Maui County audits get clean opinions but auditors cite material weaknesses, transient accommodations tax backlog and SLFRF monitoring gaps

An independent audit of Maui County’s fiscal year 2024 financial statements and federal awards resulted in unmodified opinions, but auditors reported material weaknesses and significant deficiencies, including problems in financial reporting, a backlog in transient accommodations tax (TAT) collections, and gaps in monitoring subrecipients of Coronavirus State and Local Fiscal Recovery Funds (SLFRF).

N&K CPAs, the firm engaged by the county auditor, presented the results to the Budget, Finance & Economic Development Committee. Duane Takano, audit principal, and Christiane Hara, senior manager, described the county’s financial position, year‑over‑year revenue and expense changes, and audit findings. County Auditor Lance Taguchi and Deputy Director of Finance Maria Zelensky were present and described management’s planned responses.

The audit showed notable year‑to‑year variances on the statement of net position and statement of activities. Auditors said governmental net capital assets rose by about $149 million and accumulated depreciation increased by about $75.6 million. The county reported an increase in property tax revenue of roughly $75.5 million and about $34.5 million from a new general excise tax surcharge implemented in fiscal 2024. Countywide expenses for governmental activities rose by about $94 million, driven by personnel, operational and capital costs. Business‑type revenues—chiefly the Department of Water Supply and the housing fund—also rose.

Although the financial statement and federal awards audits received unmodified opinions, auditors identified: a material weakness in internal control over financial reporting; significant deficiencies in financial reporting (including fiduciary fund accounting, arbitrage liability, and deferred inflows); a finding that the Schedule of Expenditures of Federal Awards required revision related to SLFRF reporting (including an increase of $10 million in lost‑revenue reporting); and a federal‑award‑related significant deficiency for subrecipient monitoring under SLFRF because required subrecipient risk assessments were not completed.

Management corrected several reporting errors during the audit, and the county has included a corrective action plan in the audit reports. Deputy Director Zelensky told council members the county has already taken steps on TAT: it has identified a vendor for new TAT software, plans implementation (targeted to start in September), and has added six staff members working on collections with two vacancies remaining. Zelensky said manual outreach produced about $4 million in additional collections but that older, initial‑implementation receivables remain difficult to reconcile and collect. She estimated staff have recovered roughly 80% of the initial backlog but said exact totals were not specified and that further reconciliation will be required.

Auditor Taguchi and the auditors warned that administering large federal recovery grants and other disaster‑related funds will require strengthened staffing and controls. Taguchi noted the county is not classified as a low‑risk auditee under the Uniform Guidance because of the material weaknesses. Both auditors and county staff said the county has initiated hiring—among them an open recruitment for a countywide federal grants compliance manager—and is taking steps to improve internal controls and reporting processes.

Committee members pressed for more precise numbers on outstanding TAT receivables and additional details on management’s corrective actions. Officials declined to provide an exact outstanding receivables figure during the meeting, saying reconciliations remain incomplete. The committee closed public testimony with no external testifiers and deferred further action on the audit item to allow follow‑up questions.

The county’s corrective action plans, recruitment efforts, and planned software procurement are recorded in the audit package posted to the county agenda and will be the basis for follow‑ups by audit and council staff.

Ending: Committee members said they expect updates next year on remediation of the material weaknesses and the status of TAT collections and federal‑award administration as the county implements corrective actions and fills key finance positions.