LIHUE — The Hawaii Department of Transportation’s Highways Division in fiscal year 2018 did not review capital improvement projects in a timely manner, incorrectly classified federal expenditures and violated cash management requirements by drawing funds from a federal agency prior to paying a subcontractor, according to a report issued by the Hawaii State Auditor’s Office.
An independent audit conducted on behalf of the state auditor assessed the Highways Division’s presentation of financial statements through June 30, 2018 and identified “a number of errors in supporting documentation” made by HDOT administrators.
Auditors reviewed 25 HDOT projects in progress where little or no activity had occurred in the prior two fiscal years and found that all but five were categorized inappropriately. Twenty of the selected projects “were deemed to either have been placed in service or were canceled,” the report said.
Some of the errors had been caught and recorded as proposed audit adjustments by HDOT management, but Highways Division administrators did not catch over $12 million in misappropriated or improperly transferred funds, according to the audit.
The auditor’s report also noted a trend that “could be indicative of a larger internal control issue.” Auditors found several discrepancies in adjustments made by HDOT management totaling roughly $20 million, which could potentially allow for “material misstatements of the financial statements.”
The cause of the issue, according to the audit, was that office personnel and contract accountants previously responsible for preparing year-end financial statements were assigned to other tasks, like account reconciliations or financial analyses, and due to expedited reporting deadlines the tasks were not able to be completed in a timely manner.
These issues were exacerbated by an “aged” accounting system and “an overall lack of personnel resources caused by retirements and the difficulty of filling vacancies,” the report found.
The audit also found that roughly half of the $5.9 million total “highway safety cluster expenditures” had been improperly reported or incorrectly classified in the Highway Division’s annual report on the expenditure of federally-awarded funds. Auditors attributed the error to “decentralized” grant management that relied on incomplete information from the Motor Vehicle Safety Office.
Finally, the audit revealed that over $3.6 million in reimbursible expenditures were not paid by the Highways Division until after the funds were received from the federal awarding agency. That number represents over a third of the total amount of the division’s reimbursement requests inspected by auditors.
The discrepancy left the division out of compliance with cash management requirements but was found to be a simple misinterpretation of guidelines provided by the federal awarding agency.
