by Andrew Walden
The HART audit released November 21 shows that HART somehow failed to account for $83M of federal funds which were transferred from HART to the City and County of Honolulu for Rail expenses incurred by the City.
In response, HART has decided that it might be a good idea to reconcile its books once in a while.
Since it is difficult to conceive of this level of incompetence, one must ask whether the 'mistake' is intended to cover up some violation of Federal requirements attached to the $83M.
Also -- Auditors detail effect of Anti-Rail litigation on pages 26-28.
Here are links to the full text and below are key excerpts:
pg 32...as described in the accompanying schedule of findings, we identified a deficiency in internal control that we consider to be a material weakness.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detect and corrected on a timely basis. We consider the deficiency described in the accompanying schedule of findings as 2013-01 to be a material weakness....
Pg 35 -37 FINDING 2013-01 – FEDERAL GRANT REIMBURSEMENTS
In accordance with accounting principles generally accepted in the United States of America, governments should recognize revenues and intergovernmental receivables from intergovernmental transactions that are either government-mandated or voluntary nonexchange transactions when all eligibility requirements, including time requirements, have been met.
Certain unbilled amounts for reimbursement of costs from the federal government related to the construction of the Project were discovered by us during the audit.
The above finding was caused primarily by lack of policies and procedures to ensure that reimbursable expenses are billed in a timely manner.
An adjustment was proposed by us, which management recorded, to record unbilled receivables of $83,783,523 as of June 30, 2013.
We recommend that management of HART consider implementing policies and procedures to ensure billings related to reimbursable federal expenses are completed in a timely manner. We also recommend that management evaluate the resources required to perform this function.
RESPONSE OF THE AFFECTED AGENCY -- FINDING 2013-01 – FEDERAL GRANT REIMBURSEMENTS
Response of Management
Management is presently recruiting for a full-time federal grants manager who will be responsible to ensure that all FTA eligible reimbursable costs are submitted in a timely manner.
Policies and procedures will be put in place that will require monthly submissions of reimbursable costs to the FTA as well as monthly reconciliations of expenditures versus reimbursements to date. At year-end, an annual reconciliation will also be performed comparing total actual and accrued expenditures to reimbursement amounts to determine the annual accrual of unreimbursed FTA grant revenue.
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PBN: Audit finds Honolulu rail agency failed to properly record $84M in federal funds
SA: 'Lack of policies' blamed for rail accounting error
Those federal dollars aren't missing, HART Chief Financial Officer Diane Arakaki explained after the meeting. There was simply a "recording error," which caused no adverse impact to the project, she said.
The funds were used to reimburse the city money already spent on the $5.26 billion rail project, Arakaki added.