Rail audit finds some flaws, but all funds accounted for

The first annual audit of the books for the city’s $5.27 billion rail project turned up some flaws in the rail project’s accounting practices, and the board for the Hono­lulu Authority for Rapid Transportation wants to know more about city plans to prevent those problems in the future.

The audit by the firm PKF Pacific Hawaii concluded the financial statements for HART accurately reflect the finances of the agency, and found there were no material weaknesses.

However, the audit concluded the HART staff had classified sums as large as $518 million in the wrong categories for accounting purposes, and recommended the rail authority add staff and formalize its financial reporting process.

The audit covers the year ending June 30, 2012, which was the first year of operations for HART.

The rail authority was created by the voters through a City Charter amendment in 2010. Up until last year employees working on the rail project had been part of the city Department of Transportation Services.

City officials said some of the mistakes cited in the audit were caused by the transfer of assets from DTS to HART.

Diane Arakaki, chief financial officer of HART, said several of the items cited by the auditor related to "presentation errors" for one-time transfers of assets from DTS to HART. Therefore, those problems "should not reoccur in future years."

"As a newly formed agency, HART acknowledges its lack of accounting and financial reporting resources, and has placed a high priority on developing a qualified and experienced accounting staff" this fiscal year, she wrote in a letter acknowledging the audit’s findings.

Arakaki said in an interview that HART was relying on an internal audit analyst and a part-time auditor last year, along with some additional help from the city Department of Budget and Fiscal Services.

Since then HART has hired Ara­kaki and a new fiscal officer who will serve as accounting manager. HART is also recruiting another accountant, she said.

Ivan Lui-Kwan, chairman of the HART Audit/Legal Matters Committee, said he understands the difficulty in making the transition from a city agency to a semi-autonomous organization, but said the audit process needs to be handled in a "more orderly" manner.

"I just think we need to be more disciplined in the timing of how this is done," he said.

Lui-Kwan and other board members said the most important audit finding was that there were no material weaknesses and that all rail funds are accounted for.

HART has an operating budget of $21 million for the current fiscal year and a construction budget of nearly $491.6 million.