STATE OF HAWAII
BOARD OF EDUCATION
Queen Liliuokalani Building
1390 Miller Street, Room 404
Honolulu, Hawaii 96813
Tuesday, November, 3, 2015
Don Horner, Vice Chairperson
Brian De Lima
Amy Asselbaye, ex officio
Patricia Halagao, ex officio
Lance Mizumoto, Chairperson
Yi Chen, Audit Specialist, Internal Audit Office
Matthew Denton, Audit Specialist, Internal Audit Office
Alison Kunishige, Executive Director
I. Call to Order
The Audit Committee (“Committee”) meeting was called to order by Committee Vice Chairperson Don Horner at 9:30 a.m.
II. Public Testimony on Board of Education (“Board”) Agenda Items
III. Approval of Minutes
Committee Vice Chairperson Horner called for public testimony. There was no public testimony at this time.
ACTION: Motion to approve the Audit Committee Meeting minutes of August 4, 2015 (De Lima/Williams). The motion carried unanimously with all members present voting aye.
IV. Discussion Items
A. Update on Department of Education’s Internal Audit Plan, First Quarter (July 1, 2015 ─ September 30, 2015)
Yi Chen, Audit Specialist, Internal Audit Office, presented a summary of Internal Audit’s quarterly update. Chen reported the Department of Education (“Department”) worked on the procurement and contracting process review, several fiscal reviews, a cancelled check review report, and completed the updated risk assessment and audit plan. They are currently working on an operational review of special education, activity fund audits, and monitoring management corrective action plans. Chen reviewed the office’s timeline with the Committee and stated that the Internal Audit is on track to meet their hours for the year. She also reviewed tracking items with open corrective action plans. Chen stated that no items were overdue but the Department was still working on addressing findings for the report.
Committee Vice Chairperson Horner asked for clarification on “unacceptable” items and asked Chen what is being done for those items. Chen replied that the Department is still working on a corrective action plan for the items and the “unacceptable” status will not be changed until a follow-up review is completed. Chen added that yellow marked items are partially completed. Horner asked that for the Committee’s next meeting, they would provide some granularity for the unacceptable items so that the Committee can make sure progress is being made.
Board Member Amy Asselbaye arrived at 9:38 a.m.
Committee Member Jim Williams asked for clarification on color status of the items listed in the recommendation status section. There were items marked in green, yellow, purple, and red. Chen explained that all line items must be completed for a green marking.
Committee Vice Chairperson Horner suggested that the report include a color coded dashboard summary in the future so Committee members can avoid searching through the report to see what projects need to be focused on.
Committee Member Brian De Lima mentioned that it would be helpful why certain tasks are not being completed, for example, lack of money or resources. Committee Member De Lima stated that the Board should be aware of what the Department needs to complete tasks.
Committee Member Margaret Cox brought up complaints she had received regarding the amount of time it took to reimburse physicians for services, in one case it took two years. She inquired about why workers compensation was given an audit rating of marginal and not unacceptable in the Management Action Item Dashboard Summary. Committee Member Cox wanted clarification of the difference between marginal and unacceptable and also wanted to know if the issues in workers compensation were due to a shortage of personnel. Chen replied that the Department looks at various processes in the area. Once the audit is completed, a group rates the item based on what they found. Chen stated she would need to refer the question for more detailed information on Committee Member Cox’s question.
In reviewing the Internal Audit Recommendation Status for Workers’ Compensation review, Committee Member De Lima stated that the target date for the second recommendation (Inefficiencies and clerical errors in the WC process) is December 2015. Internal Audit recommended that Workers Compensation “[r]evisit medical payment processes to streamline and reduce the length of time it takes to pay bills to service providers[.]” Committee Member De Lima added that two years is an unacceptable amount of time to reimburse providers and stated that there will be a Human Resources Committee meeting shortly after December where the matter can be discussed further.
Mathew Denton, Audit Specialist, Internal Audit Office, reported on the fraud hotline section of the quarterly update report. Denton stated that 229 cases have been received since the inception of the hotline.
Committee Vice Chairperson Horner asked how many of the cases occur per quarter. Denton replied that around 30 to 40 calls per quarter is the norm.
Denton explained that in terms or priority, cases are classified into four categories: indeterminable, investigation, management issue, or unspecified.
Committee Vice Chairperson Horner asked for clarification on the investigation process and how they are closed. He also asked for clarification on how a case is categorized as unsubstantiated. Denton explained that to close a case, staff must resolve the issue and write a review. Denton added that unsubstantiated cases indicate those with unproven allegations or allegations proven to be false. Denton clarified that every call is verified and if valid is taken up to the next level.
Committee Member De Lima inquired about who determines a case is unsubstantiated. Denton replied that the Hotline Intake Team does an analysis to determine who is assigned the case. Cases can be assigned to Complex Area Superintendent (who can assign it to someone else to investigate), or it can be assigned to other staff members. It does not automatically go to the Complex Area Superintendent. The individual assigned the case for investigation determines if the case is unsubstantiated by answering five questions. The Hotline Intake Team analyzes the answers to these five questions. If the team determines the information is insufficient, it seeks more information on the case. Committee Member De Lima asked that a copy of the five questions and the responses for the last quarter for cases that were determined to be unsubstantiated be made available to Board Members.
Committee Member Cox asked for clarification on the use of the term “Issue Addressed” on the graph showing Disposition of Closed Substantiated Cases. Denton explained that “Issues Addressed” refers to those cases that are closed and substantiated, but which did not require disciplinary action. It would include cases where someone is trying to do their job, but they still need to learn how to do it correctly.
Committee Vice Chairperson Horner reminded the Committee that the Fraud Hotline intake process is relatively new (it was instituted in Spring 2013). He asked Denton to explain how the Fraud Hotline was advertised and whether they could tell whether the sources are mostly parents or students. Denton stated promotion of the Fraud Hotline included publication on the Department website and posters in all of the schools. Denton added that the calls can be anonymous but students, parents, and staff have all used the hotline.
B. Presentation on Department of Educations Procurement and Contracting Process Follow-Up Review
Chen shared that the Department is making sure that audit findings and the consolidated report on Procurement Card (“P-Card”) reviews are adequately addressed, and that management has completed corrective action plans. Although there were improvements on policies and procedures, the item is still at the marginal level.
Chen reported on Audit’s findings:
· The correct process and procedures were not always performed;
· Process and procedures were not always performed at school and office level;
· Proper forms and supporting documents were not always submitted or kept on file; and
· There was a lack of control when employees separated from the Department or transferred to another office.
The Department provided the following recommendations:
· Management to review the current process and procedures to determine applicability;
· Provide continuous training;
· Work with School Administrative Service Assistants (“SASA”) on audits;
· Follow up with P-Card holders regularly; and
· Have vendors and the Office of Human Resources work together to timely track when someone is terminated, transferred, retired, or resigned.
Management accepted the findings and will work on recommendations. There will be an focus group with individuals from the Office of Fiscal Services and the Office of Human Resources, which will review and discuss and best way to mitigate the audit findings. Committee Vice Chairperson Horner mentioned that the purpose of the analysis was to make the process easier for individuals in the field and noted that the submittal showed eight steps in the P-Card Process. He asked that the focus group also look at how to make the P-Card process easier for individuals in the field.
Committee Vice Chairperson Horner asked how many cards were issued and if each card had a specific limit for use. Tom Ishimaru, Accounting Director, Fiscal Services, reported that there are about 320 cards issued, primarily to principals and facilities operations individuals. Committee Vice Chairperson Horner inquired as to whether the process system was working or not. Ishimaru responded that the process is more streamlined than the old process, especially for small purchases below $5,000, but card users still must comply with procurement procedures, which causes a bottleneck. Committee Member De Lima questioned the need for a focus group when there are only 320 cards issued and the large majority of people are following procedures. He suggested just correcting non-compliant card users and avoid wasting additional time and resources on the issue.
Committee Vice Chairperson Horner noted that the focus group needs to work on the system because the system is not right yet. He noted that this was the last review of the P-Card process because there were other issues the Board needed to focus on.
Committee Vice Chairperson Don Horner adjourned the meeting at 10:17 a.m.