Honolulu City Hall - Photo by Mel Ah Ching
Honolulu City Hall – Photo by Mel Ah Ching

BY NATALIE IWASA – The January 27 meeting agenda for the Honolulu City Council’s Budget Committee includes Bill 4, which will establish the law for the new grants-in-aid (GIA) program that voters supported last fall.  Several sections in that bill should raise concerns for anyone who is interested in how taxpayer money is spent, but let’s back up for a moment, and take a look at some history that has also raised questions and concerns.

An audit of the Leeward Coast Community Benefits Program (the grants program that was introduced as a way to compensate Leeward residents for having the landfill in their backyard) was released in December 2010.  The audit report cites many examples of lack of control, lack of performance measures, poor monitoring and other concerns related to the Department of Community Services’ (DCS) administration of the program.  One recommendation from the audit was that DCS prepare an annual report to city council regarding program accomplishments and the status of all grants issued in that fiscal year, including any balances due grant recipients.

The first report issued to city council under that recommendation, department communication 673, was incomplete and appears to have errors in it.  For example, one grant recipient was not even listed on the report.  Despite several requests to have a public discussion about that communication, there has not been one.  Why?

Councilmembers have stated they are now concerned that some nonprofit organizations have not been paid in a timely manner, including one that was not listed on DCS’s report and hasn’t been paid in over two years.  Yet rather than getting a clear picture of DCS’s procedures, councilmembers’ solution is to require a 100% payout of grant funds within 45 days of the beginning of the new fiscal year.  The pendulum is swinging wide, with an over-correction that will likely lead to increased waste and abuse.

Other concerns with Bill 4 include:

  • Organizations such as labor unions, political action committees, social clubs and credit unions are eligible for GIAs;
  • Councilmembers will select awardees via the budget process, which not only allows them to bury the projects among the hundreds of lines of the budget bill, but is also open to quid pro quo exchanges and other abuses;
  • It requires that interest earned on the new fund be deposited into the fund (this reduces flexibility in the budgeting process); and
  • It requires the Department of Budget and Fiscal Services manage the fund and program, which is different than what was stated in the resolution that set up the charter amendment.  It also reduces internal controls.

Rather than put so much control and lack of transparency in councilmembers’ hands, recommendations from the audit report should be incorporated into the selection process and program administration.  Grant recipients should be limited to charitable organizations which qualify under 501(c)(3) of the Internal Revenue Code.  In addition, councilmembers should open dialog with DCS to determine why some nonprofits have not been paid and then follow up accordingly.

Natalie Iwasa is a CPA who lives in Hawaii Kai

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