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from the land will lead to a positive gain for any party involved. Other solutions can be explored to support the native Hawaiians' commitment to, and interest in, ranching.

Various extenuating circumstances need to be understood before lease provisions are enforced. This may be appropriate in some cases, not in others. A flexible approach is required that offers opportunities for success and recognition of lessee commitment and initiative.

Financial Management and Reporting

1. Cash Management

Finding: DHHL has not maximized income by analyzing current cash needs and investing all cash excess to current needs into revenue producing investments (page 43).

Comment: DHHL is examining the role of other central staff agencies to determine whether external systems of control can prevent this situation from occurring. It is acknowledged that DHHL is responsible for management of its available cash. An external control system would be helpful, especially in a situation of high staff turnover.

DHHL cash investment, generally before and after the period included in the draft report, have consistently ranged between 75 and 85 percent of available cash. During the period covered in the draft report audit, DHHL experienced high staff turnover. Vacant positions existed.

Hiring and staff training has received high priority. Serious efforts have been made in this area and a proper level of investment achieved since completion of the draft report.

Cash management is also influenced by the nature of various funds involved. Certain funds are predictable in terms of income and disbursements. Others are subject to large periodic, fluctuations. Estimating available cash for investment purposes can be very difficult.

2. Financial Statements

Finding: Complete financial statements are not prepared, therefore the overall financial condition of DHHL is not readily apparent. Inappropriate management decisions may have been made (page 43).

Comment: DHHL recognizes that improvements are needed in this area. Reconciliation of accounts is being pursued. DHHL will also explore the possibility of additional assistance from the State Department of Accounting and General Services (DAGS) and from the Department of Budget and Finance (DB&F). Further, consultant services may he required to determine a feasible method of initiating proper accounting systems equipment so that complete financial statements can be developed.

3. Accounting System is Not Auditable

Finding: The main deficiency in the accounting system is that key reconciliations are not performed (page 47).

Comment: An ongoing effort continues in this area. The reconciliation process may require another one and a half to two years to complete.

=4. Accuracy of Annual Report Data

Finding: DHHL needs to improve the accuracy of data included in its annual report (page 48).

Comment: The annual reports reflect the most current and accurate information available. Changes will continue to be made as progress is made. A related concern is the need for a broad-based management information system which can accommodate fiscal,

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