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Audit finds $6M in unreported funds

LIHUE — The state Department of Business, Economic Development and Tourism failed to report over $6 million to the state Legislature as required by law, according to a report released Tuesday by the state Auditor’s Office.

“During our review of DBEDT’s non-general funds, we noted noncompliance with statutory requirements to report financial activity and balances,” auditors wrote in the report, noting the department held “non-general funds with balances totaling $5.75 million and administratively created non-general funds with balances totaling more than $750,000 that were not reported to the 2019 Legislature.”

Auditors reviewed 69 funds and accounts administered by the DBEDT from 2014 to 2019 and found problems with nine of them, most of which were found to be either improperly funded or not financially self-sustaining.

Many of the recommendations in the report were the same as they had been five years ago, after the last audit of DBEDT revolving funds, trust funds and trust accounts, all of which get funded outside of the normal appropriations process and are, therefore, according to auditors, “subject to minimal legislative scrutiny.”

Auditors reported on 38 funds or accounts that held a combined total of $485 million at the end of 2014 and over $800 million by the end of the last fiscal year, when they were used to collect almost $470 million and spend or transfer nearly half a billion dollars.

During the five-year period reviewed, state auditors found six revolving funds managed by the DBEDT that were financed inappropriately. Several of the DBEDT’s revolving funds, which are supposed to be replenished with proceeds generated by the money they hold, actually got their revenue from sources like the general fund or other DBEDT programs, and some of the revolving funds were for programs that didn’t charge for their services.

The Hawaii Community Development Revolving Fund, used to support planning activities, zoning regulations and community activities in Kaka‘ao, is by far the largest of these, with a year-end balance of over $25 million in 2019.

This fund serves the established purpose, but auditors found that its revenue is generated through other DBEDT loan programs rather than from fees paid by those who use it.
Source: The Garden Island

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