Nhsc-v1-393

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nhsc-v1-393

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2. In addition, we recommend that the issue of whether native Hawaiian ranchers can award grazing permits to non-native Hawaiians be resolved.

3. Financial Management and Reporting

Improvements are needed in the financial management and reporting systems to provide for the maximization of revenues as well as providing DHHL with the means of making sound management decisions and for providing accurate and timely reporting on the discharge of its trust responsibilities. Our review disclosed that cash management has been ineffective, complete financial statements were not prepared, the accounting system was unauditable, and the required annual report was not based entirely on accurate and supported data.

Cash Management

DHHL has not maximized income by analyzing current cash needs and investing all cash excess to current needs into revenue-producing investments. We estimate that DHHL lost in excess of $100,000 of interest revenue for the 9 months ending February 28, 1982, from uninvested cash of just one DHHL fund and another $180,000 from three other funds.

The Hawaii Department of Budget and Finance invests "excess" cash in time certificates of deposit when so requested by the DHHL fiscal officer. These investments are authorized by Section 225 of the Act. Section 225 also specifies the DHHL fund accounts to which the interest revenues are to be credited. The certificates of deposit can be purchased'for periods as short as 30 days in the amount of $100,000 or more. During the 9 months ending February 28, 1982, the rate of return has varied on such certificates from about 10.5 percent to 16.2 percent.

We reviewed the cash balances of the Hawaiian Home Development Fund for the 9 months ending February 28, 1982. During this period, the development fund had an average uninvested cash balance of about $1.2 million. Investments were made in only 2 out of these 9 months. In our opinion, the uninvested cash balance was greatly in excess of current operating needs, especially considering that revenues exceeded expenditures during the 9-month period. We estimate that DHHL could have generated additional revenues of over $100,000 by investing the development fund cash that was excess to immediate needs.

We also reviewed the cash balances for the Hawaiian Home Administration Account, the Hawaiian Home General Loan Fund, and the Native Hawaiian Rehabilitation Fund. The average uninvested cash balances in these three funds totaled about $2 million for the 9 months ending February 28, 1982. If this money was fully invested, we estimate that DHHL could have generated additional revenues of about $180,000.

We did not attempt to determine the total amount of interest for all DHHL fund accounts, nor did we determine how long this situation existed. But we believe that inadequate cash management is a major problem, since DHHL must rely largely on internallygenerated monies to fund its programs.

We believe this problem exists because aggressive cash management has not been stressed as a high priority by the Commission. We also believe that the lack of adequate financial statements as discussed below may have caused the Commission to be unaware of the situation.

-p393-

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