City’s budget Sloppy budgeting led Honolulu to mistakenly add $25 million in federal grants to its books that were not awarded, an annual audit of the city's finances found.
padded by phantom
$25 million
Honolulu mistakenly added
federal grants to its booksBy Gordon Y.K. Pang
Star-BulletinThe audit ripped the city for poor oversight of federal housing grants and inadequate monitoring of its property management companies and the nonprofit entities that receive the funding.
The mistake, made over the last two fiscal years, was partly because of "an apparent breakdown in the city's budgeting internal control process," according to the audit by accounting firm PriceWaterhouseCoopers for the Honolulu City Council. The report also recommended that the city improve the accounting of its infrastructure and inventory of major equipment costs.
The audit, distributed to the Council this week, said the budget errors did not affect the city's expenditures since the money was not appropriated.
"However, because the funds were identified as projected entitlement revenue, individuals not aware of the actual allocation had no reason not to believe that the funds would be available," the audit said. "Therefore, the opportunity existed for the city to appropriate funds that did not exist."
City officials, in response, say the infractions are not serious but that they are taking corrective action nonetheless.
City Deputy Managing Director Malcolm Tom said the city has since agreed to internal control procedures to check the accuracy of budget projections.
The bottom line is that "the budget bills that were passed did not exceed the available funds," Tom said.
The audit also faulted what it saw as inadequate monitoring of property management companies since the demise of the Department of Housing and Community Development in the wake of the Ewa Villages scandal several years ago.
Oversight of the companies is now performed by the Department of Facilities Maintenance. According to the audit, the budgets and monthly financial statements of the companies are not reviewed on a timely basis. It also concluded that the city failed to monitor the recipients who receive federal funds from the Community Development Block Grant and HOME Investment Partnership programs.
Tom said those problems are being rectified, with staff added to monitor the funds. "People are monitoring, but they were not doing it on a full-time basis," he said.
The audit also noted that the city had failed to return $700,000 in interest earned in a CDBG revolving loan program. Tom said the city informed the U.S. Department of Housing and Urban Development about the need for repayment but did not get a response, a point acknowledged by HUD officials. The city has since repaid the money including additional interest earned.
Councilman Steve Holmes, chairman of the Budget Committee, said his committee will discuss the audit at a May meeting. He declined to comment on the findings.Tom said, "Audits like these help us to strengthen our internal controls, and we welcome these recommendations."
City & County of Honolulu
