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discrepancies between the accounting records maintained by the Hawaii Department of Accounting and General Services and the records of DHHL. In addition, there were discrepancies between DHHL's general ledger and subsidiary ledgers.
The task of performing reconciliations has been assigned to temporary DHHL personnel, and there has been a loss of continuity when positions are vacated and refilled. At the time of our audit, no reconciliations had been attempted for about 8 months.
The audit function is an important part of good financial management. It helps to provide assurance to management and interested outsiders concerning the safeguarding of assets and the reliability of financial data. Accordingly, we believe that it is important that (1) the recommendations of the Legislative Auditor be implemented, (2) the accounting system be maintained on a current basis, and (3) regular audits be performed.
Accuracy of Annual Report Data
DHHL needs to improve the management information system so that data included in DHHL's annual report is accurate and supported. The Act requires that DHHL submit an annual report to the State Legislature. This report is also widely distributed to the Hawaiian community and provides information by which the Hawaiian community can evaluate the DHHL, and so it is imperative that the data is accurate.
Most of the quantitative data in the report is extracted from various records and monthly reports, but the data has not been reconciled with the source records for some time and there are differences between the records and the annual report. Also, we noted that some of the records were not accurate or complete.
For example, the DHHL listing of homesteaders showed that there were 165 more homesteaders on June 30, 1981, than the 3,034 reported in the fiscal year 1981 annual report, and there were significant differences by island and type of homesteader (see Tables 73 and 74).
We also noted that two individuals with pastoral or agricultural lots were not included as such in the homesteader list. Due to the amount of effort it would entail, we did not attempt to reconcile the list to the annual report, or verify the list. However, we noted one major cause of the differences was that homesteaders who had 35-acre farms and 5-acre residential lots on Molokai were counted twice. Also the problems with the varying unreconciled sources of acreage data previously discussed under "land inventory" contribute to the problems of the validity of the data in the annual report.
Recommendations
We recommend that the DHHL improve its financial management and reporting system to correct the deficiencies we noted in cash management, financial statements, the accounting system, and the annual report. Specifically, this includes:
- 1. The timely investment of all available monies not immediately needed for current operations.
- 2. The proper and timely maintenance and reconciliation of accounting records.
- 3. The preparation of financial statements and the independent audit thereof.
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