HomeMy WebLinkAbout2018 June 26 - Follow Up Report: County of Hawai'i's Purchasing Card (pCard) ProgramCounty of H w i i 1 3 s
Purchasing Card
Program
June 26, 2018
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Valerie T. Poindexter Bonnie S. Nims, CGAP
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OFFICE OF THE LEGISLATIVE AUDITOR
25 Aupuni Street Hilo, Hawai `i 96720 * (808) 961-8386 * Fax (808) 961-8905
website: http://hawaiicounty.�ov e-mail: publiclao(c hawaiicounty.�ov
June 26, 2018
Honorable Valerie T. Poindexter, Council Chairwoman and
Members of the Hawaii County Council
Hawaii County Council
25 Aupuni Street
Hilo, Hawaii 96720
Re: Follow -Up Audit Report
Dear Chairwoman Poindexter and Council Members:
In keeping with generally accepted government auditing standards and the Hawaii
County Charter Section 3-18(d)(3), the Office of the Legislative Auditor has a
responsibility to monitor and follow-up on audit recommendations to ensure that audit
findings are being addressed through appropriate corrective action and to aid us in
planning future audits.
This report is to inform you that we have completed our follow-up effort for the audit of
the County of Hawai"i's Purchasing Card (pCard) Program (Report No. 2015-01) dated
July 17, 2015. Our review determined that County management, including the
Department of Finance and the Hawai"i County Council, has adequately implemented
all six of our audit recommendations. We commend County Management and the
Department of Finance for their continued efforts to improve pCard Program efficiency
and oversight.
For your reference, this report includes a highlights page that provides background and
summary information on the original audit and the completed follow-up effort. Following
the highlights page is a detailed implementation status update for each recommendation.
This concludes audit follow-up work related to this audit. We sincerely thank the
Department of Finance, Office of Management, Department of Liquor Control, and all
other departments reviewed for their assistance, cooperation, and prompt feedback
during the follow-up review process. If you have any questions or concerns about the
Hawai `i County is an Equal Opportunity Provider and Employer
status of recommendations discussed in this report please feel free to contact me at
961-8386.
This follow-up report and the 2015 pCard Performance Audit Report are available on
the Office of the Legislative Auditor's web page at
http://www.hawaiicounty.gov/leqislative-auditor/.
Respectfully,
Bonnie S. Nims, CGRP
Legislative Auditor
cc. Harry Kim, Mayor
Wil Okabe, Managing Director
Deanna Sako, Finance Director
Stewart Maeda, County Clerk
Report Highlights
Followmup
County of
Review:
HawaiTs
Purchasing Card Program
Status
The County of Hawai "i Department of
Finance and the Hawai "i County Council
has implemented all six recommendations
made in our July 2015 audit report.
Background
In 2001, the State of Hawai`i's State
Procurement Office 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.
Purpose
The purpose of the audit was to evaluate if
the program's internal controls were
adequate to reduce the risk of fraud and
misuse of purchase 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 practice.
J
June 26, 2018
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.
We identified six recommendations for management to
increase internal controls for County -issued
purchasing cards:
• 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 department
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.
Recommendations: Status of Implementation
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
The Hawai "i County Council amended and
passed Ordinance No. 15-95 (November
101 2015), to clarify, Section 2-98 (b)(1)
Adjustments and exceptions, "No exception
involving public funds shall be authorized
without a public purpose".
Implemented
We recommend that County Subsequent to the 2015 audit, the Implemented
Management, including the Department of Finance continued to
Department of Finance comply with enforce the rules fairly among all
County Code Article 15, Section 2-83 departments and adhered to the County
and treat all employees and Code of Ethics.
departments in a fair and equitable
manner and to hold them consistently
to the same laws, policies, and
procedures.
In addition, the Hawai"i County Council
amended the County Code of Ethics
Section 2-83 (b)(4) Fair treatment, with
Ordinance No. 15-103 (July 1, 2016), to
clarify, "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 not limited
to: Using County property, facilities,
equipment, time, or personnel for a private
business, campaign purposes, or for any
purpose other than for a public purpose".
Purchasing Card Follow-up Recommendations: Status of Implementation 11
Recommendation � Auditee Actionmimnow-Statu
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.
The Department of Finance Purchasing Implemented
Division reviewed and updated the
Purchasing Card Program and Procedures
Manual on:
• May 2016
• August 2016
• December 2016
In addition:
• Mayor Kim prohibited the purchase
of alcohol with Finance
Memorandum 16-08 (December 12,
2016).
• Council Chairwoman Poindexter
issued, Use of County Funds for the
Purchase of Alcoholic Beverages
Memorandum (December 19, 2016)1
"It will be the policy of the County
Council and the Office of the County
Clerk that there are no reasonable
exceptions that would allow for the
purchase of alcohol with County
funds".
The Department of Finance, Department
pCard Coordinators, Department Heads, and
the pCard Administrator increased
monitoring efforts to ensure compliance with
applicable laws, rules, and County policies
and procedures.
Some examples of monitoring efforts
included:
• attaching a memo for authorized
exception approved by the pCard
Administrator in accounting system
• referencing procurement
authorization or approval
• reviewing and approving request for
adjustments and exceptions (RAE)
by the Finance Director
• submitting Delegation of Department
pCard Coordinator Responsibilities
to Finance.
Implemented
Purchasing Card Follow-up Recommendations: Status of Implementation 12
Provide Training
We recommend the Department of The Department of Finance provided
Finance provide on-going training to internal control, procurement, and pCard
each department, including pCard training on August 30, 2016.
Coordinators, cardholders, and
supervisors. In addition, the Department of Finance
provides departments with one-on-one
and as needed training.
Use 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.
In 2015, management considered
incorporating various features of the
CentreSuite program.
However, due to cost constraints, they
elected not to incorporate these features.
Furthermore, the Department of Finance
asserted that since transactions are
continuously reviewed for compliance
with applicable laws and County policies
and procedures by the Department pCard
Coordinator and Department Head, the
additional costs did not merit the
additional benefit.
We believe that as long as the
Department of Finance continues to
actively monitor pCard transactions, the
risk will be minimized.
Implemented
Implemented
To corroborate that the County implemented our recommendations, we reviewed all pCard
transactions from August 2015 to December 2017. We selected 67 transactions totaling $24,086
for further review and found that these transactions followed County policy and state law.
Purchasing Card Follow-up Recommendations: Status of Implementation 13
Conclusion
On behalf of the citizens of the County of Hawai "i, we sincerely thank leadership and staff for their
corporation during our follow-up review and for their commitment to accountability and transparency
in local government. We thank the Department of Finance and the Hawai "i County Council for
implementing all six purchasing card recommendations.
We may also consider ongoing monitoring of purchase card transactions as part of our fiscal year
2018-2019 audit plan.
Purchasing Card Follow-up Conclusion 14