2006-01-AU Audit of the County of Hawai‘i's Recycling and Diversion Grants Program

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CHAPTER 2 GENERAL FINDINGS Subsequent Events In a letter to the audit team dated May 24, 2006, Aaron Fujioka, Administrator of the State Procurement Office, stated: "This is in response to your May 19, 2006 request pertaining to applicability of HRS Chapter 103D, the procurement code regarding grants'. The procurement code provides exemptions for `grants' as follows: §103D -102 (b) (2) (A) For grants or subsidies, as defined in HRS Chapter 42F made by the state, or by the counties pursuant to their respective charters or ordinances; or §103D- 102(b)(2)(I) Pursuant to HRS Chapter 103F, for contracts to provide health and human services. Act 169, SLH 2005 amended section 103F -101, to, allow the counties to utilize Chapter 103F to purchase health and human services. We view appropriated funds, which do not specify a named recipient or provider, to be subject to compliance with the procurement code, unless addressed by county charter or ordinance. " If this State Procurement Office's interpretation is, in fact, correct, the impact on the County could be significant. Therefore, we reiterate the importance of obtaining a legal determination and clarification of the following issues: • Does the County have authority to grant funds to both non -profit and for - profit entities? • Does County Code chapter 2, article 25 provide that the only "grants" permitted to be awarded by any branch of the County are the $900,000 in annual grants awarded by the Council directly to specific non - profit entities? • When is a grant appropriate, what are the grant criteria, and how and by whom must a grant be approved? • Does adoption of a departmental budget by ordinance give the department authority to grant funds? if so, is the procurement exempt from State and County procurement codes? 18