It’s not often you see the results of an audit splashed on the front page of The Maui News, but that’s exactly what happened on Friday, Apr. 3. “County audit: $21 million lost,” read the sensation headline. The words imply drastic negligence, perhaps even a crime. Too bad the report’s actual finding was far less explosive.
A better headline would have read, “County audit: $21 million opportunity lost.” Because that was the major takeaway of County Auditor Lance Taguchi’s first report:
“Funds held by the Treasury were not sent to the Hawaii Employer Union Health Benefits Trust Fund (‘EUTF’) for nearly five years,” states the report, titled Examination of the Treasury Function of the Department of Finance and released on Apr. 2. “While those funds sat in the County’s Treasury earning less than one percent per year, the EUTF could have invested those funds on behalf of the County and earned over 10 percent per year. Although those funds were eventually sent at the end of June 2014, the delay resulted in the County losing out on over $21 million in interest earnings. Those earnings could have paid down some of the County’s $344 million unfunded liability for health benefits already earned by current and retired County employees.”
The county’s Finance Director is Danny Agsalog, who’s held the job since 2010 and was disciplined three years ago for pounding on his desk and swearing at one of his deputies, said in his Mar. 27 response to the audit that “One of the County’s long-term financial goals is to provide sound general management by balancing risk and reward.” For that reason, he said he was cautious about returning to the EUTF trust fund, which until 2014 the county considered too risky. “Unlike corporate and other for-profit entities, the County of Maui is not in the business of taking significant risks in order to generate millions of dollars in interest revenues as suggested by this audit finding,” Agsalog noted in his Mar. 27 letter.
The County Auditor also concluded that “Large portions of the Treasury’s investment portfolio were made up of securities which do not appear to be in compliance with State law and the County’s own Investment Policy,” the County’s investment portfolio was over-concentrated in the mortgage industry, a single staff accountant at the Finance Department was doing too much work and “The cash handling tasks for the processing of Sewer Exception Payments lacks adequate segregation of duties.”
In his response to these additional four findings, Agsalog disagreed with the first two–saying his office believes there’s nothing amiss with the County’s current investments–but concurred with the latter two findings.
Photo: Wikimedia Commons