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County audit flags inconsistent documentation and governance questions in $2.03M grants-in-aid program
Summary
A County Auditor report to the oversight committee found incomplete or inconsistent financial records across grants totaling $2,027,500 for FY2024-25, noted three nonresponding programs, identified fiscal sponsorship and board-compensation issues, and said a new grants management system is being soft-launched to improve oversight.
HILO July 7 The Hawaii County Auditor presented a compliance review of grants-in-aid for fiscal year 2024-25 that covered 49 organizations administering 58 programs using $2,027,500 in county funds. The review found instances of incomplete or inconsistent financial records, challenges documenting public purpose and program outcomes, and three programs that did not respond to information requests. "Overall, the review found ongoing challenges in documenting public purpose, tracking outcomes and verifying program results," County Auditor Claire McAdam said.
McAdam told the committee the review tested eligibility requirements, use-of-funds restrictions and reporting conditions; it reviewed public tax filings and requested supporting documentation. The review identified two organizations that used fiscal sponsors for entities without 501(c)(3) status and charged a 10% administrative fee, and eight organizations whose publicly available tax filings showed compensation for participation or staffing. McAdam said the county had not clarified in its application materials whether fiscal sponsors could charge administrative fees and recommended clearer guidance.
Council members pressed for clarity and accountability. Council Member Kaguata asked whether the 10% administrative fee constituted a problem; McAdam said the county application did not address the fee and recommended documenting the practice if it is acceptable. Council Member Onishi asked whether organizations with incomplete reports had subsequently received new awards; Finance Director Diane Nakagawa said the county is soft-launching a grants management system and that contracts for this award cycle were at the contracting stage, allowing the county to pause awards if necessary. "The system is live," Nakagawa said, urging patience as staff work through initial bugs.
Corporation Counsel Renee Shum told the committee the county code provision at issue prohibits compensation to board members for organizations that receive county funds, and the county language tracks state statute provisions. Council members discussed possible legislative clarification and potential nonvoting roles for executive directors to provide program information while avoiding compensation conflicts.
The committee closed the file on the grants review after discussion (voice vote recorded as 9 in favor). Several council members also said they would withhold signing agreements for three organizations that had not responded to auditor requests until the audit inquiries are resolved.
