August 28, 2026

The Honorable Tommy Waters, Chair and Members Honolulu City Council

Dear Chair Waters and Members: 

Attached is a copy of our audit report, Audit of Select American Rescue Plan Act Programs and Expenditures, Report No. 27-01. This audit was self-initiated pursuant to the authority of the Office of the City Auditor as provided by Section 3-502.1(c), Revised Charter of Honolulu.

The objectives of this audit were to:

1. Determine whether the city effectively administered the Coronavirus State and Local Fiscal Recovery Funds (FRF) under the American Rescue Plan Act in accordance with all applicable (city, state, and federal) guidelines and subsequent amendments;

2. Assess whether the allocation and distribution of FRF funds aligned with the priorities and needs identified by city and community stakeholders;

3. Evaluate whether approved FRF projects and expenditures accomplished their intended purpose; and

4. Make recommendations as appropriate.

Background

On March 11, 2021, the U.S. president signed the American Rescue Plan Act (ARPA) into law. ARPA appropriated $350 billion in emergency funding to help state and local governments respond to the public health emergency and support economic recovery as a result of the COVID-19 pandemic. The City and County of Honolulu’s share of ARPA funding totaled approximately $386 million. Funds were disbursed in two tranches: $193 million in June 2021 and another $193 million in June 2022. Federal guidelines required that funds be encumbered by December 31, 2024, and expended by December 31, 2026.

ARPA funds were intended to help government jurisdictions fight the pandemic, support families and businesses struggling with public health and economic impacts, maintain vital public services amid declines in revenue, and build a strong, resilient, and equitable recovery by making investments that support long-term growth and opportunity.

ARPA funds were administered by the city’s Managing Director’s office. In 2021, the city introduced its Initial Economic Recovery Plan, which established funding priorities and sought to distribute funds in key areas. The funds were to be distributed broadly across various initiatives to maximize recovery outcomes, strengthen community resilience, and create long-term improvements.

Audit Results

We found that substantial portions of ARPA funds were not focused on equitable recovery and community support. Significant deviations from the initial funding plan concentrated funding in a few areas, rather than broadly focusing on sustainable recovery, community support, and infrastructure investment. Over $277 million of the city’s ARPA funds, which represented 72 percent of the overall funding, were concentrated in four primary areas: one-time OPEB liability payment classified as city modernization ($131.9 million), short-term household assistance ($65.6 million), water infrastructure improvement ($42.4 million), and purchase of the Waikiki Vista property ($37.7 million). As a result, many planned projects did not receive funding and did not align with initial priorities.

More specifically, funding reallocation resulted in diminished impact in the areas of economic recovery and community support. For example, the city intended to spend $266.2 million in the areas of community support and economic recovery, but spent only $162.8 million, or nearly 39 percent less. By contrast, the modernizing city operations category increased from a planned $70 million to over $176 million. The bulk of the change in this category was to reprogram $132 million in ARPA funding to offset nearly $132 million that the city would spend on Other Post-Employment Benefits (OPEB).

Although we concluded that the city's final allocation of ARPA funds did not have the broader community impact it originally intended, we also found that expenditures generally adhered to federal guidance criteria. We reviewed a sample of 28 ARPA-funded projects totaling approximately $151.7 million, spanning four expenditure categories: 19 Revenue Replacement projects ($77.8 million), five Infrastructure projects ($45.3 million), two Public Health projects ($16.3 million), and two Negative Economic Impact projects ($12.3 million). Each project had its own set of applicable federal criteria. Across all categories, the city complied with 200 of 238 criteria, for an overall compliance rate of 84 percent. The federal government did not establish a minimum threshold for ARPA compliance, and there were no penalties for non-compliance.

The report made three recommendations to the city administration so that future emergency funding programs can be better planned and administered.

The Managing Director generally accepted the audit’s findings and recommendations and provided clarifying information. We amended the report to clarify that the city initially calculated its revenue loss of just over $386 million in 2021.

…

Sincerely,

Troy Shimasaki Acting City Auditor

PDF: ARPA-Audit-Highlights.pdf

PDF: ARPA-Audit-Report.pdf

CB: Covid Audit: Millions Meant To Support Oʻahu Residents Went Elsewhere - Honolulu Civil Beat