Supplement to Report No. 20-06, Report on Special and Revolving Fund Accounts with Inactive or Excess Balances 

More than $483 million in excess moneys may be available to be transferred from 57 special and revolving fund accounts to the General Fund without adversely affecting programs.

From Hawaii State Auditor, May, 2020

Introduction

In Report No. 20-06, Report on Special and Revolving Fund Accounts with Inactive or Excess Balances, issued on May 7, 2020, we identified $2.28 billion within 257 accounts associated with departments’ special and revolving funds that either had no financial activity during the past five fiscal years (FY2015 through FY2019) or had fiscal year ending balances that were significantly more than necessary to support the associated programs, based on the funds’ average outflows over the past three fiscal years.1 Those special and revolving fund accounts appear to hold excess moneys that may be available to be transferred without adversely affecting the programs supported by the accounts.

In this supplement, we provide additional information about the accounts, specifically whether the moneys in the accounts can be transferred to the State’s General Fund or otherwise repurposed. The information is self-reported, pulled from responses to questionnaires emailed to departments for each of their respective accounts. Departments were asked to provide the balance per department accounting records as of March 31, 2020; the amount that must be retained to support the program in FY2021; the projected amount of outflows for FY2021; and if moneys cannot be transferred, an explanation as to the basis for that position, among other things. We received responses to the questionnaires from all departments and the University of Hawaii; however, the Department of Business, Economic Development, and Tourism did not return the questionnaires for the accounts that they hold.

Potential Funds Available for Transfer: $483.6 million

We also obtained the Department of the Attorney General’s (Attorney General) guidance as to whether there are legal restrictions that may prohibit transferring moneys from the accounts to the General Fund. For accounts identified by the Attorney General that cannot be swept, we report “N/A” in the “Potential Funds Available for Transfer” column. Where the Attorney General’s determination that moneys can be transferred to the General Fund differed from a department’s position, we defer to the Attorney General and report an amount in the “Potential Funds Available for Transfer” column, if applicable. The Attorney General’s guidance is attached to this supplement.

Where a department asserts that none of the moneys can be transferred because they are needed for FY2021 operations, we report the amount that the Legislature can transfer as zero. The report’s quick turnaround time prevented us from independently analyzing the basis for the departments’ assertions. However, we also include the departments’ projected cash outflow for FY2021 for each account next to the account’s three-year average (FY2017 – FY2019) cash outflow to provide context to the departments’ assertion that all of the moneys are needed to support the program(s) in FY2021.

For all other accounts, in the column “Potential Funds Available for Transfer,” we report the difference between the account balance as of March 31, 2020, and the amount the department represents as its projected cash outflows from the account in FY2021. Based on the March 31, 2020, balance, that amount represents the department’s estimate of the excess moneys in the account needed to support the program(s) in FY2021.

We note that there are significant differences between departments’ projected cash outflows for FY2021 compared against their average outflows over the past three fiscal years. For example, many departments reported significantly higher cash outflows for FY2021, with projected out-flows averaging 181 percent over the previous years’ average. While we share the departments’ concern about their ability to fund the programs supported by the accounts for future fiscal years, we are also concerned that these reporting differences may be reflective of either a business-as-usual approach to the coming fiscal year or an effort to insulate certain department operations from fiscal challenges ahead.

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