The Honolulu Authority for Rapid Transportation is beginning to take steps to institute better internal auditing measures through a report presented by a group within the HART board of directors.

The Permitted Interaction Group, which consisted of half of the board, was tasked with reviewing suggestions from the American Public Transportation Association about HART’s internal auditing practices.

The report that the PIG published included 10 changes that should be implemented.

One of the more substantive changes would implement an outsourced, independent internal audit function for HART.

The independent auditors would report their findings to the committee, which is then charged with managing follow-up actions resulting from the audit.

The recommendations from the PIG also suggested that the audit committee establish a fraud and corruption hotline with an independent provider.

The hotline would be both for internal sources within HART and external complaints from outside the authority.

HART board member Natalie Iwasa applauded the recommendations.

“I’ve pushed for an internal audit. I’ve pushed for a hotline. I’ve also pushed for a fraud policy,” she said.

“These three mechanisms work together to help reduce the risk of fraud, waste and abuse.”

Another aspect of the recommendations creates clear deadlines for financial reporting to the HART board from HART. The authority would need to submit quarterly accrual financial statements to the board and give the board’s finance committee information about contracts budgeted for the current fiscal year by Sept. 15. The report’s recommendations also ask HART to disclose the contract’s projected award dates, if available.

The PIG’s report will be presented during the next HART board executive committee. If the committee approves the recommendations, it will go to vote in front of the full board.

HART board members Tobias Martyn, Hoyt Zia, Glenn Nohara, Dean Ha­zama, Kika Bukoski, Natalie Iwasa and Lynn McCrory made up the PIG that put together the report.

The report comes as the rail project faces a projected cost of $12.499 billion with a budget shortfall of around $3 billion.

The shortfall has started to raise questions from at least one board member, two Honolulu City Council members and Mayor Rick Blangiardi on whether the rail should continue on its planned route from East Kapolei to Ala Moana Center.

The project also continues to look for a solution regarding the train’s wheels, which are too narrow for the portions of the track that cross one another and are called frogs.

HART’s interim Executive Director and CEO Lori Kahikina told board members Friday that they are still working with Hitachi Rail on a solution.

Board member Joseph O’Donnell asked Kahikina who would be responsible for the costs of the repairs needed to fix the frog issue.

Kahikina said HART and Hitachi Rail were still working on fixing the technical issues with the wheels being too narrow for the tracks, and would work on the commercial aspect of the problem once that was completed.

O’Donnell emphasized that he believed Hitachi should have to pay for the repairs.

“If the wheels do not fit the tracks, or there’s any mix-up in the frogs, then Hitachi should be totally responsible,” he said, “not the taxpayers of the city and county.”