basic financial statements themselves, and other additional procedures in
accordance with auditing standards generally accepted in the United States of America.
In our opinion, the schedule of expenditures of federal awards is fairly stated in all
material respects in relation to the basic financial statements as a whole.
/l/, le CSA
Honolulu, Hawaii
March 28, 2016
2'c.
11
County of Hawaii, State of Hawai`i
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Fiscal Year Ended June 30, 2015
Federal Grantor/Pass-Through Grantor/Program Title
CFDA Federal Program Federal Payments to
Number Grant Number Award Amount Expenditures Sub Recipients
U.S. DEPARTMENT OF AGRICULTURE
Food and Nutrition Service
Passed through the State Department of Education:
Summer Food Service Program for Children 10.559 N/A 61,255 $ 61,255 $
Office of Forest Service
Cooperative Forestry Assistance
Fire Fighter Safety, Public Service Supplies
10.664
14 -DG -11052012-126
100,000 44,163
Passed through the State Department of Land and Natural Resources:
Volunteer Fire Assistance 13 -DG -11052012-102 50,000 50,000
14 -DG -11052012-122 18,750 18,750
Subtotal CFDA 10.664 112,913
Rural Utilities Service
Water and Waste Disposal Systems for Rural Communities 10.760 61-001-869653225
1,522,369 1,057, 084
Total U.S. Department of Agriculture 1,231,252
U.S. DEPARTMENT OF COMMERCE
National Oceanic and Atmospheric Administration
Passed through the State Department of Business, Economic
Development and Tourism:
Coastal Zone Management Administration Awards 11.419 NA13N0S4190055 303,019 14,735
Coastal Zone Management Program NA14N0S4190079 329,704 254,335
Subtotal CFDA 11.419 $ 269,070 $
County of Hawaii, State of Hawai`i
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (Continued)
Fiscal Year Ended June 30, 2015
Federal Grantor/Pass-Through Grantor/Program Title
U.S. DEPARTMENT OF COMMERCE (Continued)
National Telecommunications & Information Administration
Passed through the State Department of Commerce & Consumer Affairs:
State Broadband Data and Development Grant
CFDA Federal Program Federal Payments to
Number Grant Number Award Amount Expenditures Sub Recipients
11.558
15-50-M09057
15-50-M09057
40,000 $
188,500
40,000 $
188,390
Subtotal CFDA 11.558 228,390
Total U.S. Department of Commerce 497,460
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of Housing
Section 8 - Housing Assistance Payments Program
Kulaimano Elderly Housing
Community Planning and Development
Community Development Block Grants/State's Program and
Non -Entitlement Grants in Hawaii
Subtotal CFDA 14.228
14.195
HI 10 0002001
14.228 B -13 -DH -15-0002
Program Income
Passed through the Hawaii Housing Finance and Development
Corporation:
HOME Investment Partnerships Program 14.239 M12 -SG -150100
256,074 113,642
2,627,655
3,319,441
1,989,580 761,557
150,000 32,805
2,139,580 * 794,362
583,371 256,026
Program Income 44,111
Subtotal CFDA 14.239 $ 627,482 $ 256,026
County of Hawaii, State of Hawai`i
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (Continued)
Fiscal Year Ended June 30, 2015
Federal Grantor/Pass-Through Grantor/Program Title
CFDA Federal Program Federal Payments to
Number Grant Number Award Amount Expenditures Sub Recipients
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (Continued)
Public and Indian Housing
Section 8 - Housing Choice Vouchers 14.871 H1002V0 2012 14,511,613 $ 365,778 $
Subtotal CFDA 14.871
H1002V0 2014 13,266,188 6,919,939
H1002AF 2014 1,340,586 907,541
H1002V02015 13,061,385 6,554,631
H1002 FSF009 65,090 45,882
Program Income 1,343,344
16,137,115 *
Family Self -Sufficiency Program 14.896 HI002FSH180A014 65,652 24,314
Total U.S. Department of Housing and Urban Development
U.S. DEPARTMENT OF THE INTERIOR
Office of the Secretary
Payments in Lieu of Taxes 15.226 n/a 289,604
Fish and Wildlife Service
National Wildlife Refuge Fund 15.659 n/a 113,829
Total U.S. Department of the Interior $
19,042,133 1,050,388
289,604
113,829
403,433
$
County of Hawaii, State of Hawai`i
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (Continued)
Fiscal Year Ended June 30, 2015
Federal Grantor/Pass-Through Grantor/Program Title
CFDA Federal Program Federal Payments to
Number Grant Number Award Amount Expenditures Sub Recipients
U.S. DEPARTMENT OF JUSTICE
Office of Juvenile Justice and Delinquency Prevention
Passed through the State Department of Human Services:
Juvenile Accountability Block Grant 16.523 2011 -JB -FX -0059
Passed through the State Department of Human Services:
Juvenile Justice and Delinquency Prevention - Allocation to States
Subtotal CFDA 16.540
16.540 2009 -JF -FX -8003
2012 -JF -FX -0001
61,000 $
200,000
124,375
33,322 $ 33,322
96,343 94,343
85,243 83,293
181,586 177,636
Office for Victims of Crime
Passed through the State Department of the Attorney General:
Crime Victim Assistance 16.575 11 -VA -04 359,721 119,472 53,579
12 -VA -04 334,620 283,584 42,556
Subtotal CFDA 16.575 403,056 96,135
Bureau of Justice Assistance
JAG Program Cluster
Edward Byrne Memorial Justice Assistance Grant Program
Justice Assistance Grant
Passed through the State Department of Attorney General:
Hawaii Narcotics Task Force
Subtotal JAG Program Cluster
16.738
2012 -DJ -BX -1226 88,650 63,862
2013 -DJ -BX -0018 160,000 56,127
10 -DJ -13 75,000 16,720
13 -DJ -07 73,450 16,935
$ 153,644 $
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County of Hawaii, State of Hawaii
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARD
Fiscal Year Ended June 30, 2015
NOTE A - BASIS OF PRESENTATION
The accompanying schedule of expenditures of federal awards includes the federal grant
activities of the County and its discretely presented component unit, the Department of
Water Supply (DWS) and is presented on the cash basis of accounting. The information in
this schedule is presented in accordance with the requirements of OMB Circular A-133,
Audits of States, Local Governments, and Non -Profit Organizations. Therefore, some
amounts presented in this schedule may differ from amounts presented in, or used in the
preparation of, the basic financial statements.
NOTE B -OUTSTANDING LOAN BALANCES
The State Revolving Fund Loans are for the construction of necessary water treatment works
and for wastewater reclamation projects, as well as solid waste projects.
County - As of June 30, 2015, the outstanding principal amounted to $21,552,213 that bears
interest at 0.50 percent. The loans require semi-annual principal and interest payments and
loan fees through fiscal year 2033. The County has 8 projects funded with these loans.
DWS - As of June 30, 2015, the outstanding principal amounted to $12,591,409 that bears
interest up to 1.37 percent. The loans require semi-annual principal and interest payments and
loan fees through fiscal year 2033. The DWS has 12 projects funded with these loans.
24
PART III
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
25
County of Hawaii, State of Hawaii
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
Fiscal year Ended June 30, 2015
SECTION I - SUMMARY OF AUDITOR'S RESULTS
Financial Statements
Type of auditor's report issued:
Unmodified
Internal control over financial reporting:
Material weakness(es) identified?
_ yes
✓
no
Significant deficiency(ies) identified?
✓ yes
_
none reported
Noncompliance material to financial statements
noted?
_ yes
✓
no
Federal Awards
Internal control over major programs:
Material weakness(es) identified?
_ yes
✓
no
Significant deficiency(ies) identified?
_ yes
✓
none reported
Type of auditor's report issued on compliance
for major programs:
Unmodified
Any audit findings disclosed that are required to
be reported in accordance with Section
510(a) of OMB Circular A-133?
_ yes
✓
no
Identification of major programs:
CFDA Number
Name of Federal
Proaram or Cluster
14.228
14.871
20.205
97.036
Dollar threshold used to distinguish between Type A
and Type B programs:
Auditee qualified as a low-risk auditee?
W
Community Development Block
Grants
Section 8 Housing Choice Vouchers
Highway Planning and Construction
(Federal -Aid Highway Program)
Disaster Grants — Public Assistance
(Presidentially Declared Disasters)
$1,483,268
✓ yes _ no
County of Hawaii, State of Hawaii
SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued)
Fiscal year Ended June 30, 2015
SECTION II - FINANCIAL STATEMENT FINDINGS
Ref.
No. Internal Control Findings
2015-001 Information Security Policy
Condition: The responsibility of managing the County's Information Technology (IT)
activities is shared by five separate departments. The Department of
Information Technology (IT) is primarily responsible for managing the
County's central computer system while the other four departments have
personnel responsible for managing and supporting the computer system of
each respective department. We noted that the County's IT activities, as a
whole, does not have standardized policies and procedures over information
security that are followed by all departments and agencies of the County.
Criteria: A standardized information security policy should exist that defines
information security objectives that are approved by management. This
policy should be supported by standards and procedures that are followed
by the entity as a whole.
Cause: The County does not have formally documented policies and procedures
over information security that are followed by all departments and agencies
of the County.
Effect: The lack of standardized policies and procedures could increase the risk of
unauthorized access to the County's computer systems, which could
potentially result in unauthorized use, modification, damage or loss of critical
County data.
Recommendation
Management should develop standardized information security policies and procedures
that are followed by all departments and agencies of the County.
27
County of Hawaii, State of Hawaii
SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued)
Fiscal year Ended June 30, 2015
SECTION II - FINANCIAL STATEMENT FINDINGS (Continued)
Ref.
No. Internal Control Findings
2015-002 Physical Security
Condition: At June 30, 2015, the servers for the Eden and IAS systems were located in
a room at the Civil Defense Center (Center). During our visit to the Center,
we noted the following conditions:
Security over the servers is compromised as the door to the room
housing these servers is left open due to cooling concerns. Anyone with
access to the Civil Defense Center could potentially access the server
room.
• A fire suppression system was not installed.
Criteria: Physical access to servers and other sensitive areas is appropriately
restricted to authorized personnel. Devices are used to secure sensitive
equipment and storage media from the risk of damage from fire.
Cause: The County has not formally documented policies and procedures over the
physical security of IT systems at the Center nor effectively designed these
controls.
Effect: Unauthorized access to the server room could result in unauthorized use,
modification, damage or loss of data. The absence of a fire suppression
system could increase the likelihood of the loss or destruction of data due to
fire.
Recommendation
We recommend that the County develop formal policies over the physical security of IT
systems at the Center and to implement them. The server room should be locked and
access to keys or codes should be limited to authorized personnel. A fire suppression
system should be installed to prevent or limit the loss of data from fire.
SECTION III - FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
No matters reported.
W.*
PART IV
SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS
29
County of Hawaii, State of Hawaii
STATUS REPORT
Fiscal year Ended June 30, 2015
This section contains the current status of prior audit recommendations. The recommendations
are referenced to the pages of the previous audit report for the fiscal year ended
June 30, 2014, dated January 12, 2015.
SECTION II - FINANCIAL STATEMENT FINDINGS
Reference
Number Recommendation Current Status
2014-001 Logical Access & Access Security (pages 25 - 26)
Strengthen password controls for the IAS and ReCo Accomplished. As of
systems that include a combination of minimum June 30, 2015, password
length, complexity, expiration, history, and lockout requirements for both the
policy and duration. As a compensating control to ReCo system and IAS have
mitigate the lack of functionality in the IAS and ReCo been strengthened.
systems, strengthen the domain password
parameters and security settings to increase the
minimum password age and lockout duration
requirements.
Develop an information security policy, have the policy Not accomplished. Refer to
approved by the appropriate level of management and current year finding 2015 -
communicate the policy to employees. 001 for management's
response.
2014-002 Physical Security (page 27)
The County should develop formal policies over the Not accomplished. Refer to
physical security of IT systems at the Civil Defense current year finding 2015 -
Center and to implement them. The server room 002 for management's
should be locked and access to keys or codes should response.
be limited to authorized personnel. A fire suppression
system should be installed to prevent or limit the loss
of data from fire.
2014-003 Information Technology (IT) Governance (page 28)
The County should formally establish an IT Accomplished. The County
management steering committee that meets on a implemented quarterly IT
regular basis in order to evaluate IT risks and to management committee
ensure that identified risks are appropriately meetings to facilitate
addressed on a timely basis. information sharing and
collaboration between the
various departments
supporting the County's
information technology
function.
30
County of Hawaii, State of Hawaii
STATUS REPORT (Continued)
Fiscal year Ended June 30, 2015
SECTION III - FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
Ref.
No. Internal Control over Compliance Findings
2009-01 Activities Allowed and Unallowed - Calculation of Federal
Expenditures
Federal agency: U.S. Department of Homeland Security
CFDA No.: 97.036
Program: Disaster Grants - Public Assistance (Presidentially
Declared Disasters): Kiholo Earthquake
Award Number and Award Year: FEMA -1664 -DR -HI
10/15/06-10/15/10
Per the prior auditor's testing of the activities allowed and unallowed compliance
requirement, it was noted that the County overstated the federal share of eligible
costs related to the Ikuo Hisaoka Gymnasium by $27,965. The amount the County
reported was based on the actual expenditures, however, as the Ikuo Hisaoka
Gymnasium was insured at the time of the loss, the expenditures should have
been based on the insurance deductible in accordance with Title 44 Code of
Federal Regulations (44 CFR 206.250(c)).
Status:
Unresolved. We understand that the County has sought the assistance of the
Hawaii State Civil Defense in determining the correct portion eligible for federal
aid and is still awaiting a response.
31
Questioned
Costs
$ 27,965
2A:4STA
CORRECTIVE ACTION PLAN
32
County of Hawaii, State of Hawaii
CORRECTIVE ACTION PLAN
Fiscal year Ended June 30, 2015
Financial Statement Findings:
2015-001 Information Security Policy
Recommendation:
Management should develop standardized information security policies and procedures that are
followed by all departments and agencies of the County.
County's Comment:
At the last quarterly Information Technology (IT) meeting, the reviewing of all agency
Information Security policies and developing standardized baseline security policies for all IT
groups was discussed by the group, which consists of the County's IT Department and other
County IT sections. Agencies are to provide their security policies for review and a
standardized Information Security Policy will be developed and followed by all County
departments and agencies.
2015-002 Physical Security
Recommendation:
We recommend that the County develop formal policies over the physical security of IT systems
at the Center and to implement them. The server room should be locked and access to keys or
codes should be limited to authorized personnel. A fire suppression system should be installed
to prevent or limit the loss of data from fire.
County's Comment:
As explained in prior years, although the specific room that houses the servers is left open, the
general Civil Defense facility is restricted to authorized personnel and access to the facility itself
is limited. Visitors are required to sign in before being allowed entry to Civil Defense and are
typically escorted.
The current air conditioning (AC) capabilities of the Server Room are not adequate to allow for
the door to be closed without risking damage to the systems. The system specification
requirements for a new AC system are being compiled to replace the existing system, which
should allow the Server Room door to be closed and locked. We are considering several
possibilities which would enable the County to secure the servers while still allowing airflow for
cooling is also being considered.
Although a fire suppression system has not been selected as of yet, all data is backed up
nightly from these servers to a different physical location to reduce the risk of data loss due to
fire and other potential hazards.
33