How many billions of dollars in unexpended federal funds are sitting in Hawaii’s state coffers?
That simple question posed by a state senator has departments scrambling to compile those figures, underscoring the need to upgrade the system for monitoring the state’s federal awards.
State Sen. Jill Tokuda, chairwoman of the Ways and Means Committee, wanted to know by Monday the state’s total amount of unexpended federal funds, after holding a November briefing with state departments that have allowed millions in federal dollars to languish — putting future awards in jeopardy. But coming up with that sum has been an arduous task, and state Department of Budget and Finance Director Wesley Machida has asked for an extension to provide that figure.
Although every department that receives a federal award is required to input that information into the state’s Federal Awards Management System (FAMS), at least one department had been exempted from doing so, forcing Machida’s staff to track down that information. Plus, the system is not able to generate a report with the figure Tokuda is seeking, so every department with awards had to be contacted, said Mark Anderson, head of the state Office of Federal Awards Management.
The state, excluding the University of Hawaii, receives about 300 new federal awards each year that account for about $2.5 billion in federal funds, or 20 percent of the state’s revenue, Machida said. Some awards extend over multiple years. According to the Federal Fund Information for States, Hawaii ranks 16th in per capita federal spending at $2,152.
With so much federal money at stake, Tokuda singled out three departments for the informational briefing last month:
>> The Department of Transportation (DOT) in October reported it had $656.5 million in unspent federal highway funds, down from about $950 million in 2010. It also has $66.9 million more in airport improvement funds from the Federal Aviation Adminis-
tration. DOT expects to spend the money within the time limits required by the FAA.
>> The Department of Hawaiian Home Lands (DHHL) reported having $55 million in unspent federal housing funds for Native Hawaiians under the Native American Housing and Self Determination Act of 1996.
>> The Health Department had $100 million in federal and state funds in its Drinking Water State Revolving Fund at the end of 2014, prompting the U.S. Environmental Protection Agency to withhold $8 million until the department met certain thresholds for drawing down the fund.
“If we don’t disperse funds, we lose funds,” Tokuda said.
For example, DHHL had been receiving $13 million a year in federal funding under NAHASDA for housing for Native Hawaiians on Hawaiian homelands. That dropped to $9 million in fiscal year 2015 and was wiped out completely in the current fiscal year. Tokuda said she was told the U.S. Department of Housing and Urban Development interrupted that funding because the state wasn’t able to spend down the funds set aside from previous years.
“Have we lost out on other grants because of our inability to effectively draw down federal funds?” Tokuda said. “One of the big questions for Wes Machida was, ‘What is our overall outstanding unexpended balance in terms of all our federal funds?’ … That will be a very telling amount.”
Machida cautioned that although the unexpended amount will be large, some grants come with restrictions to spend a certain amount in upcoming years.
Gov. David Ige told the Star-Advertiser Friday that “we do need to do a better of keeping track of federal funds,” noting the challenges of having an obsolete financial management system.
The state’s system for tracking those awards is decentralized, meaning state departments and agencies that receive federal grants are responsible for the efficient drawdown of federal funds, Machida said.
In an effort to streamline the grant process, the state established the Office of Federal Awards Management in July 2013. Since November 2014, departments have been required to input their federal awards within 14 days of receipt into the Federal Awards Management System, which tracks those awards. The system, however, is not able to generate system-wide or department-wide reports, Anderson said.
The Department of Education originally had been exempted from reporting through FAMS and the Hawaii Public Housing Authority has had difficulty moving over to the reporting system, but in memos dated Dec. 1, Machida is now requiring both departments to input its awards in FAMS, Anderson said. Although FAMS has limitations, it allows Budget and Finance to control allotments through separate appropriations accounts to ensure only the amount awarded is being expended, said Anderson.
The Health Department has been compliant in reporting its federal awards, but it adds yet another step to the process, said Nancy Bartter, financial officer for the department’s environmental health administration. “Until we put it in FAMS, we can’t actually spend the money.”
To better track the balance of federal awards, the state will need to implement a new financial accounting system, Machida said. To that end, the state Department of Accounting and General Services will seek $15 million from the Legislature, but it will be up to lawmakers to grant the request.
Tokuda has suggested that any tracking system used should include triggers that warn of important thresholds or deadlines.
Ige said upgrading the financial management system will be a “very high priority” and he will work with lawmakers to make a new accounting system a reality.
Until a new accounting system is in place, Machida and Elizabeth “Betsy” Kim, the governor’s special adviser on federal affairs, said the state will have to find cost-effective ways to efficiently track the federal grants. That could involve a combination of off-the-shelf software and manual processes, she said.
Kim has been working with state agencies to streamline procedures relating to the state’s federal grant and loan programs. The goal is not just troubleshooting but to go beyond and institutionalize improvements via training, she said.
Federal funding is “definitely a double-edged sword,” said Kim, noting the myriad requirements that come with those awards. The effective drawdown of federal awards is a priority for Ige, she said, and “we as a state need to do a better job of spending nondiscretionary grants.”
Tokuda called it crucial for the state to spend its federal dollars wisely and in a timely fashion in order to bolster the state’s position for future grants.
U.S. Sen. Brian Schatz, who sits on the Senate Appropriations Committee, said the state appears to be making progress on that front, though “some areas faster than others.” The state Department of Transportation’s work to draw down its federal funds has put the state in a position to compete for discretionary funding, he said.
“The proof of that is Kauai got a $13.9 million TIGER (Transportation Investment Generating Economic Recover) grant,” Schatz said. “We wouldn’t have been in a position to compete for TIGER funding if we had not ensured the FHA (Federal Highways Administration) that we were spending money appropriately.”
Kim is working with the state DOT to re-engineer processes with regard to expending federal funds. The FHA recently praised the department for reducing the $950 million backlog of several years ago to $656.5 million, and wants it further cut to $450 million maximum over the next three years. DOT Director Ford Fuchigami testified before the state Senate’s money committee that his department is on track to reach that goal by 2018.
The Department of Health, which was given strict deadlines to draw down its balance for the Drinking Water State Revolving Fund, said it has already met its Jan. 29 dispersement target of $7.67 million and is confident it will meet the commitment target of
$28.28 million, said Joanna Seto, head of DOH’s Safe Drinking Water Branch.
The DHHL says it has taken an “aggressive approach” to spending down the federal fund balances that built up prior to 2012. The department anticipates its unencumbered NAHASDA balance will be
$1.6 million by June 30, 2017, according to figures provided by Niniau Simmons, the department’s
NAHASDA manager.
Schatz, who has worked with DHHL and HUD to come up with plans to utilize the federal funds, said it was difficult to argue for additional dollars when last year’s money wasn’t utilized. “We’re hopeful by the end of next year, I can look HUD in the eye and tell them that the situation has been resolved,” he said.
