Ka Wai Ola - Office of Hawaiian Affairs, Volume 13, Number 11, 1 November 1996 — Questions about audit recommendations [ARTICLE+ILLUSTRATION]

Questions about audit recommendations

1995 Deloitte Touche Financial Audit Report Evaluation • RECEIVED TWO YEARS LATE •TRUSTEES WERE GIVEN NO OPPORTUNITY FOR INPUT BY 8 ADMINISTRATION • BOARD HAS STILL NOT RECEIVED 1994-95 ANNUAL REPORT. COMPLAINT:MAJORITY TRUSTEES NEVER INSIST THAT AUDITOR'S RECOMMENDATIONS BE IMPLEMENTED OR FOLLOWUP.

DELOITTE AND TOUCHE FINANCIAL AUDIT CORRECTIVE RECOMMENDATIONS GO UNHEEDED.

FĪNDINGS AND RECOMMENDATIONS OF 1993 STATE MANAGEMENT AUDIT ALSO NOT IMPLEMENTED. 1 . OHA does not have adequate management controls a. lacks plans, policies and procedures 2. Improvements in financial management needed 3. Funds from Legislature permitted to lapse... in 1995, $96,000 4. Controls needed for Airline Coup>ons. 5. Procurement procedures not documented as cited in 93- 94-1995 Audits 6. Purchase order controls lacking as is Petty Cash, cited by DAGS . 1. CRITICAL OMISSIONS IN CONTRACTING AUDITOR A. State's annual report of changes in OHA'S cash balances NOT included to reconcile Trust Receipts B. State's listing of Expenditures for 93-94 Audit in whieh OHA failed to detect $295 million in expenditures, 'due to a said inadvertent entry of $124 million whieh was called to the attention of administration in 1996. C. State's Quarterly reports of OHA's Money not in State Accounts. More than 200 million not reported. D. No Annual report of Custodian of Investments from First Hawaiian Bank, listing fees, accoimt balances, commissions, cash, withdrawals, 260 million held. E. DESPITE THE FACT THAT Investments comprise 75% OF OHA'S ASSETS, audit does not include a: Portfolio schedule or audit Withdrawals or addittons, e.g. one million for repurchase agreement without explanation. No reporting of fees/ commissions paid to managers Need an endowment plan within the Investment Account. ' THE AUDIT FAILS TO CITE NEEDED: 1. MANAGEMENT OF BUDGET 2. CASH PLANNING AND AUTHORITY CHECKS FOR EXPENDITURES 3. PLANNING, BUDGETING AND VARIANCE ANALYSES 4. LACK OF INTERNAL CONTROLS AND AUDITS 5. EXPENDITURE CONTROLS 6. CONSOLIDATED REPORTING OF: A. STATEMENT OF INCOME AND EXPENDITURE BY FUNDS B. PRINCIPAL SOURCES OF REVENUE C. FUNCTION OR PURPOSE FOR WHICH EXPENDITURES WERE MADE 7. EXHIBITS OF ALL MAJOR FUNDS AND BANK ACCOUNTS : A. BALANCE AT BEGINNING OF YEAR B. RECEIPTS YEAR C. DISBURSEMENTS YEAR D. BALANCE AT END OF YEAR AFTER DEDUCTING OUTSTANDING WARRANTS AND VOUCHERS. TRUSTEE /BENEFICIARY RESPONSIBILlTY ACCOUNTABILITY INDIVIDUAL TRUSTEES & BENEFICIARIES ARE RESPONSIBLE WHEN EACH CAN PREVENT TRUSTEES FROM COMMI1TING A BREACH OF TRUST & FOR RE-DRESSING ANY BREACH COMMITTED. The purposeful failure to submit financial accounting to trustees for five years is a definite breach of trust. At least we as ordinary people have access to our bank accounts every day. The audit of '95 is incomplete and unacceptable and must be rejected.

I | Auditor Recommendations 1994-95 Rec'd 1996 1. JustifybenefittobeneficiariesofTrust expenditures 2. Same : NO plan or priorities 3. Monitor Investment Portfolio ! ! li/ 4. Procurement Process, improve documentation 5. Reconciliate all cash with State Records 6. Identify fixed assets purchases with trust monies

Audit Recommendations 1993-94 Received 12-'94 1 . Same, never implemented 2. Develop priorities for expenditures no cash management forecasts of inflows and outflows no analysis of variance rep>orts between budget projec tions & actual results no projections of future cash needs 3. Same. fees to investment managers not assessed. NO REPORT OF TRADER'S COMMISSIONS. • whether lose or gain, earnings based on same schedule 4. Same problem. Procurement contrary to law, Attorney serves before contracts were finalized and signed. •Documentation, selection & screening ignored. 5. Same problem cited, no reconciliations 6. Same cited 7. Budget not followed, and variance reports not analyzed. 8. Native Hawaiian Loan Fund: many discrepancies not corrected 9. Laek of Personnel Policy Manual, inconsistent p>ersonnel management. •No monitoring of workers Comp. Cases left open and OHA continues to pay unnecessarily.

! Trustee, At-Large