Office of the Auditor | State of Hawai`i

Photo: Department of Hawaiian Home Lands

AUDITOR’S SUMMARY

Three trust funds and one trust account did not meet criteria

OUR REVIEW of two special funds, two revolving funds, six trust funds, and one trust account of the Department of Hawaiian Home Lands (DHHL) found three trust funds and one trust account did not meet the criteria for trust funds and trust accounts, respectively, and should be reclassified.

Section 23-12, Hawai‘i Revised Statutes (HRS), requires the Auditor to review all existing special, revolving, and trust funds every five years. Reviews are scheduled so that each department’s funds are reviewed once every five years. Although not mandated by statute, we included trust accounts as part of our review. This is our seventh review of DHHL’s revolving funds, trust funds, and trust accounts. It is our third review of the special funds held by DHHL since Act 130, Session Laws of Hawai’i 2013, amended Section 23-12, HRS, to require review of special funds along with revolving funds and trust funds.

We used criteria developed by the Legislature and by our office based on public finance and accounting literature. For each fund, we present a five-year financial summary, the purpose of the fund, and conclusions about its use. We did not audit the financial data, which is provided for informational purposes. We do not present conclusions about the effectiveness of programs or their management, or whether the programs should be continued.

Reporting shortfall
WE NOTED THAT DHHL did not file statutorily required reports for non-general funds with balances totaling approximately $261.2 million under the program measures reporting requirement and administratively created non-general funds with balances totaling approximately $4.9 million. Accurate and complete reporting will greatly improve the Legislature’s oversight and control of these funds.

Agency response
DHHL GENERALLY AGREED WITH OUR FINDINGS but did not agree with our recommendations for four of the funds and accounts. We maintain our recommendations. DHHL concurred with our findings related to reporting shortfalls and will take appropriate corrective action as recommended.

FUND TYPES

SPECIAL FUNDS
are used to account for revenues earmarked for particular purposes and from which expenditures are made for those purposes.

REVOLVING FUNDS
such as loan funds, are often established with an appropriation of seed money from the general fund, and must demonstrate the capacity to be self-sustaining.

TRUST FUNDS
such as a pension fund, invoke the State’s fiduciary responsibility to care for and use the assets held to benefit those with a vested interest in the assets.

TRUST ACCOUNTS
are typically separate holding or clearing accounts and are often used as accounting devices for crediting or charging state agencies or projects for payroll and other costs.