Accounting error Two sewage valve repair kits valued at about $290 each were counted mistakenly during inventory as 19,998 kits.
found in city
financial audit
A sewer fund was off
City implements anti-scam policy
by some $5.8 millionBy Gordon Y.K. Pang
gpang@starbulletin.comThe data entry error caused the sewer fund's inventory balance to increase by some $5.8 million over three years.
The discrepancy, which city officials only recently discovered, caused the city to miss getting an Excellence in Government Finance award from the national Government Finance Officers Association for the first time in over a decade, the City Council Budget Committee was told yesterday.
Budget Director Caroll Takahashi said bond raters have assured her that the lack of the award won't affect the city's bond rating, which helps determine the interest rate at which the city obtains revenue bonds.
The discrepancy was first discovered by the independent auditor PricewaterhouseCoopers during the annual financial audit for the city's federal financial assistance programs. The auditor, calling the discrepancy a "material weakness" in the city's financial procedures, gave the city a "qualified opinion."
The city had to go through some 1,800 sheets of entries to find the problem, said Tim Steinberger, city director of environmental services. A physical inventory is also being conducted.
Steinberger said an antiquated inventory system was used to manage the inventory but that a new accounting system is being installed. "We should not run into this problem again," he said.
Dennis Tsuhako, a partner with PricewaterhouseCoopers, said it appears the city is taking the proper steps to deal with the discrepancy.
The auditing firm also took the city to task for not requesting in a timely manner some $12.5 million reimbursement from a state revolving fund for a highway project, a delay which caused the city to lose an undetermined amount of earned interest income.
Administration officials acknowledged that money from bond funds were used to pay for the project because of the delay in drawing state funds but say the interest money lost was minimal.
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City officials say they now have set up relocation policies and procedures to ensure there is no repeat of a scam such as the theft of $5.8 million from the Ewa Villages relocation fund. City revamps policy
to avoid repeat
of Ewa scamBy Gordon Y.K. Pang
gpang@starbulletin.com"We're not going to let that happen ever again," Managing Director Ben Lee told the City Council Budget Committee yesterday.
Finance officials told committee members that recommendations made by independent auditor Deloitte & Touche and the Council's own in-house auditing staff have been implemented, although some programs such as relocation and fraud awareness training workshops for employees are ongoing.
Last month, an auditor with the Office of Council Services criticized the administration of Mayor Jeremy Harris because seven of eight Deloitte & Touche recommendations had not yet been completed even though the auditor's report was released in September 2000.
Michael Hansen, who heads the Internal Control Division of the Budget and Fiscal Services Department, said yesterday that the formalized relocations policies and procedures, which incorporate the recommendations, were issued to all city agencies on Monday.
Former city housing official Michael Kahapea was able to funnel money from the Ewa Villages relocation fund into bogus companies set up by accomplices because he had control over major aspects of the process.
Relocation duties are now in the hands of several people in several agencies, Hansen said. Photos are taken before and after relocations, and site visits are made to ensure the work is done, he said. Movers, meanwhile, have to be on a qualified list verified by the Purchasing Division.
"There were no formal guidelines; there were no checks and balances," Lee said. "There was too much responsibility given to one individual and I think that was wrong."
Ivan Kaisan, an auditor for the Council, said the real test will be how agencies apply the policies and procedures.
City & County of Honolulu
