Honolulu May Have To Pay $16M For Misuse Of Housing Grants
A federal audit slams the city for “dysfunction, inefficiency” in its administration of Community Development Block Grant funds.
The City and County of Honolulu may have to pay nearly $16 million to the for allegedly wasting federal grant money from 2012 to 2015.
An audit by the聽published聽Aug. 26 concluded Honolulu spent $15,918,909 on property acquisitions and contracts that were unnecessary or violated federal and city guidelines governing the use of funding.
鈥淭he City鈥檚 decentralized grant administration process created dysfunction, inefficiency, and wasted grant funds,鈥 the audit stated. 鈥淭he dysfunction and inefficiency caused the City to be repeatedly at risk of failing the HUD timeliness test. The City made decisions based upon its need to spend grant funds, which resulted in noncompliance with requirements and wasting grant funds.”
The grants are part of a 聽to support affordable housing, as well as other services and economic opportunities for people with low to moderate incomes. Honolulu received $22.9 million from聽July 2012 to June 2015.
Despite the city’s high demand for affordable housing, Honolulu has a history of failing to spend Block Grant funds in a timely manner. Earlier this year, HUD sent the city a letter urging it聽to follow federal guidelines or risk losing funding.
The audit found that the city approved nearly $16 million in questionable expenditures, partially in an effort to spend grant money more quickly:
- Granting $10 million to fund the purchase of the Hibiscus Hill Apartments, an affordable housing complex in Waipahu, for $21 million, more than $4.2 million over the property鈥檚 assessed value.
- Spending聽$2.9 million to acquire the Kaneohe Elderly Apartments without documenting聽why it was necessary to do so.
- Restricting competitive procurement for a $1.6 million award to purchase firetrucks.
- Approving $1.45 million for聽a contract despite the appearance of a conflict of interest.
- Failing to review and record program income for active projects.
The audit recommends that HUD require the city to justify its expenditures or use non-federal funding to pay the nearly $16 million back. The Office of Inspector General also wants HUD to force the city to develop written policies and procedures for the Block Grant聽program and implement adequate controls to ensure compliance with federal and state guidelines.
Local HUD officials Mark Chandler and Ryan Okahara were unavailable for comment Monday.
Related
Nelson Koyanagi, who leads the , wasn’t available for an interview Monday but said in a statement that he believes the city administers its Block Grant program in accordance with HUD requirements.
“We anticipate that, as we continue to work with HUD to address the audit鈥檚 recommendations, (the Office of Inspector General) will recognize that the city and HUD have together made sound, well-reasoned decisions for the benefit of the low and moderate-income individuals, families and communities served by the CDBG program,” Koyanagi said.
One of the audit’s key聽recommendations is that the city 鈥渃onsolidate the grant program into one department under leadership with a proven record of compliance with clearly defined lines of authority and responsibility.鈥
Two-Department Management
It’s not the first time an outside organization has urged the city to reorganize how it manages its Block Grant聽funds. Two years ago, HUD enlisted the to analyze the city’s Block Grant program administration.
The group “concluded that roles and responsibilities were unclear, policies and procedures were undocumented, human capital was not deployed in the most efficient manner, and serious issues of communication existed and had impacted staff morale and performance,” the audit stated.
While the association recommended that the city administer the grants within a single department, that hasn’t happened. Right now they are administered by both the Department of Community Services and the Department of Budget and Fiscal Services.
The Office of Inspector General audit similarly blamed the city’s organizational structure for misspending.
“The two departments involved with the CDBG program did not function well with each other, and the additional layer of the second department slowed grant administration,” the audit stated, citing how duplicative reviews of environmental compliance聽delayed projects.
“Due to unresolved issues that the two departments could not agree on, projects could sit idle for a significant length of time,” the audit stated. “The two departments鈥 directors were supposed to resolve issues among the departments. However, the City had not clearly defined which department was responsible for specific program administration, the directors had equal authority, and there was no clear resolution process.”
The city used to have a single housing department but got rid of it in the late-1990s following a scandal.
Read the full audit and the city’s responses below:
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