HomeMy WebLinkAboutCounty Auditor FY2013-2014 DEPARTMENTAL BUDGET REVIEWS The departmental budget review reconvened on 1:44 p.m., and proceeded as follows:
Chair Furfaro: Aloha and good afternoon. We are back from
recess, and this is the ongoing Budget Presentations for the Fiscal Year 2013-2014.
Typically, it has been announced that my practice is that we take testimony in the morning
on all items for the agenda for the day, but I believe we have three (3) people here to testify.
I also believe that we have other testimony coming in. I am going to stick to the rule about
accepting testimony. Ken, you brought Walter Lewis' in? Yes, ok. We will accept that for
the record. Is there anyone else who has written testimony from others, either on the
Auditor or the Elderly Affairs agenda item that is later this afternoon? Okay. If not, can I
just see a raise of hands again of who is going to give testimony? There are three (3) people.
Okay. Great. You will get your six (6) minutes. I will announce when we are at the three
(3) minute mark so you have a halfway mark. I will go in the order as follows: Ken, I will
go with you first. Mr. Rosa, I will go with you second. Mr. Bulatao, I will go with you third.
Please come right up.
KEN TAYLOR: Chair, members of the Council, my name is Ken
Taylor. Before I get started, I would just like to make sure that you all got Walter Lewis'
written comments.
Chair Furfaro: Yes, we have it.
Mr. Taylor: Thank you. I am here today in support of the
Auditor's activity that has taken place the last few years. It is my understanding that in
the Mayor's Budget, he has considered cutting one (1) staff person from the Auditor's staff,
and I think that is really unfortunate and out of line. I hope you folks will see to
reestablish that position in the coming Budget. I have currently read the Audit for Fuel
Cost, Consumption, and Management Interim Report, Audit Capital Project Management,
Fire Station Project, Performance Audit, Building Division Development, Department of
Public Works, Audit Capital Project Management, Road Maintenance Program Fiscal Year
2006-2007 Phase 1, and also the Audit of implementation of the recommendations for the
Cost Control Commission Energy Savings. I think all of those reports were very well-done.
Unfortunately, you folks have not seen—if I recall correctly, and I am sure you will correct
me if I am wrong, but none of these Audits have been on the agenda of the Council for
discussion and consideration of making sure that the Audits' recommendations are followed
through. This Budget hearing process should be a situation where each of these audit
recommendations, as they relate to the different Departments, should be well taken into
consideration as you accept budgets. As I looked into the importance of the independence of
the audit, I find that it the Institute of Internal Auditors—the definition of "internal
auditing" states the "fundamental purpose nature and scope of internal auditing, internal
auditing is an independent, objective assurance, and consulting activity designed to add
value and improve the organization's operations."
Chair Furfaro: Ken, that is your first three (3) minutes.
Mr. Taylor: Thank you. "It helps and organization
accomplish its objective by bringing a systematic discipline approach to the evaluating and
improving the effectiveness of risk management control and governance processes." This is
why I really think it is so important. As you know, our Audit Department is fairly new to
the County, voted on by the people, and I think this independence of this Department is
really important and the community benefits greatly from having this activity take place.
Not only does it make for a better operation and saves money, but it benefits all of the
people of the community. Again, I hope you see fit to make the Auditor's Department whole
because I am afraid if one (1) small Department like this—I believe he only has three (3)
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employees plus himself. I think that take one (1) of those individuals away, you might as
well just eliminate the Auditor's Office because there will not be much of anything
accomplished over the next couple of years. In the Institute of Internal Auditors Code of
Ethics, "internal auditing is independent, objective assurance and consulting activity
designed to add value and improve an organization's operations. It helps an organization
accomplish its objectives by bringing a systematic disciplined approach to evaluating and
improving the effectiveness of risk-management, control and governance processes." As you
move forward with the Budget Process, I hope and pray that you see fit to keep the
Auditor's Office whole. Thank you.
Chair Furfaro: So that we both understand it, in the Budget
Process, the Administration reviews budgets and submits them to us. We do not
necessarily initiate the first submittal, but we certainly have the plus and minuses at the
end. We have not gotten there at this point. I want to make sure you understand. On the
Audits that have been complete like the gas, building, Capital Improvement Project (CIP),
and those that are ongoing; we will ask the Auditor to give us a reconciliation of those as
part of the questions coming back, that he gives us the reconciliation of those completed
and so forth. I think that is all I wanted to make sure you understood.
Mr. Taylor: Can I ask you one (1) question?
Chair Furfaro: Sure.
Mr. Taylor: On this issue, will there be another time during
the Budget Process that we would have an opportunity to...
Chair Furfaro: To talk about anything on the Budget?
Mr. Taylor: Yes.
Chair Furfaro: Yes.
Mr. Taylor: Thank you
Chair Furfaro: Also, the last one is that the Council is not
required to post his Audit reports, but may post them if the Auditor desires. If the Auditor
desires it to be posted—because his office puts everything on the website access, but the
Council is not required to put into Council of every Audit that he does. We are not required
to but he may request us.
Mr. Taylor: I understand that, but you are also the holder of
the purse strings and it seems to me that the Audits and the recommendations from the
audit are very closely tied to...
Chair Furfaro: I am not going to get into a discussion with you
on that. I just explained to you how it works. The Council is not required to post in our
normal Council Meetings every Audit review, but the Auditor does have the authority to
make a request for to us put that on. The information on the completed audits is available
on the web. He is required to provide a plan. The Council is the authority that approves
his yearly plan. We can modify it at that time but once we approve it, it is his plan.
Mr. Taylor: Thank you.
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Chair Furfaro: You are welcome. Joe, you were going to come
up?
JOE ROSA: Good afternoon members of the committee. I
wanted to testify against the cutting of the Budget on the Auditor's Office. Six (6) years
ago, I know the people of Kaua`i voted to establish the Office and it has hereby been
established, headed by Ernie Pasion. I think he has done a very interesting job on his
investigations. One he really looked into was the Fuel Cost Consumption. That is
something that is always hard to fulfill and explain. A lot of times they say it is by
evaporation but it is more than that from what I read from the investigation. It was
improper use of things or cards and keeping tabs on the consumption of fuel. To cut one (1)
member of a committee that is doing an outstanding job, I think it is ridiculous. They
should cut something from the Engineering staff where I see people who are inadequate to
do the job in those positions, from what I have been hearing. Why not cut those high-paid
people and keep a secretary or another worker that can do something that is worthwhile
doing, like Ernie has been doing? I read the reports on the Kaiakea Fire Station, the gas
consumption and the CIP. I am going to get one that has been completed that has to do
with the road projects. I think everyone should read it. If anybody has a chance, like you
mentioned, Jay, to go on the web. I am not a web man because it is way beyond my time. I
do not have the fingers to look into the web, so I depend on my knowledge, papers, and at
these Council Meetings through Ho`ike. I often wonder now if you are going to cut staff, is
it going too hot for people in the County that he is rocking the boat and shuffling up some
people's feathers? They are going to cut so that the work will slow down and he will not
have his people to go out and do the jobs themselves? Those are the things that bring
thoughts to myself and some people who have asked me about it. I say I can find out. I will
go to the meeting and make a testimony. I think Mr. Pasion has done remarkably well for
the staff he has. Like I said, sure, it will rock somebody's boat. What he is doing to me is a
right. Why do you have to correct a right? There is no wrong. That is the kind of thing I
look for in good government like how management should run a business. That is why I am
here to testify on Mr. Pasion's staff; of him and his staff and that they are doing a
remarkable job. I have his reports all here because this is something of interest. I have
worked with government. I know how government runs. Like I say, there are a lot of
things that they do which they do not do it according to the Union. When they bring people
to positions for temporary assignment, there is nothing wrong to bring from up-down. If
you bring them down-up, you have to compensate the person in that position. That is a cost
item.
Chair Furfaro: Joe, that is your first three (3) minutes.
Mr. Rosa: I was a union steward and those are the things
we look into. We could bring from up-down with no compensation. When you bring from
down-up, you compensate that person. That is part of management, like I say, somewhere
they are lacking that responsibility and looking at things like that there. I did not come to
the meeting because I had an engagement two (2) weeks ago on a Wednesday, but I heard
about overtime when they pave. I do not see any need for getting the guys from the refuge
to come in and work overtime. All you need is an inspector and your project engineer.
There will need no overtime because you work within the limits of the paving company. I
worked with the State Department of Transportation (DOT) and if they worked overtime on
Saturday or Sundays,the company would pay for my overtime, not the State. Those were
the things that were negotiated. If the contractors and subcontractors wanted me to work,
they would pay for my wages. The County is bringing somebody else—somebody is getting
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too much overtime. That is why I hear. Even in Honolulu City and County, they have so
much overtime. It has not been looked at and checked so they need more auditing and
things like that there. Overall, as I say, they should look into it and I think they should
have basic knowledge of these reports. I am pretty sure most of you have real talent or can
go through your computers and see those reports. I saw Ernie and I told him, "Very good
reports. You hit the nail on the head. You are rocking a lot of boats and things in this
Department." I myself would like to see things learned from it and the operations of the
County be better. With that, I will close and say, please leave the staff member on. Cut
some of those high engineers that you have because we do not need mechanical engineers in
the County who do not have mechanical engineering to be done. We are not running a
sugar mill. I thank you.
Chair Furfaro: Hold on, Mr. Rosa. Members, can I have a
personal privilege for a moment? Joe, I want to let you know that Planning did respond to
us on your Rice Street. I have the documents.
Mr. Rosa: Thank you.
Chair Furfaro: We can meet any time after the 26th.
Mr. Rosa: Okay. I will mark that down on my calendar.
Chair Furfaro: Thank you very much. Jose, you have the floor.
It is nice to see you in town.
JOSE BULATAO, JR.: It is good to be here. Good afternoon, Chair
Furfaro and Council members. My name is Jose Bulatao, Jr. from Kekaha. In the realm of
public service, the importance of clarity, transparency, and accountability must be held in
highest regard. To do that, auditing processes and procedures need to be established and
maintained with integrity. Having the right person to do the right job is what it takes. We
here on Kaua`i are fortunate indeed to have Ernie Pasion serve in the capacity as Auditor of
the County of Kaua`i. As an accountant, as a public servant, and as a person involved in a
variety of community, and church-focused programs and activities, Ernie has impeccable
credentials. Having the honor and privilege to work with Ernie in collaborating the
yearlong array of projects, programs, and activities in conjunction with the centennial
celebration of the presence of Filipinos in Hawai`i provided me an opportunity to work
side-by-side with him, extensively, in coordinating a myriad of details and an array of
responsibilities with focused intensity. With boundless energy and unparalleled reliability,
Ernie's consistency in meeting his responsibilities was steadfast. Undoubtedly, this comes
naturally with Ernie. Ernie obtained professional credentials in his field of expertise, first
in the Philippines where he was born, and later on the mainland where he lived for a while
before he and his family chose to come to Kaua`i to make this place his permanent
residence. While here, Ernie has attended workshops and seminars to update his
credentials wherever and wherever possible. In the County of Kaua`i, he has served in
various positions with consistent reliability. We have seen him at work in the Elections
Division. He has had high visibility in the arena of Council Services. His new position of
Auditor is where his consistency and reliability prevail at high-performance levels. He has
taken on the roles of leadership and involvement in response to community endeavors and
church programs and activities. In his interaction with the people of Kaua`i, he has been
able to gain their respect, confidence, trust because of his work ethic and his congeniality.
Specifically in focusing upon his roles and responsibilities in being the Auditor for the
County of Kaua`i, Ernie has provided the means by which his leadership skills is reflective
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in the work that he has accomplished. Where the intricacies of bureaucratic data, records,
reports, and receipts must be scrutinized and analyzed with skill and precision, Ernie is at
his best, highest-level of accomplishment. Auditing processes and procedures must be
objective in nature. Auditing processes and procedures need to be analytic, exhaustively
thorough, and as complete as possible. It is in Ernie's nature to have these qualifications
but these responsibilities should not rest solely on his shoulders. I have one (1) more thing
to add. My sister, Millie Wellington, who was my chauffeur to bring me here to Lihu`e to
the big town, asked me to include this. She said, "Keeping Ernie and his staff person on the
job will be saving the County money, not costing the County money." That is from Millie
Wellington. I have concluded my testimony. Thank you.
Chair Furfaro: Thank you. Let me see if there are any questions
for you on your testimony. May we have a copy of your written testimony?
Mr. Bulatao: With or without my autograph?
Chair Furfaro: Are there any questions for Mr. Bulatao? No.
Mr. Bulatao: Okay.
Chair Furfaro: Thank you. It was good to see you, Jose. We
would like to start with your presentation, Ernie. I want to make sure first before we go
any further, do you have the narrative for the response on your business plan? The
business plan for the Audit Department for the upcoming year?
ERNESTO G. PASION, County Auditor: I submitted that, Chair, as requested
subject to change.
Chair Furfaro: Yes. Is there anyone who does not have the
Audit Plan? If not, I will have copies made now. Let us have a couple of copies made.
Ernie, you have the floor.
Mr. Pasion: Council Chair Furfaro, Vice Chair Nakamura,
and Councilmembers, good afternoon. For the record, my name is Ernesto G. Pasion,
County Auditor. For the benefit of the public, I would like to read my Fiscal Year 2014
Budget Presentation. I do not have any PowerPoint presentation materials this afternoon.
First I would like to go into the Budget Overview. The Office of the County
Auditor's Fiscal Year 2013-2014 Budget of one million ninety-six two hundred,ninety-five
dollars ($1,096,295) is four hundred forty-six thousand seven hundred eighteen dollars
($446,718) or twenty-nine percent (29%) lower than the Fiscal Year 2012-2013 Budget of
one million five hundred forty-three thousand thirteen dollars ($1,543,013). We know that
there is a Budget crwich so we have voluntarily cut our consultant fees budget, which I will
discuss later in "Operations." We submitted the Budget that reduced our Budget when
compared to Fiscal Year 2013 by three hundred twenty-nine thousand three hundred
eighteen dollars ($319,318) or twenty-one percent (21%). Salaries which represent thirty-
one percent (31%) of the total Budget show a decrease of ninety-five thousand dollars
($95,000) or twenty-two percent (22%), which was many due to a Dollar Funding of a staff
Auditor II. Benefits which represent eighteen percent (18%) of the total Budget, show a
decrease of sixty-five thousand dollars ($65,000) or twenty-five (25%). It was due to a
combination of two (2) factors which were reduced staffing and adjusted benefit rates.
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Chair Furfaro: Excuse me, Ernie. I just want to get some
clarity. You are comparing your employee benefits to the whole Budget as submitted? That
represents eighteen percent (18%)? You are not showing it as a percentage as it relates to
just salaries?
Mr. Pasion: I am representing it to the total Budget.
Chair Furfaro: Everybody else has been showing it as a
relationship to the payroll, the raw payroll only.
Mr. Pasion: Well, Chair...
Chair Furfaro: No, I just wanted to make sure I understand it.
Yours is on the whole Budget?
Mr. Pasion: When I say salaries represent thirty-one percent
(31%) of the total Budget, it means when I am referring it to the total Budget. If we are
talking about salaries last year and this year, I am saying that it is a twenty-two percent
(22%) decrease.
Chair Furfaro: I understand. The first paragraph "benefits
which represent eighteen percent (18%) of the total Budget" is different from everything
else we have seen. It says the "benefits are fifty-six percent(56%) of raw payroll." That is
the difference. I just want to make we are clear.
Mr. Pasion: Okay, Chair. Utilities, which represent one
percent (1%) of the total Budget show a decrease of two thousand dollars ($2,000) or twenty
percent (20%), reflecting the economies of scale from the consolidation of two (2) officers
previously occupied by the office and energy conservation practiced by the office.
Equipment and Building Leases which represent five percent (5%) of the total
budget show, a decrease of one thousand dollars ($1,000) or two percent (2%), which is
achievable to less usage of copier equipment.
Operations which represent forty-five percent (45%) of the total Budget show a
decrease of two hundred eighty-four thousand dollars ($284,000) or thirty-six percent (36%).
The Budget for consultant fees reduced two hundred twenty-five dollars ($225,000) or
thirty-eight percent (38%). The Budget for Special Projects show a decrease of twenty-five
thousand dollars ($25,000), due to the elimination of the Peer Review funding, which only
occurs only over three (3) years.
The Budget for Continuing Professional Education (CPE) which involves the
Auditors to earn eighty (80) CPE hours within two (2) years to be able to do audits virtually
remained the same. The Operations Budget includes two hundred twenty-five thousand
($225,000) for the annual Comprehensive Annual Financial Report (CAFR) also known as
the CAFR, and one hundred sixty thousand dollars ($160,000) for the procurement of
outside auditors to perform a Capital Project Planning and Financing Audit. Also included
in the Budget is twenty-five thousand dollars ($25,000) for a survey to be done by an
outside professional firm for a Service Efforts and Accomplishments Survey and Analysis
project to be otherwise done in-house.
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The Operations Budget also includes twelve thousand dollars ($12,000) for the
office's computer and telephone systems security. During the Association of Government
Accountants Seminar held in Honolulu, the auditors of the jurisdiction of Hawai`i discussed
the importance of having a system to securitize sensitive audit files by having a stand-alone
server, firewall and telephone system. The audit restrictions have such a system with the
exception of the Office of the County Auditor on Kauai. The setting up of the system has
been discussed with Information Technology (IT) management.
I am going is to skip the comparative graphs because you have them with you that I
sent electronically. "Position Listing." New positions: one (1), Staff Internal Auditor
position changed to Auditor II, exempt, without a change in salary. B., Vacant positions:
one (1) Auditor II, exempt, and the salary is sixty-four thousand four hundred twenty-four
dollars ($64,424) and was vacant since January 7, 2013. We anticipated filling this position
by June 1 2013; however recruitment was terminated because the position was Dollar
Funded. We are requesting the County Council to restore the full funding for this position
as originally submitted.
During the interview this year, we had a preview of our Budget with the Mayor and
his Budget Team. We asked the Mayor if the Mayor would inform us if he intends to do any
cutting of the Budget before submitting it to the County Council, and the answer was,
"Yes." Again, déjà vu. Going back to my first Budget submittal in 2010, I was surprised
that the Mayor cut my Budget without him or any member of the Budget Team first
notifying me.
First of all in our form of government, there is a separation of powers between the
Administrative and the Legislative branches. What is wrong with the Mayor cutting the
Budget of the Office of the Auditor? The Mayor's Administration is the primary auditee.
The auditee should not be able to prevent the Auditor's Office by doing its work accorded by
the County Charter by cutting its funds to do audits. The independence of the Auditor
must be preserved. The Mayor should not be allowed to cut the Auditor's Budget
unilaterally. Only the County Council as a body, as the Council Chair has put it rightly,
has that power.
For Contractual positions, we have none. Critical positions with impending
retirements or departures; the County Auditor's position term ends September 15, 2015.
On page 3, letter (e.), the education training plan for this position; staff member working on
Certified Internal Auditor credentials. The next section (IV.) is "statistics," which shows
the actual three (3) years. I have provided that to you already, so I am going to skip that
one. It was requested that I provide transfers from various accounts and reasons for
transfers for the Fiscal Year. On September 7, 2012, a Request for Appropriation and
Allotted Adjustment form was submitted to Chair Furfaro. The funds were needed for
registration fees for Continuing Professional Education and approved transfer was as
follows: ten thousand dollars ($10,000) taken out of"Consultant Services" and ten thousand
dollars ($10,000) was transferred to "Other Travel, General." Now, we go to the Mission of
the Office of the County Auditor. It is our vision the through carefully selected audits of
critical areas that we can promote honest, efficient, effective, and accountable government
for the County of Kaua`i.
"Goals and Objectives for Fiscal Year 2012-2013." Goal 1, to serve as a catalyst for
positive change throughout County operations. Goal 2, to encourage efficiency and
effectiveness of County programs. Goal 3, to inspire public trust by safeguarding the
County's financial integrity by having annual financial audits done by outside auditors and
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conducting in-house performance audits. Letter (a.), the Departmental objectives were as
follows: Objective 1, produce a Countywide Fiscal Year 2011-2012 Comprehensive Annual
Financial Report. This objective met the requirements of goal number 3. This objective
was achieved. The Comprehensive Annual Financial Report, also none as CAFR, was
submitted on December 7, 2012. Obstacles or challenges related to this objective. The loss
of an Auditor was an obstacle. The work of the lost Auditor up to an extent had to be
performed by County Auditor and remaining staff. Objective number 2, complete two (2) to
four (4) performance audits. This audit was intended to meet goals 1 and 2. This objective
was not achieved. Obstacles or challenge related to this objective. A reduction in audit
staff resulted in the loss of one (1) anticipated audit for the year. Objective number 3,
complete a Citizen-Centric Report for 2011-2012. This objective was intended to meet goals
1, 2 and 3. No, the objective was not achieved. Obstacles or challenges related to this
objective; the loss of one (1) auditor or half of the audit capacity decreased time available for
this project. Letter (d.), "Will objectives be accomplished by June 30, 2013?" We do not
know. We had intended to hire a replacement auditor; however, the position was
eliminated and was dollar funded for the upcoming fiscal year, so hiring has been
terminated. With the loss of half of the auditor capacity, we will endeavor but may not be
able to accomplish the objectives by the end of the fiscal year. "If not, what percentage of
the audits will be completed by June 30, 2013?" We do not know for the reasons stated
above. Obstacles and challenges; as previously stated, we have worked at half capacity at
staff auditor level for the entire fiscal year. The number of staff was also reduced by one
third. Strategies to address obstacles or challenges; we will be requesting the restoration
for funding of the second auditor position.
Item VII, "Successes and Achievements for Fiscal Year 2012-2013." For the first
time in three (3) years, the financial audit for the fiscal year was completed according to the
original schedule. Credit was also due to the N&K CPAs and KMH, LLP, Auditor for the
Department of Water for their efforts to assist the Department of Water in issuing their
financial statements as scheduled. Letter (b.), both staff auditors and the County Auditor
achieved their certification as Certified Fraud Examiners.
Item VIII, "Upcoming Plans and Initiatives for Fiscal Year 2013-2014." Our goals
will remain the same. Our work plan objectives will track our goals. Our objectives will
reflect a decrease in the number of staff auditors from two (2) to one (1). Should this
situation change, we will revise our objectives. Objective 1, complete the Annual Financial
Audit for Fiscal Year 2012-2013. Objective 2, issue audits that result in a seventy-five
percent (75%) acceptance rate by auditees for recommendations. This type of objective is
used by many audit shops, and is intended to ensure that audit recommendations are
relevant, practical, and of value to the auditees. One (1) good example of this is the Road
Management !Audit. All of the findings and recommendations were accepted by the
Administration and are in the process of implementing them.
We plan to commence the following audits in Fiscal Year 2013-2014: Capital Project
Planning and Financing. With the current financial pressures, future financial pressures,
decreased Federal and State funding, and aging infrastructure; the County needs a very
efficient and effective way of meeting capital needs with available funds. The project will
review the County's processes for prioritizing and financing capital projects to determine
what whether the County follows best practices efficiently and effectively, and prioritizes
projects so that the County's most urgent needs are addressed at an appropriate cost. The
next one is Service Efforts and Accomplishments Survey and Analysis. The project
supplements the Comprehensive Annual Financial Report, CAFR, by providing more
detailed and complete information about the performance of County services including
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costs, quality, quantity, and timeliness. We will add a survey to our fieldwork to gather
input about the public's perception of County services and assist community needs. A
similar project was conducted by the Honolulu City Auditor for Fiscal Year 2011. To
paraphrase the Honolulu Auditor, the result it provides the Council, the Administration,
and the public with an independent, impartial assessment or performance trends that can
be used to strengthen government accountability and transparency; improve government
efficiency and effectiveness; provide data for future decision making; and improve the
delivery of public services. The next one is "County Ethics Polices, Survey and
Assessment." The association of Certified Fraud Examiners estimates that a typical
organization loses five percent (5%) of its annual revenue to fraud. This in the County's
Fiscal Year 2012-2013 Budget, the potential annual loss to fraud could be in excess of six
million seven hundred thousand dollars ($6,700,000). A strong ethical program is a
deterrent to fraud. The project assesses the effectiveness and efficiency of the measures
used by the County to ensure ethical behavior by County employees and officials through
surveys and interviews, including whether an employee tip line or Whistleblower hotline
should be established. The next one is the Discretionary Expense Account spending,by
elected officials. In this project, we will ascertain and review the effectiveness of the
County policies and procedures, and other controls that ensure discretionary expense
accounts spending by elected officials is consistent with the statutory and ethical
requirements governing the use of public funds. In the recent audit conducted by the
Honolulu City Auditor, the Honolulu Auditor was able to obtain information on
discretionary spending constraints and reimbursements for personal meals, food and
beverages, and alcohol for all Counties except Kauai. This audit will fill this gap
information and provide the public with the information necessary to compare the County's
policies and procedures with those used in other jurisdictions and with best practices. Item
(b.), "Upcoming Initiatives." The Office of the County Auditor will continue to offer and
make presentations to the public through organizations such as the Kaua`i Chamber of
Commerce, Kaua`i Filipino Chamber of Commerce, and other community groups to explain
the role and responsibilities of the County Auditor and the audit process. The
presentations will be similar to the one made to the Lihu`e Business Association for which
the Office of the County Auditor received positive response from members and attendees.
Item II, the Office plans to continue to offer to the County Department Heads, managers,
and supervisors presentations regarding the audit process to help other County employees
better understand the role of the Office of the County Auditor, and the ways in which
audits are typically conducted. Item IX, "Challenges." Staff vacancy: we believe that two
(2) audit professionals are the minimum required to perform audits under the quality
control and accuracy requirements of the Generally Accepted Government Auditing
Standards or GAGAS, and the office's auditing manual. A minimum of two (2) audit
professionals is necessary so the audit results can be checked by an audit professional who
was not involved in the audit. That is my presentation and I'will entertain questions.
Chair Furfaro: Help me understand this portion of your plan,
Ernie. As I read "Discretionary Spending," I remember the situation and you plan to
specifically deal with elected officials here?
Mr. Pasion: Yes.
Chair Furfaro: Did you say yes? This portion is directed at
elected officials?
Mr. Pasion: Yes.
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Chair Furfaro: Let me just ask you this. The situation that the
media caught—and maybe a lot of people do not understand that here on Kaua`i, where the
elected officials would be the seven (7) of us, the Mayor, and the Prosecutor. How do we
define "discretionary spending?" This is how I know it. In Maui and in Honolulu, each
Councilmember gets an allocated amount of moneys. They use that for entertainment.
They use that for staffing and so forth. Then, that money is made available to them in the
Budget. Now here, we get a fixed amount for a car allowance and a cell phone. That is
taxed for us. We do not see that we have a budget to tap or a check request to make. That
is it. I think it is made up as car and cell phone allowance together in one (1) check and
that comes to us in our payroll. Even that benefit is then taxed. They deduct all of the
particulars from that as if it was an earning, but it is an allowance. We do not have any
other discretionary funds for us in the way of hiring personal staff. We are different from
Maui County and different from Honolulu. I forgot the one (1) Councilmember, but he was
using his discretionary money to entertain and so forth.
Mr. Pasion: In the City of Honolulu?
Chair Furfaro: Yes.
Mr. Pasion: Yes.
Chair Furfaro: Those were discretionary moneys. Here, we have
to document an expense report and provide receipts and the rationale for the travel and so
forth. Is that what you are referring to here in the discretionary?
Mr.Pasion: In part, yes, Chair. If you look at the Mayor's
Budget, there is a discretionary account budget for the Mayor. For the Council, as far as I
know because I was here before, there is a Travel Budget and there is an allocation to the
different members. That is the one that we would have to audit because we would like to
see how the moneys are spent.
Chair Furfaro: I understand. There have been some changes.
For instance, I actually allocate that travel to each member here. It is not quite the same
the way it was when you were here. They reconcile it like an expense report on a travel
authorization but they have that freedom. You are saying that is one (1) of the accounts
that you are indicating you would be auditing?
Mr. Pasion: Right.
Chair Furfaro: Okay, you have answered my question. I just
wanted to make sure that we understand that some of the other Counties are very different
from us. They get money and they hire their own staff.
Mr. Pasion: Right.
Chair Furfaro: We do not have the same parallel. Okay.
Mr. Rapozo, go ahead.
Mr. Rapozo: For the benefit of the public watching, I think we
ought to be careful how we talk about "discretionary" versus "non-discretionary." The other
islands—and the most recent publicized incident with the County Council candidate was
campaign spending. He was using campaign spending, his political account, to go out to
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dinner with people and his wife and his kids. At the end of the day, Campaign
p p ,
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Spending Commission ruled that it was okay. That was that one. The fund that the Chair
is talking about is not discretionary funding. It is allocated to travel. I cannot use that
money. It is not our money in other words. The trips and the hotels are all booked by staff.
The Councilmembers do not touch that. That is where it is. After today, I do not want the
public to think, "Wow, the Council gets all this money and they can use what they want."
We have absolutely zero discretionary funds. Absolutely zero. We do not even have the
ability. I guess we could try. Let us say I went out to lunch with a constituent. That comes
out of my money, my pocket. There is no mechanism for this body to submit a request for
reimbursement to the Chair. There is no pot of money for that. In Honolulu, there is. For
Maui and Hawai`i island, they all have discretionary funds. Kaua`i does not. That is why I
highlighted this because, Ernie, in your narrative, which I am sure the newspaper would
pick up because it could be construed as if Kaua`i refused to participate. It said, "In a
recent audit conducted by the Honolulu City Auditor, the Honolulu City Auditor was able to
obtain information on the discretionary spending constraints on reimbursements for
personal meals, food and beverages, and alcohol," which again we do not have that account,
"for all Counties except Kaua`i." That is because Kaua`i does not have it. You just
mentioned that the Mayor may have. If he does, I am not aware of it. I just wanted to be
clear as far the County is concerned and the Council.
Chair Furfaro: That is why I brought the question up. I think
you are aware of it. We as the County of Kaua`i, and our seven (7) elected officials; we do
not have any discretionary, other than the policy that our staff may book. If we went to
lobby the Legislature and a plane ticket, and so forth. We do not have any control on that.
I will give the floor to Councilmember Nakamura. Thank you, Mr. Rapozo, for revisiting
that piece.
Ms. Nakamura: Just to add onto that, even when the Council
meets sometimes at 8:30 in the morning until sometimes 8:00 or 10:00 at night, our meals
are paid out of our own pockets. There is no discretionary fund to allow us to pay for
incidentals like that. I think the public should know that. It is a very frugal body in terms
of what we spend on ourselves. I wanted to find out that if the Council does not have that
discretionary fund, who does among the other two (2) elected officials? That will help to
narrow your scope.
Mr. Pasion: Right.
Ms. Nakamura: Maybe if I could have someone from Finance here
to answer that question. Does the Mayor or the Prosecutor have a discretionary fund?
Ernie, did you hear the question?
ERNEST W. BARREIRA, Budget and Purchasing Director: I did. Good
afternoon, members of the Council. Ernie Barreira, Budget and Purchasing Director. I am
going to place a qualifier on my response saying that I would like to go back and confer
closely with the Managing Director but under 30,00 in Mayor's Budget, there are
contingencies noted in that line item. I am not specifically certain, as we sit here today,
what that is for. I expect my cell phone will buzz shortly to give me verification.
Ms. Nakamura: Do we know what is in Budget for that line item?
Mr. Barreira: It is not detailed beyond that so I would have to
research it further and get back to you.
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Ms. Nakamura: We do not know what the amount is?
Mr. Barreira: Yes, I could give you that. In Public Relations—,
Misc. and Mayor Contingencies, it is five thousand dollars ($5,000). Like I said, I am not
certain if that is considered protocol. I would have to check and give you a detailed
response.
Chair Furfaro: I would like to reconfirm as I brought it up in the
beginning, the query, and with my explanation of other Counties. There is no such line in
the Council Budget.
Mr. Barreira: I was looking as we spoke and I did not see that.
Chair Furfaro: I would like to get that confirmed. Ours written
by a policy of an allocated amount, which deals with even taxing us for car and phone. That
is what is there right now.
Mr. Barreira: If I do get a response, I would be happy to share
it with the Council Chair.
Chair Furfaro: I will send it over as a question.
Mr. Barreira: Very good. Thank you.
Chair Furfaro: Ernie, he is going to investigate that line for us.
We are going to send it over. Any other questions on his discretionary budget plan at this
point? Then we will go to other questions on the discretionary amount.
Mr. Bynum: Also when I read this that Kaua`i was the only
one that did not respond to this Honolulu Audit, I immediately knew that is because we
have no discretionary funds. It is important that the public understands that. In my
opinion, we should. For every other County here, Councilmembers have personal
secretaries and personal staff. They have expense accounts can. For Hawai`i island, you
can go online and see how they spend that money. It seems like a Councilmember may
want to meet with a community group and have somebody with expertise present, and it is
our tradition to get a lei for that person or to have some snacks for that evening meeting.
Those are minor things, but those things come out of our pocket right now because there is
absolutely no discretionary money, which I think is inappropriate. It puts us at a difficult
situation. I also would say that Councilmember salaries are about half of what Department
Heads are. I know that everybody around this table works as hard as the Department -
Heads do. When I came on board, I was shocked. I have no secretary. You are one of the
chief executive people in the County and you have no personal support. You have no
discretionary funds. I would love if we did and I would love to that that accountability like
how Hawai`i island does. They can go look at their Councilmember's budget, see what it
was, and how every penny was spent real-time online. I do have concern about that, Ernie,
because if you do three(3) audits a year and you have around a million dollar budget, it is
going to cost three hundred fifty thousand dollars ($350,000) to study the five thousand
dollars ($5,000) discretionary funds that the Mayor has. I do not know if that would be a
good use of audit funds.
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Chair Furfaro: We do not need to get into a lot of discussion
about it right now. Let us get all of the questions and then get one (1) response from you on
only discretionary spending right now.
Mr. Hooser: Ernie, thank you for your report. As I was
listening to the questions and relooked at the description, and just to reinforce because it
says, "Ensure the discretionary spending," in parenthesis says "expense account." I do not
have an expense account. Then is says, "Study discretionary spending on meals, food and
beverage, and alcohol." We certainly do not have any of that authority of discretionary
spending. I did not think about this at the beginning but after looking at this and
recognizing that the Mayor does have perhaps more latitude in discretionary spending, I
am a little concerned like it is the six thousand (6,000) pound gorilla in the room, that given
the recent discussion on the gasoline situation for the Auditor's Office. I do not want it to
look like the Auditor's Office is targeting just the Mayor's Office in looking at this, because
it could be construed as that. I understand, you want to be fair and even-handed with
everyone, but given that we do not have any discretionary spending—and I am not sure
about the Prosecutor's Office. Would it just be the Mayor's Office that would be examined?
Mr. Pasion: The purpose of this, Councilmember Hooser, is
the fact that it was included in the Honolulu report and mentioned that way would have
been better if somebody said, "We do not have any," rather than just ignoring and did not
get any information from here. That is what we are trying to clear for everybody. That is
the purpose of it.
Mr. Hooser: Okay.
Mr. Pasion: When I looked at the Budget for the Mayor,
there is that such account in the Mayor's Budget. I did not see anything in the Council's
Budget because you also have your individual budget, just like the City of Honolulu where
each Councilmember has their own budget. They are allowed so much so they could hire
their own staff. Here, it is all combined with everybody and then you have to pull travel
budgets, and the Chair and you guys agree on how much is allotted to each Councilmember.
The purpose was to clear the report that came out of Honolulu. Everybody provided except
for Kaua`i. How come? That is the purpose of it.
Mr. Hooser: Okay.
Mr. Pasion: It will be a short report saying that there is no
such thing for Kaua`i. Rather than being included in an audit report for Honolulu and say,
"Oh, there must be something." Something has to be cleared with them saying and to clear
the reputation of Kaua`i with the audit of Counties, as far as this cost item.
Mr. Hooser: Okay. Thank you.
Chair Furfaro: I want to make sure that we all really
understand. I just recently got your business report in this form, as far as what your plan
was going forward. I did not know that we have no discretionary spending, but it is going
to come up as an audit item. I am trying to explain to you that we are not the same as the
other Counties. In the future, if something comes up in a report that you find is very
different than how we behave in our Charter, I would also appreciate it if you would
respond to them and say, "Hey, do not necessarily comment on something that is zero and
zero." There is no discretionary—unless you want to say it differently for the Prosecutor or
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14
for the Mayor's Office. That is the only place it exists. Do you have a copy of my travel
policy or should I resend it over to you?
Mr. Pasion: I would appreciate it if you would resend it to
me, Chair.
Chair Furfaro: I will resend send it over to you. Are there other
questions about the proposal here? Mr. Kagawa, you have the floor.
(Did the Chair leave and relinquish his Chairmanship to Mr. Rapozo during
sometime after this?)
Mr. Kagawa: Thank you, Ernie. My years right after college, I
worked as a CPA for four and a half (4.5) years with Gerald Oshijima. I was fortunate
enough to work on a lot of government audits in those years. Just in our small staff of
twelve (12) or so, we had two (2) CPAs. Mr. Oshijima was the audit partner at Deloitte and
my other audit manager was a CPA with another big national firm. I am just thinking for
our County Auditor's Office to be effective, we need to have people who know what they are
looking for. Do we have anybody with a CPA license in your Office right now?
Mr. Pasion: We do not.
Mr. Kagawa: Because I would...
Mr. Pasion: Councilmember, there is a difference between
CPAs and Professional Auditors, especially Performance Auditors. The CPA auditors are
more limited to financial audits, than to performance audits. The performance audits are
more like we go into operations where it is not like a program. The audits that we get as
far as the CAFR is a program audit, and that is why they say, "It will start on this date and
be done on this date." It is because they follow the program. For us, you do not know what
is out there until you start going into the field and say, "Okay,there is some possible abuse
or irregularity that you have to pursue." Then, you have to now hire investigators to help
you if you do not have the expertise in-house.
Mr. Kagawa: I am not saying that all five (5) of your employees
should be CPAs. I am saying that maybe one (1) out of five (5). It would be nice to have
somebody with a CPA background that has worked on government audits who can help you
develop some plans as to how to attack because I know a County Auditor's job is a little
different. Like a financial audit you have prior year's work papers to follow, but in your
type of audits, it is a surprise element. A lot of people do not know that you are coming.
We have to develop our own way of determining evidence. I would think that having
somebody with that could help. When I hear people say, "Why are you calling this office? It
is an effective office." What I want to see is—I would be glad to support the ninety
thousand dollar ($90,000) position provided that the requirement of that job would to be to
have a CPA license. At least out of those five (5) employees, you will have one (1) with a
CPA license and background that can provide your staff with some help as to have a plan.
Ultimately, the best way for your Office to be successful is to do audits in-house because I
think it would be your employees that know how to get the information the best, rather
than bringing people from O`ahu who do not really know our way of government. If you
could do it in-house, that would be nice. This is just my personal opinion that having
somebody with a CPA background would be good for our Office. I do not know what your
feeling is on that and if you are open to that?
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Mr. Pasion: We did have one (1) but that person is not with
us anymore. We would look at what is available out there. It took us more than six (6)
months to have that position filled when we started the function. We will be doing the
same process to get the best that we could get from the field.
Mr. Kagawa: Okay. The second question, Ernie, and this is
not regarding personnel so much, but consultant services is one of the big line items
because your Budget is going down about five hundred thousand dollars ($500,000) from
last year to this year. Four hundred fifty thousand($450,000) of that is your reduction in
consultant services, but have you an increase of almost two hundred thousand ($200,000)
with "Other." Can you explain those two (2) and the impact of losing that four hundred fifty
thousand dollars ($450,000) and the impact of gaining the hundred ninety-five thousand
dollars ($195,000) in"Other?"
Mr. Pasion: Okay. We have two (2) line items for consultant
fees, Councilmember. The new Budget Team came up with separation of two (2) accounts.
One (1) account that we have now is the two hundred twenty-five thousand dollars
($225,000) which is for the CAFR for N&K CPAs. The one hundred ninety-five thousand
dollars ($195,000) is for Performance Audits. For example, we are providing one hundred
sixty thousand dollars ($160,000) for the Capital Project budgeting and then twenty-five
thousand dollars ($25,000) of that for the survey for the Service Efforts and
Accomplishments Analysis Report.
Mr. Kagawa: Okay. Ernie,g y. you explanation is good on those
other two (2), but I guess my question is that our CAFR Audit is costing two hundred
twenty-five thousand dollars ($225,000), but in the past, why was it costing us a lot more?
It was six hundred seventy-five thousand dollars ($675,000)...
Mr. Pasion: Okay. Now I understand. We intended to do
different kinds of audits. Of the six hundred seventy-five thousand dollars ($675,000), tow
two hundred fifteen thousand dollars ($215,000) was for the CAFR.
Mr. Kagawa: Okay.
Mr. Pasion: The remaining amounts were for an audit that
we were going to do of the Parks & Recreation Management and Maintenance. We were
going to do audit of the Human Resource Management and Hiring Practices. The process
for when you are going into these audits,if you have find any irregularity or abuse, then we
have fifty thousand dollars ($50,000) for Investigator Services and twenty-five thousand
dollars ($25,000) for Legal Services if the Office of the County Attorney is conflicted from
any of the audits that we go into. We did not have a chance to get into those because we did
not have the staff to work on it.
Mr. Kagawa: For the Parks and Human Resources ones, those
would have been contracted out, right? Were we going to contract them out?
Mr. Pasion: Yes, we will contract them out because if would
require a lot of the Engineering and Technical—we would be working with them.
Mr. Kagawa: Okay. Overseeing?
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Mr. Pasion: Right.
Mr. Kagawa: Thank you.
Mr. Rapozo: Are there any other follow-up questions?
Ms. Yukimura: Hi, Ernie.
Mr. Pasion: Hi.
Ms. Yukimura: Let us see. In the plan for next year, is our
regular Financial Audits for this coming fiscal year?
Mr. Pasion: It is included, Councilmember.
Ms. Yukimura: Thank you. I think if Financial Statement
Audits are conducted, the Charter requires that there would be somebody with a CPA?
Mr. Pasion: It has to be done by an outside CPA firm. It
cannot be done in-house because of the fact that if we do it in-house, it would be subjected
to bias, especially when we go to float our bonds. It has to be done by an independent CPA
firm.
Ms. Yukimura: No, I understand that. I am reading The Charter
here and it says, "If the Financial Statement Audits are conducted, the County Auditor
shall be a Certified Public Accountant."
Mr. Pasion: That is the reason why we outsource it to a CPA
firm. We do not do Financial Audits in my Department, Councilmember.
Ms. Yukimura: No, but it says that the "County Auditor shall be
a Certified Public Accountant."
Mr. Pasion: Yes, but we opted not to do it in-house.
Ms. Yukimura: I see, but I thought this meant that if you have to
oversee the Auditors, the CPAs, that the Auditor himself or somebody in the Office had to
be a CPA.
Mr. Pasion: No, not necessarily.
Ms. Yukimura: That is not your interpretation of the Charter?
Mr. Pasion: Right.
Ms. Yukimura: How many staff people do you have?
Mr. Pasion: Right now, we have Lani, Stephanie, Doreen,
and me. That is why we have a vacant position and was dollar funded by the Mayor.
Ms. Yukimura: In terms of title or function, Lani is considered
a...
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Mr. Pasion: An Auditor.
Ms. Yukimura: Stephanie is?
Mr. Pasion: An Audit Analyst.
Ms. Yukimura: Doreen is?
Mr. Pasion: Clerical.
Ms. Yukimura: Okay. With you, there are three (3)Auditors?
Ms. Pasion: There are two (2) Auditors. Stephanie is
support.
Ms. Yukimura: Okay. Two (2) auditors. You are saying that you
want back the position that was removed?
Mr. Pasion: Yes.
Ms.Yukimura: What is your intention with that position?
Mr. Pasion: It is to have it refilled and get the best that we
can get available.
Ms. Yukimura: That would be an Auditor position as well?
Mr. Pasion: Yes.
Ms. Yukimura: But not a CPA?
Mr. Pasion: Well, it depends on what is available. The way I
would look at is that we do more performance audits in-house. Any Financial Audits is
being done by an outside CPA. By the way, when we have audits that are done and to
conform to The Yellow Book, we go to an outside CPA firm that follows all the requirements
of The Yellow Book. They might have to sub a technical. For example, like what happened
with the Kilauea Gym. We hired KMH, LLP, which is a CPA firm, and then because it is so
technical, they hired a subcontractor who was an engineering firm to help them with the
audit. That is how it would work.
Ms. Yukimura: I guess I am missing something. You are saying
that model you are citing from the Kilauea Gym is how your Office would work?
Mr. Pasion: If we had to outsource an audit, most likely the
one that would get the audit would be a CPA firm. For example, if we did the Parks.
Ms. Yukimura: Yes.
Mr. Pasion: Most likely, it would be awarded to a CPA firm,
and then they would hire technical assistance.
yk
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Ms. Yukimura: I see. You are talking about getting the CPA
function by contracting out?
Mr. Pasion: Right.
Ms. Yukimura: That is what you are saying?
Mr. Pasion: Yes.
Ms. Yukimura: What is the balance you are thinking of? This is
my last question.
Mr. Rapozo: Really?
Ms. Yukimura: For the first round.
Mr. Rapozo: I inadvertently let Ross take two (2), so in all
fairness, go ahead.
Ms. Yukimura: If you had this additional position, you would
have three (3) auditor positions, if you include yourself?
Mr. Pasion: Right.
Ms. Yukimura: That sort of indicates you are building an
in-house capacity to do audits.
Mr. Pasion: On the performance ones, for example, on the
Roads, that audit was done by Lani, but we had to use Manthos to provide the technical.
Lani did the audit but required technical inputs of Manthos Engineering. She did that.
She did the same thing with the Kaiakea Fire Station, too, and also the Kilauea Gym. We
are engineers. We are not experts in every field. According to The Yellow Book, if we do
not have the expertise in-house, we are allowed to bring those experts to help us to provide
an objective audit.
Ms. Yukimura: I guess I understand the specialized engineering
or even legal, if the County Attorney-but auditing skills, I am still kind of looking at that
balance. Thank you.
Mr. Pasion: Thank you.
Mr. Hooser: In listening to Councilmember Yukimura's
questions, it made me look at the Charter. I do not know whether we need to either ask the
County Attorney in writing or ask him to come over, but it does look like there should be a
CPA. Since we are talking about a position...
Mr. Rapozo: Today's discussion is on the Budget.
Mr. Hooser: Right.
Mr. Rapozo: His presentation and the Budget numbers. If
there is a question about the qualifications, that should be done via the County Attorney. I
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do not expect the County Attorney to come here today. The Chair is back, but I would hope
that we can focus on Budget as presented and the Audit Plan as was presented. If we have
an issue with qualifications and who should be doing a specific audit, I would ask the Chair
for his guidance. As far as I am concerned, I would say that should be handled at a
different time.
Mr. Hooser: We can do it at a different time. I guess it was in
response to the Auditor's request for a position, and for that position, what they are going to
do. It kind of leads to a...
Mr. Rapozo: That is perfectly fine.
Mr. Hooser: We could do that at another meeting.
Mr. Rapozo: That is a question that I have, actually. As far
as the dollar funded position?
Mr. Hooser: Right.
Mr. Rapozo: He is requesting that we fund it.
Mr. Hooser: Right. I believe in response to earlier questions,
the response was it was not anticipated to be a CPA. That led to the question of whether or
not the Charter requires a CPA.
Mr. Rapozo: Okay.
Mr. Hooser: That is how I got there.
Mr. Rapozo: I guess everybody can interpret the Charter how
they desire, but I think what I heard from Ernie was that obviously, he would like to get a
CPA for all of the positions, but he is pretty much reliant on what the market will give.
Like he said, it took six (6) months to hire the last person who was a CPA. He is no longer
there. As far as whether or not we need a CPA, that should be a discussion for someone
who can interpret the Charter. As far as asking Ernie what his intent is to fill that
position, that is perfectly fine today.
Mr. Hooser: With regards to the Budget, and again, it might
take some time for the County Attorney to look at anyway, but if in fact a CPA is required,
that would be a Budget item and then we need to comply.
Mr. Rapozo: Correct.
Mr. Hooser: I think we should figure out how that would
determine some clarity on whether or not it is. Then if it is, we can see about how we can
comply.
Mr. Rapozo: I guess a good question would be to ask the
Auditor what his interpretation is and what he plans on doing.
Mr. Hooser: Right.
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Mr. Rapozo: We can use that as far as communication over to
the Attorney's Office. I think that would be appropriate.
Mr. Pasion: I will be glad to...
Chair Furfaro: First of all Ernie, before you respond to that,
there is a communication and there is some history. We even had Marion Higa over to take
a recommendation from her. I just want to let you folks know that it was not something
that past. As far as the query on the structure, I did not participate in removing the CPA
in the Budget.
Mr. Rapozo: The Auditor, you mean.
Chair Furfaro: The Auditor's position for a CPA. That was
initiated by the Administration's review. Subsequently then, we have a question going
back to them. I will see if I can get some of the history from our visit with Marion Higa.
Mr. Rapozo: Do you want to proceed?
Mr. Pasion: The CPA certification is mentioned in the
Charter, Section 32.01 (B.), which states, If financial statement audits are conducted, the
county auditor shall be a certified public accountant." Since the Financial Statement
Audits are outsourced, CPA certification is not required of the Auditor. We do not do any
Financial Audits. If you require us to do Financial Audits, we would have to outsource it
for sure.
Mr. Rapozo: Right. Again, Mr. Chair, I think that should be
enough for that subject because that is an interpretation issue. We will leave that for the
interpreters. As far as the Staff Internal Auditor, which was removed—I will not say
removed, but dollar funded by the Administration; what is your intent as far as filling that
position, if you should get it?
Mr. Pasion: I would have it posted and get all of the
candidates, and then assess what is best. Based on what I would see is that I would ask for
their audits in the past and get copies of it. That way, we can see how they handled
performance audits and things like that. Again, we do not do Financial Audits here. We
outsource them.
Mr. Rapozo: Right. That is reflected in the Budget.
Mr. Pasion: Right.
Ms. Nakamura: Ernie, just to clarify, you are not looking
specifically for someone with a CPA background, should the funding become available?
Mr. Pasion: I am not saying that, Vice Chair. I am saying
that we would assess whoever is applying and then we will then ask for their past audits.
Ms. Nakamura: The CPA requirement would not be a
requirement of that position?
Mr. Pasion: That is correct.
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Ms. Nakamura: Okay. Thank you.
Mr. Rapozo: Councilmember Yukimura, follow-up?
Ms. Yukimura: Yes. What is the salary or the amount you are
requesting for this position?
Mr. Pasion: It is the same amount that we had.
Ms. Yukimura: What is it?
Mr. Rapozo: It is eighty-nine thousand seven hundred
seventy-six dollars ($89,776).
Ms. Yukimura: Okay. Is that enough to get a CPA?
Mr. Pasion: I believe so.
Ms. Yukimura: You may not mean to make it a requirement, but
as part of your difficulty in getting a CPA is the salary level at which you are setting.
Mr. Pasion: Like I said, it will be based on what is available
out there, CPA or non-CPA, based on their past performance in audits.
Ms. Yukimura: It is your opinion that it is enough to attract a
CPA, possibly?
Mr. Pasion: I think so.
Ms. Yukimura: Okay.
Mr. Pasion: I just received a survey from Association on Local
Government Auditors (ALGA) on salaries and I can see those rates.
Ms. Yukimura: Even with a place like Hawai`i where there is a
high cost of living?
Mr. Rapozo: I am sure we have a lot of CPAs out there looking
for work.
Ms. Yukimura: Okay. Thank you. Very good.
Chair Furfaro: Mr. Rapozo, continue with the meeting because I
am playing phone tag on another issue.
Mr. Rapozo: Okay. Go ahead, Mr. Hooser, follow-up.
Mr. Hooser: Since we are talking about the possibility of the
position that is being requested, just to be clear, CPA aside; are there others in your Office
who are accountants or have accounting degrees?
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Mr. Pasion: No.
Mr. Hooser: There are no accountants at all in the Office?
Mr. Pasion: None, except me.
Mr. Hooser: Okay. You are an accountant?
Mr. Pasion: That is my background.
Mr. Hooser: Okay. I was not sure. I knew you had some
degrees but I did not know that they were...
Mr. Pasion: I have a BS background in Banking and Finance,
and then my MBA in Chicago and I was the Chief Financial Officer of a company of an
eighteen billion dollar ($18,000,000,000) corporation in Chicago. I had nine (9) controllers
reporting to me, with travel to Japan and Europe, and to all our clients in the United States
and Canada. We closed the books on the 7th working day and 15th working day. The Board
of Directors had their worldwide reports in their hands. That is the kind of discipline I had
in the past.
Mr. Hooser: I did not want to assume that everyone was an
accountant. I just wanted to make sure there was someone had an Accounting Degree or
background in Accounting. Thank you.
Chair Furfaro: I just want to make sure that we also understand
that we have the decision over the Auditor. The Auditor is mandated to hire his staff, but
with the understanding that they will meet the requirements of the Audit Department,
whatever that may be. I want to make sure that we understand that for subsequent
selections, we only qualify and hire the Auditor. He is responsible to meet the criteria of
the rest of his staff.
Mr. Rapozo: I would agree, Mr. Chair. That is why I guess it
is troubling when I saw the dollar funding. I possibly thought that maybe you...
Chair Furfaro: No, that came to me as information after the
fact.
Mr. Rapozo: That is, I think, a bigger problem in this process.
It is no different than the Administration sending over a Budget reducing our Council Staff.
It is no different.
Chair Furfaro: I just sent that note back.
Mr. Rapozo: I actually do not even know how to deal with that
right now. It is not only disrespectful but I believe it crosses the line of the separation of
power. That is a Legislative Department and the Auditor is responsible for his staff, but
collectively, they come under the jurisdiction of the Legislative Branch which I do not
believe that the Administration has any right to reduce any position, any Budget item,
period. That is just my opinion. Councilmember Nakamura.
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Ms. Nakamura: Thank you for your presentation, Ernie. I
wanted to ask you a question relating to your 2013-2014 Audit Plan. In previous Audit
Plans, you have indicated how many full performance audits you plan to complete. I
understand there is some uncertainty this year, not knowing whether that audit position is
dollar funded now. Under two (2) different scenarios, could you tell us how many
performance audits you plan to complete?
Mr. Pasion: I want to give you the information, Vice Chair,
that the other jurisdictions do not make a commitment like that. What I have done is
researched on how many audits the other jurisdictions have done. If you are interested, I
can provide that information to you. The Honolulu's Office of the Auditor, there are eight
(8) of them. One (1) is non-audit. There are seven (7) of them and they average—I had
copies made, so we can compare ourselves.
Ms. Nakamura: Thank you for being prepared.
Mr. Pasion: We compare favorably to the other jurisdictions
with being a young organization, audit shop. In looking at the two (2) years that that we
completed, we had six (6) audits. We average three (3) audits a year and with the four (4)
people that I have, excluding the clerical person, we have 0.75 report per staff. If you look
at Hawai`i island, over three (3) years that they have, they have 6 (6) audit reports. They
are averaging two (2) a year and they have three (3) in their audit staff, excluding their
clerical. They are averaging 0.67 reports per staff. From the Office of the City Auditor,
where they started in 2003-2004 and they have up to Fiscal Year 2012, they have thirty-one
(31) reports over the nine (9) years. They had 3.44 average per year and there are seven (7)
auditors there. They are averaging 4.91 reports per staff. I wanted to give you that
information to you as far as commitments of how many audits we do a year because you do
not know when you get into an audit, what is out there.
Ms. Nakamura: I guess why I am confused is that the stated goal
for your 2010-2011 work plan was to complete three (3) to four (4) full performance audits.
When I look at your list here—so we take away the financial CAFR because that is not a
performance audit, correct?
Mr. Pasion: Right.
Ms. Nakamura: We take that out. Then I look at what did you—
for that year 2010-2011, what did you complete? I believe you completed the Energy
Report.
Mr. Pasion: We completed the Energy Report. We completed
the...
Ms. Nakamura: The Fuel Cost Consumption and Manage Report.
That is what was completed that first year.
Mr. Pasion: Vice Chair, for 2010-2011 we completed three (3).
The Kaiakea Fire Station...
Ms. Nakamura: I am sorry, this is not in order. Thank you for
pointing that out.
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Mr. Pasion: We have the Audit of the Capital Project
Management, Kaiakea Fire Station; the follow-up Audit of the County of Kaua`i Building
Division referring to the Kilauea Gym Audit; and then we have the Performance Audit
Implementation of the Recommendations of the Cost Control Commission Concerning
Energy Savings.
Ms. Nakamura: Okay, but did you complete those audits? The
Kaiakea one in that year?
Mr. Pasion: Yes. We consider our audits when we issue the
draft report. The reason why we do that is because remember when we came out before the
Council on the Kilauea Gym, we never received anything from the Auditee.
Ms. Nakamura: Correct.
Mr. Pasion: We issued the report and then the day before
they came up with their response—if we wait for them to give us their response, we do not
know when we can finish our audit.
Ms. Nakamura: Do we have the date by which the draft Kaiakea
Fire Station Report was completed?
Mr. Pasion: Yes. I will get back to you on that one, Vice
Chair.
Ms. Nakamura: That would be helpful. My assessment is that
Kaiakea Report was completed in 2012.
Mr. Pasion: Maybe that is when the final report was issued,
rather than the draft report.
Ms. Nakamura: Okay. Let us use the draft report then as the
guideline.
Mr. Pasion: right.
Ms. Nakamura: I would like to just confirm the draft report.
That would be helpful. Mr. Pasion, if you could include the date the draft report was issued
so that it is consistent.
Mr. Pasion: Sure.
Ms. Nakamura: That is the Kaiakea.
Mr. Pasion: Yes.
Ms. Nakamura: For the follow-up audit, was that a brand-new
performance audit or is that relating to the Kilauea Gym?
Mr. Pasion: That was related to the Kilauea Gym, Vice
Chair.
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Ms. Nakamura: Was that generated by your Office?
Mr. Pasion: Yes.
Ms. Nakamura: That was the original report?
Mr. Pasion: The original one, that was done in 2005. It was
in the files here in this Council's files until I got the Office established and was issued to
me, and then I had to get it out by February of 2010. Then, we had to do a follow-up audit
of that audit which is that follow-up audit on the Kilauea Gym.
Ms. Nakamura: I guess it would be good to just get the draft
report date for that.
Mr. Pasion: Sure.
Ms. Nakamura: That would be helpful. Definitely, the Cost
Control Commission Report was done that year?
Mr. Pasion: Yes.
Ms. Nakamura: I think the questionable one is the Kaiakea.
Mr. Pasion: We will get that information for you.
Ms. Nakamura: Thank you. For that first year, your goal was
three (3) to five (5) full performance reports. According to yours, you did three (3) out of
those five (5).
Mr. Pasion: Right.
Ms. Nakamura: Then the next year, your stated goal was three
(3) full performance reports. Is that correct?
Mr. Pasion: Yes.
Ms. Nakamura: Okay. What was actually completed was the...
Mr. Pasion: Road Maintenance...
Ms. Nakamura: Fuel Cost...
III
Mr. Pasion: Fuel Cost...
Ms. Nakamura: I think we both agree on that one. That was
completed that year?
Mr. Pasion: The Interim Report on the Fuel Cost was issued
that year.
Ms. Nakamura: What else was issued that year?
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Mr. Pasion: The Cash Management was issued.
Ms. Nakamura: Okay. I have that completed the following year,
so can we get the date of this one?
Mr. Pasion: Sure. The third one is the Road Maintenance.
Ms. Nakamura: The Road Maintenance?
Mr. Pasion: Yes.
Ms. Nakamura: Can we just get the date for that one as well? I
do not have that listed here.
Mr. Pasion: Sure.
Mr. Rapozo: Which one was that, Councilwoman?
Ms. Nakamura: That was the Roads Maintenance Report.
Mr. Rapozo: Okay.
Ms. Nakamura: In the past year—then the next year, your goal
was for the year 2012-2013. I guess we have two (2) full performance audits.
Mr. Pasion: Right. We were short of Staff on that one.
Ms. Nakamura: For part of the year?
Mr. Pasion: Yes, so we anticipate issuing one (1).
Ms. Nakamura: Which one do you anticipate to issue?
Mr. Pasion: The Furlough Audit.
Ms. Nakamura: The Furlough Audit. Okay. That is what I was
going to ask about. That is what I was going to ask about. When you do your work plan,
you have a laundry list of possible projects to work on?
Mr. Pasion: Right.
Ms. Nakamura: It does not mean you are going to do them all,
but these are possible performance audits?
Mr. Pasion: That is correct.
Ms. Nakamura: What happens to those that you do not decide to
work on?
Mr. Pasion: They will be on the list to be done in the future.
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Ms. Nakamura: I noticed some of them, for example—so you are
going to do the Furlough Audit, the partial hiring freeze audit. Enforcement of Planning
Permits?
Mr. Pas i on: Yes, th at is o n our list yet to be done in the
future. It is based on what is available to us. We cannot do everything.
Ms. Nakamura: Right. I do not see them on this year's list. Is
there a reason for that? It was promised—you said in 2010-2011 that these were some you
were going to look at potentially, because it rose to the top of importance. Yet, I am just
wondering; some of them you are now completing? We are going to get the Furlough. For
the others, what happens?
Mr. Pasion: They are on the list to be done in the future.
Ms. Nakamura: To be done in the future, but it is not important
now?
Mr. Pasion: For example, we were supposed to do budgeting.
Then the fact that the Budget Director was there for a long, long time and then he retired
and then they realized they were going to switch to a different system. We said, "There is
no point in doing the Budgeting Audit now. Let us give Ernie and his team time and maybe
in two (2) years we can look at what they have done to improve the process."
Ms. Nakamura: Okay. The other one is the "Enforcement of
Planning Permits and Conditions" that was first on your 2010, in your 2011, in your 2012,
and then it kind of dropped off the radar.
Mr. Pasion: Right now, that is an ongoing—we have
contracted with BOW to help us on that.
Ms. Nakamura: How long will it be ongoing? Do you anticipate
having a report any time soon on that?
Mr. Pasion: It also depends. Again, you do not know how
things will materialize until you get into the field and how you get corporation from the
auditees. That is why it is so difficult to really commit to a solid number. For example, the
Fuel Audit is still not done. We did an interim but the final is yet to be issued.
Ms. Nakamura: True but in it case, it has been on here for three
(3) years, yet there is not even an interim or draft. Do you see an end date, I guess is my
question?
Mr. Pasion: When we look at staff and we think it is more
important than the one we had before, that is when we decide that we will get to that later
and here is one that is more important.
Ms. Nakamura: Okay.
Mr. Pasion: It is really the call of the Auditor based on the
risk and the impact on the County that we decide. That is the reason why we wanted to do
April 12, 2013
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the Audit of the Human Resources and Hiring Practices because it would have included
hiring freeze part of it. We never had a chance to do it.
Ms. Nakamura: Should it appear on your work plan as something
to follow-up on? Or is it just assumed that you are working on it since it already appeared
on the previous?
Mr. Pasion: What we could do is we could just keep on adding
and adding but when I do that, it is a firm commitment to finish everything on the list.
That is what the City Auditor does.
Ms. Nakamura: I guess I am not getting a really good sense of
what the priorities are of the Department. I am just trying to figure that out. Is it to finish
up what were the priorities before, or is it to take on new projects? Where do you put your
limited resources now that there are some restrictions on funding?
Mr. Pasion: That is the reason we came up with this. What I
presented today is based on what we would do if we do not get the dollar funded position.
We would (inaudible) Capital Project Planning and the Service Efforts based on the
available...
Ms. Nakamura: Can I just ask one final question on the take-
home car policy and compliance that appear both on the 2011 and the 2012 work plans.
Could you tell us the status of that audit?
Mr. Pasion: That is ongoing as a matter of fact. Hopefully, it
is going to be out before the end of this Fiscal Year. Again, we have that with Pacific
Hawai`i LLP (PKF), the outside CPA firm in Honolulu. They have to look at the whole
thing. They were just going to look at thirty (30) vehicles and now they are looking at—
what they found out is that they are going to go into three hundred (300) vehicles now. You
do not know what is going to happen until you get into the field to find out how expansive it
could get based on what percentage of what is being investigated by the auditors. That is
ongoing right now, Vice Chair. The take-home vehicle is ongoing right now.
Ms. Nakamura: Okay.
Mr. Pasion: It is ongoing with PKF. Like I said, I hope we
can get it out before the end of the Fiscal Year.
Ms. Nakamura: Okay. Your policy of stating your goals for how
many performance audit-you have done that in past. I guess that is why I was wondering
if you were going to do it this year, and I guess you are saying you are not going to do that.
Mr. Pasion: Right.
Ms. Nakamura: Thank you.
Mr. Rapozo: Thank you. The date for the Kaiakea Fire
Station was December 6, 2011. The Road Maintenance was August 3, 2012. December 6,
2011 was Kaiakea. That was when the draft was issued and sent over to the
Administration and Road Maintenance was August 3, 2012.
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Ms. Nakamura: Thank you.
Mr. Bynum: The next draft audit we would likely see is the
Furlough Audit?
Mr. Pasion: Yes, Councilmember.
Mr. Bynum: Do you have a guesstimate of when that will be?
Mr. Pasion: I am hoping that it will be by the end of this
Fiscal Year.
Mr. Bynum: Before the end of this Fiscal Year?
Mr. Pasion: Yes.
Mr. Bynum: You are still not engaged with the auditee?
There is no hold-up on that? At this point you have done all the interviewing that you need
to do?
Mr. Pasion: No, we are still.
Mr. Bynum: Okay. Thank you.
Mr. Kagawa: To follow-up on the Furlough Audit, are we
analyzing the big question that Councilmembers asked which was, "Is it feasible to put
workers on furlough or not to?" Is that what is going to be answered?
Mr. Pasion: Before the County went into the furlough, we
provided to the Administration the audit of the California Furlough done by University of
California at Berkeley as input. What they found out is that government grants were
affected, so it affected the inflow of money into the State of California. They also included
all of those that did not depend on the General Fund of the State. What happened here is
that it also affected Housing, Elderly Affairs, and people who were getting money should
not have been affected. We are looking at that. "We are looking at what kind of savings did
we derive from doing the furlough?" "What kind of controls was lost?" B
ost. not having the
g g By g
work, there could be controls that were not done or something like that. Those are the
kinds of things we are looking into. Also, "How effective was the furlough?"
Ms. Yukimura: Ernie, the plan you offered us is if you do not
have the position, right?
Mr. Pasion: Yes.
Ms. Yukimura: The position was not entirely removed. It was
just dollar funded?
Mr. Pasion: I do not have the funds that were submitted by
the Mayor, so I am saying...
Ms. Yukimura: Right. The moneys were taken out, but the
position was not taken out.
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Mr. Pasion: No, the position is there.
Ms. Yukimura: If you get the position—it is kind of a follow-up to
Council Vice Chair's question, but what is the program you would deliver?
Mr. Pasion: If I get it then I would have to reassess the
project that we would be able to submit.
Ms. Yukimura: Yes, but we are telling everybody who is coming
before us that if you want these moneys, what will you produce for the moneys given? So
you do not have any more of a specific idea of what you would be able to deliver if you had
this position?
Mr. Pasion: We would have to look at what we have in our
lists. By the way, bringing somebody into the County, you need some time to find out what
is going on in the County. Do you know what I mean?
Ms. Yukimura: No, but you are there with three (3) other people
right now, so it is not like that person is going to bring in the familiarity or the priorities.
That is set by your Office and your leadership.
Mr. Pasion: Councilmember, this is how it works. Let us say
I have a project and I assign it to an Auditor. I work with the Auditor, look at the findings,
look at the recommendations, and then we make adjustments or look into more stuff. The
other Auditor is not involved. When we believe that we have the package, we turn it over to
the other Auditor which is for the independent review of the audit. It is the IRR, which is
required by The Yellow Book to, make sure that everything we process is all in there; all
the pertinent facts and supporting documents. We cannot get the other Auditor involved in
that audit. Then vice versa or the same thing. If I am working with this Auditor here, this
other one is not involved.
Ms. Yukimura: I do not think I am making myself clear enough.
I am just saying, what priorities will you have as the Auditor for this other position that
you are asking for?
Mr. Pasion: I would have to look at my list.
Ms. Yukimura: What list?
Mr. Pasion: I have a list of projects that I would take from.
Ms. Yukimura: It is going to depend on who you get rather than
what you want to accomplish?
Mr. Pasion: It will depend on both factors.
Ms. Yukimura: Thank you.
Mr. Rapozo: Thank you. Are there any follow-up questions?
Go ahead.
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Mr. Hooser: I did not have any other questions but after
hearing everybody else, I have another question or two (2). It is fair to ask if your Office
was to get another ninety thousand dollars ($90,000) plus fringes, what is that the people of
Kaua`i get for that money? When you say to look at your list, is that list of projects that are
underway now? Or a list of new projects?
Mr. Pasion: It could be a list of new projects.
Mr. Hooser: You have a list of potential audits/reviews?
Mr. Pasion: Yes.
Mr. Hooser: Could we get a copy of that list, too?
Mr. Pasion: I can provide you that list.
Mr. Hooser: Okay. Great, thank you.
Mr. Rapozo: Thank you very much. You have another one?
Go ahead.
Ms. Nakamura: I have a question on your work plan or Audit
Plan for the coming year. On the County Ethics Policy Survey and Assessment, can you—
sounds like you are going to do survey and assessments of County employees and officials?
Mr. Pasion: Yes.
Ms. Nakamura: What kinds of questions would you ask and what
are you trying to get out of this?
Mr. Pasion: Us Auditors, we do good networking. For the
City of Berkeley, they had an award on that particular audit and so we would look at
what...
Ms. Nakamura: What kind of questions would you ask about
Ethics? We have an Ethics Code. What are you going to ask related to that?
Mr. Pasion: Like I said, we would refer to the kind of list and
we would also look at other lists from other jurisdictions that did this kind of survey.
Ms. Nakamura: What would be the nature of the questions that
you would ask?
Mr. Pasion: Let me get that information and I will be
providing it to you.
Ms. Nakamura: What do you hope to accomplish with this
particular audit?
Mr. Pasion: I want to make sure that we are aboveboard on
the way we operate our County government. That is what it would be so that the people of
County would say that everything is okay.
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Ms. Nakamura: By people self-reporting whether or not they are
doing things ethical? Is it self-reporting?
Mr. Pasion: Having an independent report like that would
assure the citizens of the County that the County government is operating ethically.
Ms. Nakamura: Yes, but I am going to be self-reporting. I am
going to say, "Yes, I get to work on time," or "I do not have a conflict of interest." I am going
to report to you through a survey.
Mr. Pasion: It will also require the involvement of Staff to get
of the information.
Ms. Nakamura: Right. I would like to take a look at that
Berkeley report, if it is available. I just do not understand what you get out of this. Thank
you.
Mr. Pasion: I will do that, Vice Chair.
Mr. Rapozo: Thank you. Basically from what I understand
about these types of audits or surveys are that they go out and survey the employees. It is
not just self-reporting because it is basically saying, "Hey Ernie,Nadine is doing this. Joe
is doing that." They compile the information and it is really to determine whether or not in
some jurisdictions they have these tip lines where you can report abuse. The military does
that and that is where I am familiar with it, from the military, not from government
because I think most Counties will not do it. That is my understanding of how these
surveys work. It does work in many jurisdictions. That is how I understand that to be, but
I would like to see the Berkeley study as well. That would be interesting. Are there any
other questions?
Ms. Nakamura: Just as a follow-up on the discretionary, going
back to that one. With limited resources, Ernie, and with the Mayor having a limited
Budget and I do not know about the Prosecutor, but I really feel that is not a major priority.
I would not spend a lot of time or resources or make that a high priority, given in some
other things. Maybe we can talk about some of the other items that might rise higher than
that. I know this is still a work in progress, so I hope you would be open to other
suggestions.
Mr. Pasion: Okay. I will take that into account, Vice Chair.
Mr. Bynum: I know the Council can request through
resolution, you to conduct certain audits, right?
Mr.Pasion: Yes.
Mr. Bynum: If we give you that and unanimously the Council
says, "Ernie, we want you to do this." How do you prioritize that? Does it bump your
priorities? Is it up to you? I do not recall.
Mr. Pasion: According to the Charter, the Council can submit
a request for us to look into audits via resolutions, approved by the majority of the body.
April 12, 2013
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33
Then it comes to us and we look at the thing, and the request and we would then take into
account looking at other projects that we have and do a risk assessment. "What is the
impact of doing this compared to this one?" We would do that. It does not mean to say that
by submitting it to us that we jump and drop everything and we do what you submit to us.
We have to look at the impact of what you are submitting to us compared to the audits that
we have on the list.
Mr. Bynum: All of what you said makes sense but for the
bottom line, is it your determination whether those requirements rise to the level that you
are going to slot it? I just do not know in the long run...do you have to do what the Council
asks you to do eventually? Is it just another suggestion that you put in and make an
independent decision?
Mr. Pasion: I am citing the Charter. The Charter says that it
is submitted to the Office of the County Auditor and is under consideration of the County
Auditor.
Mr. Bynum: Okay.
Mr. Pasion: Going back to the past, we did some pre-audits
for the Council on the Landfill and the hazardous waste. The Chair submitted that to us
and we looked into it. We also did another one and one submitted by the Cost Control
Commission that we looked into. We welcome the Council submitting to us what you guys
want us to audit.
Mr. Bynum: But you are not required to do it or required to
assess it?
Chair Furfaro: Let me summarize this because there is a policy I
wish you would have referred. You and I have met on this, and I think the way the
procedure you responded to is exactly what is in the policy. Let me circulate it, Tim, and
then we can review the particulars because the biggest part is that you have to come back
to us and say if there are additional costs and what those costs would be.
Mr. Pasion: That is correct. We have to have funds to do that
request and if not, then you have to fund it for us to do that audit.
Mr. Bynum: I ask these questions for a reason because I am
working on one.
Mr. Pasion: Okay.
Mr. Rapozo: Thank you, Mr. Bynum. We have Elderly
Affairs. We have to take a caption break. Mr. Hooser and Councilmember Nakamura have
a question. Mr. Chair, if it warrants any more discussion, we can do a Call-Back under
your discretion. We still have to do a caption break, so apologize to Carol.
Mr. Hooser: It is a follow-up the discretion. From my
understanding, we are here to approve or discuss the Budget, but also the Audit Plan seems
linked to the Budget because we are being asked to fund an Audit Plan. At some point we
actually vote on the Audit Plan. Is that correct? I thought the Council approved the Audit
Plan?
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Chair Furfaro: It goes this way, Mr. Hooser. He submits the
plan and the Budget that we approve supports which pieces we are doing.
Mr. Hooser: Okay.
Chair Furfaro: That is how it goes.
Mr. Hooser: Okay. We approve the Budget, which plan is
linked to it, so indirectly we do. As you come back for further discussions, you had
mentioned earlier you will bring a list of other options and audits on your list. I will
assume we will have a discussion on that list at some point.
Mr. Pasion: Right.
Mr. Hooser: We will have a discussion and it is possible you
might amend your plan to reflect ideas or concerns that were expressed by Council? It is
possible?
Mr. Pasion: Possibly.
Mr. Hooser: As opposed to having a resolution passed, that is
another way for the Council to exert their prerogative or intent, if you would. Then at the
end, it is up to you whether you accept that or not? That is another opportunity for us to
bring those ideas forward to you.
Mr. Pasion: Yes.
Mr. Hooser: Yes.
Mr. Rapozo: If you have audit concerns and you want them to
consider it, I would suggest getting it to him as soon as possible so he can incorporate it into
the plan.
Mr. Hooser: Okay. Like the golf course, I wanted to ask for
a...
Mr. Rapozo: I think you mentioned the Humane Society the
other day.
Mr. Hooser: Yes.
Mr. Rapozo: He will do the assessment and if it makes the
Audit Plan, then fine. If does not, we will do a resolution and with the resolution, should
be, if needed, the funding.
Mr. Hooser: Okay. Otherwise, it would be the Audit Plan
with the existing funding?
Mr. Rapozo: Yes. The idea is to try to get him on the Audit
Plan.
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Office of the County Auditor (cy)
35
Mr. looser: Okay. Thank you very much.
Mr. Rapozo: But he is an independent auditor.
Ms. Yukimura: Ernie, I think you have always told me we have
to get it in a resolution for you to do it?
Mr. Rapozo: If it is not in the plan.
Mr. Pasion: If it is not in the plan then according to the
Charter, the Council can submit to the Auditor by resolution, where the Auditor can
consider doing an audit
Ms. Yukimura: Thank you.
Mr. Rapozo: Ernie, thank you very much. I have one (1)
question. Certified Fraud Examiners, all of your Audit Staff is certified audit examiners?
You do not need to go into detail. It was in your narrative.
Mr. Pasion: Yes.
Mr. Rapozo: Thank you. We will take a ten (10) minute
caption break and be back with Elderly Affairs. Thank you for your patience, Elderly
Affairs.
There being no objections, the departmental budget review recessed at 3:44 p.m.
Chair Furfaro:
I asked the Auditor to stay because I wanted to
summarize a few things so that we all understand especially for some of you either coming
back and revisiting and/or first time exposure. First of all, I think we are all in agreement
that the first subject matter that I had brought up dealing with the Discretionary Audit. As
you know, I had some concerns about that as being a project item because we do not have
discretionary funds and then the conservation went on to a few other concerns, so that
needs to be refine. Also, we had a situation that dealt a little bit about what is the desire
outcome we want from what the Vice Chair had talked about when it deals with the Ethics
query— the Berkeley piece and so I do not think we are quite clear in settling in on that so
we are going to send over some questions to the Auditor's Department specifically on those
2 parts. Now, when it comes to the understanding of the procedural process, the Auditor
submits a budget with a plan. There is a lot of documentation, you gentlemen should know,
that we are asking the question about the plan, not the ladies that confirm what
Councilmember Yukimura said because in the very beginning the position that the Audit
Department said is, they did not need to provide us with a plan simultaneously with their
budget. I was at disagreement with that from the very beginning because your plan is the
financial aspects of what is in the plan. You cannot judge the financial plan without
knowing what the goals and accomplishments are. I can dig out a bunch of understandings
that we have now with the Auditors group for you gentlemen. The next item that I want to
make sure that we are all in agreement and I am going to summarize the piece that we are
sending over to Ernie, it is his plan. He writes the plan, he supports it with the financial
piece of the budget, and we review that. There is no problem with us asking him to put in
certain things for his consideration but if his piece does not reflect a project you wanted like
for example, the golf course, the club house, I can give you several of my request and it
went to the Administration as well, he has the opportunity to say if you want us to go into
April 12, 2013
Office of the County Auditor (cy)
36
that kind of detail about net food and beverage sales, and so forth, we can do it but it has to
be added to the plan. There is a lot of documentation on that. So, on that note, I wanted to
recap the pieces, Ernie, I am sorry I was in and out because we have another issue that
does not involved you. On Monday folks, we have three (3) members with excused
absences, okay. We must have four (4) people for a quorum. The item while the
Administration is here, the item that I have the questions dealing with is Personnel
Services; do I interpret that as having a connection to HR? Just a shake of the head. You
are acknowledging that and yet HR is a very important subject to all of the members here
but we are going to be doing business with the minimum of the Staff here. Before we end
today, can I ask you folks now, can you consider a relocation and work with Scott, he is here
on when we might do that. I do not think that Personnel Services and HR will be limited to
this timeframe. If we can find another date, I would like to do it before we end today to
announce it to you folks and then that will give us a little more time with Housing. Those
are my housekeeping notes. Kealoha, thank you for your patience and we are delighted to
have you here with us now. Come right up. Ernie, thank you.