19-05, Review of Special Funds, Revolving Funds, Trust Funds, and Trust Accounts of the Department of TransportationPosted on Jan 25, 2019 in Summary
24 funds and accounts did not meet criteria
WE REVIEWED 377 FUNDS AND ACCOUNTS administered by the Department of Transportation (DOT) and reported on 46 of them – specifically, 14 special funds, 21 revolving funds, 5 trust funds, and 6 trust accounts. We found 5 special funds, 17 revolving funds, 1 trust fund, and 1 trust account did not meet criteria – specifically, 16 revolving funds should be reclassified as trust accounts and 1 trust account should be reclassified as a trust fund; 2 special funds should be evaluated to determine whether they should be closed; and 3 special funds, 1 revolving fund, and 1 trust fund should be closed.
Section 23-12, Hawai‘i Revised Statutes (HRS), requires the Auditor to review each department’s special, revolving, and trust funds every five years. Although not mandated by statute, we included trust accounts as part of our review. This is our sixth review of DOT’s revolving funds, trust funds, and trust accounts, and our second review of DOT’s special funds.
We used criteria developed by the Legislature and by our office based on public finance and accounting literature. For each fund, we present a five-year financial summary, the purpose of the fund, and conclusions about its use. We did not audit the financial data which is provided for informational purposes. We do not present conclusions about the effectiveness of programs or their management, or whether the programs should be continued.
Inactive accounts result in unused moneys of approximately $120 million
DOT created funds inappropriately
Harbors Division suggested some minor technical edits to the report, which we have incorporated. We note that these edits are for clarification purposes only and do not impact our analysis of Harbors Division’s funds.
In its response, Harbors Division did not address our finding regarding the Risk Management Fire and Casualty Losses – Harbors trust fund, which we found should be closed. Moreover, Harbors Division did not address our observations regarding inactive accounts and non-compliance with statutory requirements for reporting. We must emphasize that they should close the inactive sub-accounts and comply with statutory reporting requirements.
Highways Division acknowledged that the Safe Routes to School Program Special Fund and the Motorcycle and Motor School Operations Education Fund can be funded through the general fund appropriation process. Highways Division said that the revenue for these funds are transferred from other State agencies’ special funds and, therefore, questions whether the general fund appropriation process is applicable. This additional information did not impact our final analyses as the current source of revenue is immaterial if this program were to be funded through the general fund appropriation process as Highways Division concedes is possible. We also note that Highways Division did not provide this information to us in their response to questionnaires about its funds, during multiple discussions about its funds, or at the exit conference. In the report (at pages 5-6), we document the difficulties that we encountered in obtaining information from Highways Division, including the less-than-complete responses and information we were provided about its funds. For us to thoroughly assess a department’s funds, it is important that we receive complete and timely information.
Highways Division disagreed with our conclusion that the Safe Routes to School Program Special Fund does not meet the criteria of a special fund due to partial nexus between the program and source of revenue. We recognize the Legislature’s desire to secure a source of funding to make the Safe Routes to School Program permanent, however, as we explained in the report, we did not find convincing evidence of sufficient nexus between the program and one of the sources of revenue, which is one of the statutory criteria required of a special fund.
Highways Division did not object to our determination that the Special Deposits – Highways trust account should be reclassified to a trust fund and that the Highway Senior Debt Service Reserve Account and Transportation Improvement Special Fund should be closed because these funds no longer serve their original purpose. We assume that the Highways Division intends to follow our recommendations with respect to that account and those funds. Finally, although Highways Division did not address our observations regarding inactive accounts and non-compliance with statutory requirements for reporting, we must emphasize that they should close the inactive sub-accounts and comply with reporting requirements.