HomeMy WebLinkAbout2025-01 Liquor Dept Travel ExpensesCounty of Hawai‘i
Office of the County Auditor
Report No. 2025-01
March 7, 2025
Department of Liquor Control, Liquor Commission,
and Liquor Control Adjudication Board
Travel Expenses
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Hawai‘i County is an Equal Opportunity Provider and Employer
March 7, 2025
Honorable Holeka Goro Inaba, Council Chair and Members of the Hawaiʻi County Council Hawaiʻi County Council 25 Aupuni Street Hilo, Hawaiʻi 96720 Dear Council Chair Inaba and Council Members,
In accordance with generally accepted government auditing standards and the Hawaiʻi County
Charter Section 3-18(d)(2), the Office of the County Auditor conducts or causes to be conducted
performance and/or financial audits of the funds, programs, services, and operations of any
county agency, executive agency, or program, as set forth by the county auditor in an annual audit
plan that shall be transmitted to the county council and the mayor and file with the county clerk
as a public record.
We have completed our audit of the Department of Liquor Control, focusing on travel expenses
and practices within the Department, Liquor Commission, and Liquor Adjudication Board. While our review identified areas where improvements in travel-related expenditures could enhance resource allocation and governance, we wish to emphasize that these observations should not detract from the valuable work carried out by the Board and Commission. The services and oversight they provide remain a vital part of county operations. Objectives sought answers to the following questions:
1. Is the Department of Liquor Control in compliance with Hawai'i Revised Statutes § 281-
17.5? Specifically, do the fees collected by the Liquor Commission have a direct and
proportionate relationship to the costs and expenses incurred by the Department?
2. How effectively are travel funds being allocated and utilized within the Department of
Liquor Control, and is the travel budget for the Department, Liquor Commission, and
Liquor Adjudication Board justified and appropriate?
3. Are the management practices of the Department of Liquor Control related to travel transparent and accountable? Do the Department’s internal controls and financial
reporting mechanisms ensure integrity, efficiency, and proper governance?
County of Hawaiʻi Office of the County Auditor 120 Pauahi St., 309 Hilo, HI 96720 F 808.961.8905 www.hawaiicounty.gov
Tyler J. Benner
County Auditor County of Hawaiʻi Office of the County Auditor Ph 808.961.8386
Our findings highlight the importance of continuously aligning expenditures with departmental objectives for effective public stewardship. Specifically, we made three recommendations to the
Department. If implemented, results will formalize the procedure, establish safeguards to limit liability, and require careful reviews to ensure that all proposed travel is necessary and cost-effective.
We also made two recommendations to the Hawaiʻi County Council. If implemented, these
recommendations would enhance governance practices and promote fiscal accountability. The
first recommendation establishes a review and justification process during budget hearings, and
the second considers an amendment to the Charter by introducing a two-year cooling-off period
to restrict consecutive service between the Commission and the Board. This change would
safeguard the fairness and impartiality of the regulatory and adjudicative processes while
encouraging diverse public participation.
We appreciate the Department of Liquor Control’s unrestricted access to information, personnel,
and coordination throughout the audit. The cooperation was exceptional.
In response to a draft of this report, management expressed disagreement with our audit results. To improve government accountability and ensure audit recommendations are implemented or
resolved, we continuously monitor the status of recommendations using our remediation tracker.
To view the Department’s status, visit us at https://www.hawaiicounty.gov/our-
county/legislative/office-of-the-county-auditor.
If there are any questions or concerns about the status of the recommendations discussed, feel
free to contact our office at 808.961.8386.
Respectfully,
Tyler J. Benner
County Auditor
cc: C. Kimo Alameda PHD., Mayor William V. Brilhante Jr., Managing Director Diane Nakagawa, Finance Director Jon Henricks, County Clerk Laurisa Nishimoto, Chair Liquor Commission
Gerald Takase, Director Sidney Fuke, Chair Liquor Adjudication Board
Table of Contents
Report Highlights .......................................................................................................... 1
About Us ........................................................................................................................ 2
Objective, Scope, and Methodology ............................................................................ 3
Definitions ...................................................................................................................... 5
Chapter 1 Introduction
Introduction ....................................................................................................................... 6
Chapter 2 Audit Results
Travel Policy ........................................................................................................................... 11
Finding 1: The Department follows the County’s travel policy in the absence of its own
written Department-level travel policy despite unique considerations that affect the
Department, Commission, and Board. ............................................................................ 13
Recommendation 1: Establish a Department-Level Travel Policy ............................... 13
Council Responsibility: Addressing Questionable Travel Expenditures ......................... 14
Finding 2: The Council Approves the Department’s Budget Each Year Despite
Concerns About Excess Travel Spending ...................................................................... 16
Recommendation 2: Implement a Comprehensive Review and Justification Process for
Travel Expenditures During Budget Approval ................................................................ 16
Training and Resource Allocation Efficiency ...................................................................... 17
Finding 3: The Department Emphasizes Travel Based on Seniority Rather Than
Utilizing a Need Based or Role-Specific Framework ...................................................... 23
Recommendation 3: Prioritize Travel on a Need-Based and Role-Specific
Framework ...................................................................................................................... 23
Board and Commission Membership ................................................................................... 24
Finding 4: Safeguards Limiting Consecutive Roles on Commission and Board are
Absent ............................................................................................................................. 25
Recommendation 4: Amend Charter to Restrict Consecutive Service .......................... 25
Quorum and Sunshine Law .................................................................................................. 26
Finding 5: Concerns Regarding Sunshine Law and Other Reporting Requirements. .... 29
Recommendation 5a: Limit Attendance to Less than Quorum During Travel ................ 29 Recommendation 5b: Provide Sunshine Law and Ethics Training to All Members ....... 29
Chapter 3 Fraud, Waste and Abuse
Fraud, Waste and Abuse ................................................................................................ 30
Conclusion ...................................................................................................................... 31
Chapter 4 Management Response Department of Liquor Management Response ............................................................... 32
Chapter 5 Attachments Attachment 1: Travel Expenses ...................................................................................... 35
Attachment 2: Department of Liquor Control Explanation of Travel Priorities ................. 37
Attachment 3: Excerpt Board of Ethics October 9, 2024, Minutes .................................. 38
1 | Report Highlights
Why We Conducted This Audit
We conducted this audit at the request of the
Hawaiʻi County Council via Resolution 548-24, Draft
2. The resolution requested that the Office of the
County Auditor conduct an audit to ensure the
efficient allocation and utilization of funds in
compliance with Section 281-17.5, Hawaiʻi Revised
Statutes.
What We Found
1. The Department follows the County’s travel
policy in the absence of its own written Department-level travel policy despite unique considerations that affect the Department,
Commission, and Board. 2. The Council approves the Department’s budget
each year despite concerns about excess travel spending. 3. The Department emphasizes travel based on seniority rather than utilizing a need-based or role-specific framework.
4. Safeguards limiting consecutive roles on Commission and Board are absent. 5. Concerns regarding Sunshine Law and other
reporting requirements.
We Recommend
1. Establish a department-level travel policy.
2. Implement a review and justification process
for travel expenditures during budget approval.
3. Prioritize travel using a need-based and role-
specific framework.
4. Amend the Charter to restrict consecutive
service on the Board and Commission.
5a. Implement attendance limits for Board and Commission members at events, restricting
participation, in most cases, to less than a quorum.
When a larger travel party is deemed necessary, the Department should coordinate with the Office of Corporation Counsel to issue
an event-specific reminder to Board and Commission members not to discuss board business.
5b. Coordinate with the Office of Corporation Counsel to provide regular Sunshine Law and
Ethics training to all Board and Commission members to ensure understanding and compliance; preferably annually.
Performance Audit of the Department of Liquor Control, Commission, and Adjudication Board
Travel Expenses
County of Hawaiʻi
Office of the County Auditor
March 2025
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2 | About Us
About Us
Mission
It is our mission to serve the Council and citizens of Hawaiʻi County by promoting accountability,
fiscal integrity, and openness in local government. Through performance and/or financial audits
of County agencies and programs, the Office of the County Auditor examines the use of public
funds, evaluates operations and activities, and provides findings and recommendations to elected
officials and citizens in an objective manner. Our work is intended to assist County government
in its management of public resources, delivery of public services, and stewardship of public trust.
Audit Authority
Hawaiʻi County Charter §3-18 establishes an independent audit function within the Legislative
Branch through the Office of the County Auditor.
Purpose
The purpose of this audit was to assess the Department of Liquor Control's compliance with Hawai'i Revised Statutes (HRS) § 281-17.5 regarding the proportionality of fees collected to department expenses, evaluate the allocation and justification of travel funds for the Department, Liquor Commission, and Liquor Adjudication Board, and determine whether the Department’s
management practices, internal controls, and financial reporting mechanisms ensure transparency, accountability, and effective governance.
Performance Audit Definition
Performance audits provide objective analysis, findings, and conclusions to assist management
and those charged with governance and oversight with, among other things, improving program
performance and operations, reducing costs, facilitating decision-making by parties responsible
for overseeing or initiating corrective action, and contributing to public accountability.
Our objective in performance auditing is to improve public services provided by the county
government. We do this by recommending specific actions to address the issues we raised and
by providing valuable information to the public, the administration, program leadership, the county
council, and the mayor.
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3 | Objectives, Scope, and Methodology
Objectives, Scope, and Methodology
Audit Objectives
1. Is the Department in compliance with HRS § 281-17.5? Specifically, do the fees collected
by the Commission have a direct and proportionate relationship to the costs and expenses
incurred by the Department?
2. How effectively are travel funds being allocated and utilized within the Department, and is
the travel budget for the Department, Board, and Commission justified and appropriate?
3. Are the Department's management practices related to travel transparent and
accountable? Do the Department’s internal controls and financial reporting mechanisms
ensure integrity, efficiency, and proper governance?
Scope The audit was conducted from July 2024 to October 2024. It examined travel expenditures and
budget data for fiscal years 2019 - 24 and compliance with relevant governance for board terms
from January 2017 to June 30, 2024.
The audit further evaluated the Department's travel procedures, its participation in National and
State organizations, and the activities of the Board and Commission.
The audit did not cover areas outside of travel expenses and statutory compliance, administration
of grant funds, or other functions of the Department, Board, or Commission.
Throughout this audit, we refer to the Department of Liquor Control as “Department,” the Liquor Commission as “Commission,” the Liquor Adjudication Board as “Board,” and the Hawaiʻi County Council as “Council.” Additionally, we refer to Hawaiʻi Revised Statutes as “HRS,” The Hawaiʻi County Charter as “Charter” and the Hawaiʻi County Code as “Code.”
Methodology
To accomplish our objective, we:
Data Collection and Analysis:
• Analyzed department expenditure detail reports and requests for in-state and out-of-state travel
• Collected and reviewed data on travel budgets and actual expenditures for fiscal years
2019-24
• Assessed reports on applications fines assessed and collected by the Commission and Board
• Benchmarked travel expenses as a percentage of department budgets
4 | Objectives, Scope, and Methodology
Compliance and Governance Assessment:
• HRS § 281-17.5 Liquor Laws of Hawaiʻi
• Hawaiʻi County Charter
• Hawaiʻi County Code
• Reviewed the State’s Sunshine law requirements HRS Chapter 92
• Assessed internal controls and financial reporting mechanisms within the Department Travel and Training Review:
• Conducted interviews with department administration and staff
• Requested the Department’s travel policies
• Evaluated the Department’s participation in national and State organizations
• Reviewed the allocation of travel funds for the Department, Commission, and Board
• Assessed the effectiveness of travel in supporting employee development and
organizational goals Observations:
• Observed compliance with governance and reporting practices at meetings of the Board and Commission Management Practices Evaluation:
• Reviewed meeting minutes and program highlights
• Analyzed the roles and responsibilities of Board and Commission
• Assessed the current practices for expanding travel opportunities and allocating travel resources
Community and Legal Review:
• Reviewed materials related to the enforcement of liquor control laws, including
complaints and fines
• Examined Charter and applicable laws related to the roles of the Commission, Board, and Department
Fraud, Waste, and Abuse Prevention:
• Assessed risks of fraud, waste, and abuse in the Department’s management of travel
expenses
• Documented potential inefficiencies in resource allocation and recommendations to prevent misuse of funds
• Interviewed department personnel to identify areas vulnerable to waste or inefficiencies in travel practices We conducted this performance audit in accordance with generally accepted government auditing
standards. These standards require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and conclusions based on our
audit objectives. We believe that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.
5 | Definitions
Definitions
• CAP - Center for Alcohol Policy
The purpose of the Center is to educate
policymakers, regulators, and the public
about alcohol, its uniqueness, and its regulation. By conducting sound research and
implementing initiatives that will maintain the appropriate state-based regulation of alcohol,
the Center promotes safe and responsible consumption of alcohol, fights underage drinking
and drunk driving, and informs key entities and the public about the effects of alcohol
consumption.
• NABCA - National Alcohol Beverage Control Association
The mission of the National Alcohol Beverage Control Association
(NABCA) is to support member jurisdictions in their efforts to protect
public health and safety and ensure responsible and efficient systems
for beverage alcohol distribution and sales.
• NCSLA - National Conference of State Liquor Administrators
The purposes of the Association shall be to promote the enactment
of the most effective and equitable types of state alcoholic beverage
control laws; to devise and promote the use of methods that provide
the best enforcement of the particular alcoholic beverage control laws
in each State; to work for the adoption of uniform laws insofar as they
may be practicable; to promote harmony with the federal government
in its administration of the Federal Alcohol Administration Act; and to
strive for harmony in the administration of the alcoholic beverage control laws among the
several states.
• NLLEA - National Liquor Law Enforcement Association Chair The NLLEA is committed to improving the standards and practices of liquor law enforcement, to the professional development of its
members, and to public recognition of the role and achievements of liquor law enforcement in protecting and promoting public safety. The NLLEA actively collaborates with other national law enforcement
organizations and with state and local law enforcement organizations to enhance understanding of the overall importance of liquor law enforcement in preventing impaired driving, youth access, crime, and
community problems. In addition, the NLLEA fosters a cooperative and mutually beneficial working relationship with alcohol research and public health organizations and with responsible liquor industry members. We consider these groups to be
amongst our closest allies in ensuring that alcoholic beverages are promoted, distributed, and consumed in a legal fashion.
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6 | Introduction
Chapter 1
Introduction
Why did we perform this audit?
On July 24, 2024, The Council unanimously approved Resolution No. 548-24, Draft 2. The
resolution requested that the Office of the County Auditor (OCA) "conduct a performance audit of
the Department of Liquor Control to ensure the efficient allocation and utilization of funds in
compliance with § 281-17.5, Hawaiʻi Revised Statutes."
Issued identified in the resolution included:
1. Self-Funded Operation: The Department operates on a self-funded basis, relying on fees collected by the Commission.
2. Statutory Compliance with Fees: HRS § 281-17.5 requires that fees collected by the Commission must have a direct and proportionate relationship to the costs and expenses of the Liquor Commission.
3. High Travel Budget: The travel budget for the Department, Board, and Commission is
notably high, with an estimated budget of $124,000 for fiscal year 2023-24 and the next
three fiscal years.
In response, OCA agreed to conduct preliminary fieldwork to determine whether the requested
audit warranted an in-depth review. Based on the fieldwork, we identified specific areas that
would benefit from a comprehensive review of the subject matter.
What is the purpose of the Department?
To regulate the manufacture, importation, sale, and consumption of intoxicating liquors and to
ensure compliance with state and county laws through enforcement.
What is the Department's Mission?
To promote the health, safety, and welfare of the general public by regulating the importation,
manufacture, distribution, sale, and service of intoxicating liquors.
Where is the authority of the Department found?
Charter § 7-3.1 states that,
“There shall be a department consisting of a Commission, Board, a Director of the
Department, and the necessary staff.”
7 | Introduction
How is the Director selected, and what are their responsibilities?
Charter § 7-3.4(a) states that,
“The Director shall be appointed by the Commission and may be removed by the
Commission. Any motion for removal of the Director of the Department must contain a
statement of reasons, and the Commission shall not vote to remove the Director of the
Department unless the Director of the Department has been given an opportunity to
respond to the statement or reasons at a hearing before the Commission.”
Responsibilities
Charter § 7-3.4(b) states that,
“The Director of the Department shall:
(1) Be the administrative head of the Department.
(2) Provide clerical and administrative services for the Commission and the Board,
including the submission of a budget for the operation of the Department.
(3) Investigate complaints regarding violations of the liquor control laws of the State
or complaints regarding violations of rules and regulations established by the
Commission and report such violations to the prosecuting attorney of the county.”
What is the purpose and responsibilities of the Commission?
Charter § 7-3.2(a),(b),(c) states that,
“There shall be a Commission consisting of nine members who shall be appointed by
the mayor and confirmed by the council in a manner prescribed in Section 13-4. Each
of the nine council districts shall be represented by a resident appointed from that
district. The Commission shall:
(a) Adopt rules and regulations having the force and effect of law for the administration
and liquor control in the county and to carry out provisions of the liquor control laws
of the State.
(b) Grant, renew or refuse applications for licenses for the manufacture, importation
and sale of liquor in the county under applicable laws and regulations.
(c) Having such other powers and duties as may be provided by law, not in conflict
with the provisions of this section.”
What is the purpose and responsibilities of the Board?
Charter § 7-3.3 states that,
“There shall be a Board consisting of five members who shall be appointed by the mayor
and confirmed by the council in the manner prescribed in Section 13-4.
8 | Introduction
The Board shall hear and determine all complaints regarding violations of the liquor
control laws of the State, or complaints regarding violations or rules and regulations
established by the Commission and impose such fines or punishments as may be
provided by law upon the conviction thereof.”
What are the requirements surrounding Board and Commission member selection?
Selections are governed by Charter § 13-4. Boards and Commissions. Summarized in part:
(a) The members shall serve staggered terms of five years.
(b) Members shall be appointed by the mayor and confirmed by the council and may be
removed upon recommendation by the mayor and the approval of the council.
(c) No member may be reappointed to the same Board or Commission until two years have
passed since their previous term. However, members appointed for two years or less may
immediately succeed themselves for a full term.
(d) No member may continue serving after their term expires, except for up to ninety days or
until a successor is appointed and confirmed, whichever occurs first.
(e) Any vacancy in any Board or Commission shall be filled for the unexpired term.
(f) Members shall receive no compensation but may be reimbursed for necessary expenses
incurred while performing their duties. As established by the ordinance, necessary
expenses may be paid in advance as a per diem allowance.
(g) A chairperson shall be elected from its membership annually.
(h) A majority vote of a Board or Commission membership is required for any action to be
valid. However, for boards or commissions with only advisory functions, a majority vote
of those present is sufficient to validate an action.
(i) Each Board and Commission has the authority to establish its own rules of procedure for
conducting business. These rules must include the time and place of all regular meetings
and specify that a quorum consists of a majority of the members to which the Board or
Commission is entitled.
(j) Notwithstanding any other provision in this chapter, no person shall be barred from serving
as a member of any Board or Commission by reason of occupation alone.
(k) The council must confirm or reject any appointment made by the mayor to a board or
Commission within forty-five days of receiving notice. If the council takes no action within
that time, the appointment is considered confirmed.
(l) The redrawing of council district boundaries during a commission member's term shall not
affect a member’s eligibility to represent the district to which the member was appointed.
9 | Introduction
What This Means Each entity plays a distinct role within the broader governance framework of liquor control in
Hawaiʻi County, with their duties purposefully divided to provide checks, balances, and meaningful oversight.
The Commission adopts rules, grants or denies licenses, and oversees regulatory matters. The Department is responsible for enforcing rules and checking compliance with liquor laws
related to the manufacture, importation, sale, and consumption of intoxicating liquors. The Board adjudicates violations of laws, imposing fines and punishments as required. While
they function independently, the interaction between these entities ensures that no single body holds complete control over the regulatory and enforcement processes. Despite structural separations, their activities particularly in terms of expenditures are interconnected. We examined how the Department, Board, and Commission allocate and utilize financial resources, especially travel funds, revealing how these expenditures impact their respective functions.
Expenditure Analysis
Travel expenses from FY 2019 to 2024 were extracted from
EDEN Fresh Detail Reports, compiled into a dashboard, and analyzed.
Travel Trends
Over the five fiscal years, the Department spent $367,732.98 on travel expenses (See Attachment
1). We noted the additional costs to facilitate local meetings, which include mileage, auto
reimbursement, and miscellaneous charges, like meals and light refreshments. These expenses
were not evaluated.
Department expenses account for approximately 63.1% of travel costs, while the Commission
and the Board represent 21.3% and 15.6%, respectively. This distribution appears appropriate if
travel for all three bodies is considered equally important. There were 47 unique events over the
60 months, meaning that the Department is traveling, on average, approximately every 5.5 weeks
in addition to regularly scheduled Board and Commission meetings and on-island work
assignments. On average, 6.6 travelers are sent to events, with attendance ranging from 1 to 32
(some training sessions were attended virtually).
The top three travelers in the Department constitute 61.5% of their expenses. The top three
travelers from the Commission account for 60.5% of their expenses. The top three travelers from
the Board make up 42.1% of their expenses.
10 | Introduction
Larger departments have higher total travel expenditures in absolute terms; however, an analysis
of travel expenses as a percentage of each Department’s overall budget reveals a different
perspective. The following graph represents each Department's travel expenses as a percentage
of its total budget. For example, in FY 2023-24, the Liquor Department had a total budget of
$2,367,123, with actual travel expenditures of $100,210.08 representing 4.2% of its overall
budget. This comparison shows that while not necessarily inappropriate, there is a
disproportionate emphasis placed on travel compared to other county departments.
Figure 1: Travel As A Percentage of the 23-24’Budget. Source: Expenses - Eden Expenditure Detail Eeports, Budget - Actuals FY 2023-24
Budget Figures, The Proposed Operating Budget FY 2024-25, FY 2023-24 Actuals column. Compiled Office of the County Auditor
EDEN Fresh Detail Reports. Additional data analysis available at:
https://app.powerbi.com/view?r=eyJrIjoiZDNlOWRjZDctNmQ3NC00OGFiLThjM2YtMzA0NTg
zZGI5NDliIiwidCI6ImZiNjIwYWI1LThmYWItNDhkZC1iYTQ4LTg5YzAzNjcyODdlNCJ9
Notes about the data : While efforts were made to attribute charges to actual travelers, a few entries reflect
miscellaneous corrections or billing errors and may represent the individual responsible for keying in the
transaction or the holder of the purchasing card (P-Card) rather than the actual traveler. Compiled Office of the
County Auditor
Police, 0.63%
Fire, 0.34%
Research and Development ,
3.71%
Prosecuting Attorney, 0.90%
Legislative, 2.20%
Liquor Control, 4.23%
Mass Transit , 0.51%
OHCD, 0.12%
Office of Management , 2.44%
Aging, 1.00%
Planning, 0.93%
Finance, 0.75%
Civil Defense, 1.18%
Corporation Counsel, 0.76%
Public Works, 0.07%
Enviromental Management ,
1.12%
Human Resources , 0.45%
County Auditor, 1.32%
P&R, 0.02%Miscellaneous, 0.02%Elections, 0.53%
OSCER, 0.71%
Block Grants, 0.84%
Information Technology, 0.02%
Animal Control, 0.01%
TRAVEL AS A PERCENTAGE OF THE 23-24' BUDGET
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11 | Audit Results
Chapter 2 Audit Results
Travel Policy
Audit Activity
To assess travel practices against travel policy, we:
• Reviewed Code Article 16, Travel and Other Expenses
• Requested the Department's Travel Policy
• Reviewed Travel Authorization, Expenditures, Reconciliation, and Travel Reports
• Reviewed Department Explanation of Travel Expenses
• Obtained an informal opinion from the Board of Ethics (BOE)
• Considered Sunshine Law, HRS § 92
Overview
Travel policies play a critical role in managing and controlling expenses by establishing clear
guidelines to ensure that the appropriate personnel travel and the number of trips taken align with
the individuals' roles and responsibilities. Additionally, these policies help ensure compliance with
relevant laws and regulations, such as HRS § 92 (Sunshine Law) and Code Article 16 § 2-98
(reporting requirements), promoting transparency and mitigating legal risks. Standardized travel
policies provide a framework for documenting and justifying expenses, ensuring accountability,
and preventing the misuse of funds. Effective policies streamline travel planning, reducing
administrative burdens by aligning travel with an organization's objectives.
We found
In response to a request for a travel policy, it was noted that the Department did not have a written
policy at the department level and instead followed the county's travel policy. However, the
Department outlined its informal travel priorities, emphasizing participation in events offered by
three organizations:
1. National Alcohol Beverage Control Association
a. Annual Conference
b. Legal Symposium
c. Administrators Conference
2. National Conference of State Liquor Administrators
a. Annual Conference
b. Central/Western Regional
c. North/South Regional
3. National Liquor Law Enforcement Association
a. Annual Conference
Each calendar year, Chairs and Vice Chairs of the Board and Commission are given the
opportunity to attend a conference of their choice. Additional opportunities are offered to Board
12 | Audit Results
and Commission members and senior staff based on seniority. (See Attachment 2). Subsequently, during the audit, the Department stated:
"Other factors considered in determining travel include the schedules of members and staff, the
timing of conferences within the fiscal year relative to when members are appointed and confirmed, and the relevance of conference content. Whenever possible, the Department aims
to send new members to conferences once they have a general understanding of their
responsibilities, while experienced (senior) members attend to stay current with industry changes and to help train newer members."
One or two staff members are responsible for assisting with travel arrangements and coordinating between the Department and the respective organizations.
In addition to these conferences, the Department also participates in the following:
4. Annual State Liquor Conference
5. State Liquor Investigators Workshop - All Board members, Commissioners, senior staff,
investigators, and support staff are invited to this workshop.
After assuming the role, the current Director expanded travel opportunities to include the Board,
a practice previously limited to the Commission, with not all Commission members participating.
This decision, presented as a management initiative, was intended to provide equitable travel
opportunities to the Board and Commission. While the intent of this change appears to be focused
on promoting equal participation, the prior practice of limiting travel may have been established
for operational or compliance-related reasons.
The Department also proactively and voluntarily sought guidance from the BOE through an
informal opinion (See Attachment 3) to determine if a potential conflict of interest exists between
the Commission appointing the Director and the Director determining travel priorities for the
Commission. The BOE concluded that,
“No conflict as long as the Department creates in writing their current policy and follows
their written policy. Should any alterations or changes to the policy be created it is
suggested to bring them to the Liquor Commission Board and the Liquor Adjudication
Board before enacting said changes.”
Conclusion The absence of a formal written travel policy tailored to the Department’s unique needs presents challenges. Unlike other departments, this Department facilitates travel for its Board and Commission, creating complexities beyond typical travel arrangements. As the Department's considerations encompass more than standard travel, a tailored policy would provide the necessary structure to address these differences. Without such a policy, there is an increased risk of non-compliance with statutory requirements, including the Sunshine Law. This report
addresses Sunshine Law compliance issues in a later section.
13 | Audit Results
Finding 1: The Department follows the County’s travel policy in the absence of its own written Department-level travel policy despite unique considerations that affect the Department, Commission, and Board Cause of the Condition
The Department has relied on the county’s travel policy and informal priorities and practices without formalizing a department-level policy. Effect of the Condition The absence of a department-level travel policy and changes in practice raises concerns about the consistency and oversight of travel expenditures.
Recommendation 1: Establish a Department-Level Travel Policy We recommend that the Department develop and implement a department-level travel policy that establishes clear guidelines for approving, justifying, and reconciling travel expenses.
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14 | Audit Results
Council Authority and Responsibility:
Addressing Questionable Travel Expenditures
Audit Activity
To determine if travel budget line-item reviews are sufficiently vetted for a clear public purpose,
are necessary, and are responsible, we:
• Reviewed Resolution 548-24 Draft 2 to Conduct Performance Audit of Department of
Liquor
• Reviewed and analyzed Charter 7-3.4(b)(2) Director of the Liquor Control
• Reviewed and analyzed Charter Article X, § 10-5 Operating Budget: Council Action
• Reviewed and analyzed expenditures with HRS § 281-17.5 Liquor Laws of Hawaiʻi
• Reviewed past budget proposal meetings
• Inquired from Department of Finance personnel about preliminary budget processes
Overview
The Department of Liquor Control does not use general fund money. Instead, the Department's
budget is supported by licensing fees, which must maintain a direct and proportional relationship
to the Department’s actual operating expenses to comply with statutory requirements.
Specifically, HRS § 281-17.5 governs the Commission's authority to collect and adjust fees,
ensuring they align with the costs incurred from the Department’s regulatory activities, such as
liquor license management.
We Found
Resolution 548-24 Draft 2 focused on two applicable concerns:
1. Self-Funding of the Department: The Department relies on fees collected by the Commission, which must have a direct and proportionate relationship to the Department's expenses. 2. Travel Expenses: Recent budget hearings reported a high travel budget of $124,000 for
the Department for Fiscal Year 2023-24 and predicted for the next three fiscal years.
There are five primary takeaways from HRS § 281-17.5 Summarized in part:
1. Direct Relationship Between Fees and Costs: Any fees the Commission collects,
including liquor license fees, must directly relate to the Commission's actual costs for
overseeing liquor activities (like the production, sale, and regulation of liquor). Liquor can’t
charge more than what it costs to operate.
2. Usage of Collected Fees: The fees collected by the Commission can only be used for
the Commission’s operating and administrative costs. They cannot be used for anything
outside of what’s necessary to run the Commission except as law permits.
3. Increasing Fees: If the Commission wants to raise fees, they must first get approval from
the Council and Mayor.
15 | Audit Results
4. Notification to Licensees: If the Commission plans to change the fee structure,
notification must be provided to everyone who holds a liquor license that would be
affected. After the change, they must inform the licensees of the result.
5. Fee Surpluses: If the Commission collects more money than it needs (anything more
than 20% above its budget), it must adjust the fees to comply with the rules and return or
credit any excess funds to the licensees.
Each year, the Director of the Department should determine what they consider to be an
appropriate relationship between fees and costs, then compile and submit a proposed operating
budget to the Council in accordance with Charter § 7-3.4(b)(2), which states,
“The Director of the Department of liquor control shall:
Provide clerical and administrative services for the Commission and the Board, including
the submission of a budget for the operation of the Department.”
Self-funded status does not inhibit or limit the Council's authority over the Department's budget
proposal. As outlined in Charter, Article X, § 10-5:
“after a public hearing and any necessary amendments, the County Council may adopt the
operating budget, with or without further changes. The council may add new items,
increase amounts, or reduce or remove items, except for legally required appropriations
and debt service. However, the estimated revenues for the upcoming year must always be
at least equal to the total proposed expenditures.”
Conclusion
When approving the budget, the council affirms that the proposed expenditure is reasonable. The
Director is responsible for submitting the proposed budget, while the Commission ensures that
fees align with actual costs. If the council reduces a line item in the Department’s budget, it does
not have the authority to alter the fee structure directly. However, its adjustments may impact the
Commission’s operations.
The Commission, therefore, must still review and adjust fees as necessary to maintain a direct
relationship between fees and actual costs in compliance with HRS § 281-17.5. Surpluses that
exceed allowed limits must be returned or credited to licensees. The Director supports this
process by ensuring the budget reflects appropriate fee collections based on the Commission’s
structure.
16 | Audit Results
Finding 2: The Council Approves the Department’s Budget Each Year Despite Concerns
About Excessive Travel Spending
Cause of the Condition
The council approves proposed travel during the budget review process despite persistent
concerns that fail to instill confidence that activities are necessary and appropriate.
Effect of the Condition
The lack of sufficient scrutiny and justification for travel expenditures increases the risk of
disproportionate travel spending, which may result in a misalignment between collected fees and
actual operational costs, potentially conflicting with the principles outlined in HRS § 281-17.5.
Recommendation 2: Implement a Comprehensive Review and Justification Process for
Travel Expenditures During Budget Approval
We recommend the Council work with the Department to obtain a more precise outline of
proposed travel events and attendance numbers, supported by justifications that instill confidence
and enable the Council to make more informed decisions. In the event of unresolved concerns,
the Council may consider exercising its authority to adjust travel allocations as permitted under
Charter § 10-5.
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17 | Audit Results
Training and Resource Allocation Efficiency
Audit Activity To assess if training and travel resources are allocated efficiently, we:
• Reviewed Charter Chapter 3 regarding roles and responsibilities
• Reviewed Finance Memorandum 08-12 Spending Guidelines
• Reviewed Travel Reports
• Reviewed Board and Commission Meeting Minutes
• Reviewed program highlights from the proposed operating budget on March 1, 2024
• Reviewed training methods and development principles for tailoring training to
experience levels
• Compared Six-Month Progress Reports on Program Objectives and Final Status Report
on Program Status Objectives FY 2019-24 to Travel Reports
Overview
It is important to clarify that travel and training are not interchangeable terms. While travel may
provide access to specific training opportunities, it is not the only means of reinforcing learning or
skill development. Training can take many forms, such as in-person instruction, remote learning,
on-site workshops, self-paced online courses, reading industry-related materials, and
participating in mentorship programs. Travel should be utilized only when it best serves a specific
learning objective that cannot be effectively achieved through alternative methods.
Research on learning and development indicates that the most significant gains in proficiency
occur during the initial stages of training as individuals move from novice to foundational
understanding and early practical application. As individuals gain experience, the benefits of
general training diminish. This underscores the importance of prioritizing training opportunities
for those with less experience, as they are at a stage where they benefit most from foundational
knowledge. Experienced individuals benefit more from specialized, role-specific training
designed to enhance their advanced competencies.
Considering their charter functions, Department personnel need training to enhance clerical,
administrative, and investigative skills relevant to their roles. Commission members should focus
on rule-making and improving their ability to make informed license award decisions. The Board
should prioritize training in legal frameworks, evidence evaluation, and the application of
regulations in liquor law cases.
We Found
The current practice prioritizes travel opportunities based on seniority rather than conducting a
gap analysis of skillsets and assigning training based on needs or roles. This prioritization
overlooks less experienced members who may require foundational training and
disproportionately assign resources to senior members who may not benefit from general training
as much.
18 | Audit Results
The current system does not base travel around ensuring competency for the distinct roles and
responsibilities of department personnel, the Commission, and the Board. As a result, the training
provided may not always align with each group's specific functions and needs, reducing the
effectiveness of the training investments.
Alternative Training Methods
The Department prioritizes travel for in-person training; however, there are cost-effective
alternatives to achieve similar outcomes. These include limiting the number of travelers, sharing
and discussing travel reports, and utilizing virtual learning platforms, self-paced courses, and
written materials.
Resource Allocations
When evaluating the allocation of resources for training, it is essential to evaluate the inputs or
costs. It is equally important to evaluate the output or immediate results and outcomes or long-
term impacts of the investments in personnel. Our review looked at inputs of monies spent on
airfare, lodging, meals, registration, and similar expenses and outputs and outcomes as described
in meeting minutes, travel reports, and program objective statements. The input investment into
personnel resulted in the following outputs and outcomes:
Department Travel Breakdown
Fiscal Year Travel Expenses Members Sent Average cost per Traveler Events Attended Average cost per event
2019-20 $46,050.05 20 $2,302.50 14 $3,289.29
2020-21 $421.20 2 $210.60 2 $210.60
2021-22 $45,990.21 11 $4,180.93 10 $4,599.02
2022-23 $55,307.75 22 $2,513.99 15 $3,687.18
2023-24 $63,286.84 20 $3,164.34 10 $6,328.68
Figure 2: Department Travel Breakdown
Source: Work Assignments, Corrections, Meeting with Licensee/Commission/Board Meetings filtered from totals
Represents all travelers except Board and Commission members. Compiled Office of the County Auditor
Outputs:
From Program Objective Statements Licensing Activities
• 391 Interviews with new liquor license applicants, surpassing targets in most years
• 199 new license applications were processed, although targets fell short in some years
• 239 site visits to premises, supporting regulatory compliance Operations
• Conducted 471 liquor card classes and manager examinations: o Included sessions in multiple locations: Hilo, Kona, Waimea, and special sessions. o A total of 6,480 licensed employees were trained over the period, reflecting efforts to manage high turnover and maintain compliance.
• Conducted an average of 1,745 compliance checks per month:
o Despite challenges like the COVID-19 pandemic, compliance checks were regularly conducted to monitor and enforce regulations. o In later years, compliance checks averaged below the target due to resource
limitations, but the Department maintained adequate oversight.
19 | Audit Results
Public Programs
• Processed 267 contingency fund grant requests:
o Activities supported alcohol-free and drug-free programs for youth and community organizations, including educational and wellness events.
o Programs were implemented in alignment with department objectives to promote
responsible alcohol consumption.
• Distributed over 700 doses of Narcan nasal spray to licensees to address narcotic
overdose risks and promote public safety. Training and Development
• Extensive participation in national and regional conferences, covering liquor law enforcement, digital ID verification, regulatory compliance, and public safety initiatives.
Outcomes Despite high travel costs, the Department achieved several positive outcomes in terms of its
operations. In licensing and compliance, the Department consistently exceeded targets for
interviews, manager examinations, and licensee checks, although some shortfalls occurred in
new application processing and site visits. Increased classes and licensee checks were held to
address turnover and public health restrictions, demonstrating adaptability. In public health, the
Department succeeded in youth outreach programs and alcohol-free events, with compliance
audits for underage drinking showing improved rates after targeted interventions.
Conclusion The Department's training programs appear highly correlated with its successful outcomes,
particularly in maintaining up-to-date knowledge of regulatory developments and enhancing
enforcement procedures. The training agendas outlined in travel reports closely align with the
duties expected of department personnel. These programs have helped staff stay informed about
national and regional best practices, leading to improved performance in regulatory compliance,
public safety, and youth outreach initiatives. However, the significant travel costs associated with
these programs should be regularly assessed to ensure they contribute effectively to performance
improvements.
20 | Audit Results
Liquor Commission Travel Breakdown
Fiscal
Year
Travel
Expenses
Members
Sent
Average
cost per member
Events
Attended
Average
cost per event
Commission
meetings conducted 2019-20 $18,801.46 9 $2,089.05 5 $3,760.29 11
2020-21 - - - - - 12
2021-22 $12,868.41 7 $1,838.34 4 $3,217.10 12
2022-23 $21,352.91 8 $2,669.11 6 $3,558.82 12
2023-24 $25,396.32 9 $2,821.81 4 $6,349.08 12
Figure 2.1: Liquor Commission Travel Breakdown Source: Work Assignments, Corrections, Meeting with Licensee/Commission/Board Meetings filtered from totals Compiled Office of the County Auditor
Outputs:
From Meeting Minutes
Licensing Activity A total of 239 applications were reviewed over the five years. These included new liquor licenses,
license transfers, and alterations.
Application Processing
The Commission efficiently explored elements related to review and approval, including
descriptions of the business, identifying locations, discussing and exploring impacts of the
applicants’ proposed activities, ensuring public notice and public sentiment were considered, and
contributing to efficient and consistent processing of approvals, with only a few applications being
continued or withdrawn.
Operational Focus
During this period, the Commission did not enact any new legislation. Instead, it focused on
adapting its operations to accommodate external challenges, such as those presented by COVID-
19, including managing license extensions, regulatory adjustments, and ratifications related to
liquor control.
Outcomes
The Commission consistently achieved approval rates of over 97% for liquor license applications,
with some years reaching 100%. The Commission seamlessly processed applications during the
COVID-19 pandemic. Each year, state legislation is proposed, and one of the major changes to
state liquor laws after COVID-19 was the provision of “to-go” liquor service. This change in State
liquor law was based on the input and leadership of the Commission that had enacted emergency
rules during COVID-19 to help the businesses from closing completely or going bankrupt. Until
2024, no new local legislation was introduced. Still, the Commission maintained a steady
approval process, upholding regulatory standards and assisting local businesses in obtaining the
necessary permits. In 2024, the Commission gathered input from businesses and communities
and conducted public hearings to update its Rules and Regulations, with updates planned in early
2025.
21 | Audit Results
Conclusion
The observable correlation between travel, training, and performance is moderate. The
Commission has consistently processed, investigated, and managed applications efficiently.
Stability within the existing regulatory framework has eliminated the need for new local legislation
since at least 2015. Without new legislative initiatives, skills acquired from conference attendance
have been applied primarily to fact-finding questions during application reviews. Most
applications follow a uniform and prescriptive methodology; however, when applicable,
commissioners exhibit competencies by exploring concepts such as parking capacity,
accommodations for serving in public spaces, noise considerations, and others. While travel may
be necessary for the orientation of new members, the value and necessity of sustained investment
in existing members should be reviewed periodically for its influence on performance.
22 | Audit Results
Liquor Adjudication Board Travel Breakdown
Fiscal
Year
Travel
Expenses
Members
Sent
Average
cost per member
Events
Attended
Average
cost per event
Meetings
conducted
2019-20 $7,354.94 5 $1,470.99 3 $2,451.65 3
2020-21 - - - - - 2
2021-22 $21,084.76 7 $3,012.11 5 $4,216.80 6
2022-23 $22,078.61 6 $3,679.77 5 $4,415.72 3
2023-24 $6,742.58 5 $1,348.52 3 $2,247.53 2
Figure 2.2: Liquor Adjudication Board Travel Breakdown Source: Work Assignments, Corrections, Meeting with Licensee/Commission/Board Meetings filtered from totals Compiled Office of the County Auditor
Outputs: (2019-24)
From Meeting Minutes
• Number of Meetings: 16 Board meetings were held during these five years.
• Number of Cases Heard: The Board addressed 81 cases, covering a range of violations, including:
Figure 2.3: Violation by Type Source: Liquor Control Adjudication Board Meeting Minutes Compiled Office of the County Auditor
1
2
1
3
22
3
1 12
7 1
28
VIOLATION BY TYPE
Consumption on Public Sidewalk
Failure to Have Active Person in
Charge
Failure to Have Designated Person in
Active Charge
Failure to Have Designated Person inCharge
Failure to Notify Officer Changes
Failure to Post Required Notices
Failure to Submit Alteration Permit
Failure to Submit Gross Liquor Sales
Report
Failure to Submit Percentage Fees
Patrons Present After Legal Closing
Time
Sale to Minor
23 | Audit Results
Outcomes
Over the fiscal years 2019-24, the Board heard cases for fines totaling $73,700.
Liquor Adjudication Board Fines Fiscal Year Fines Suspended Net Fines 2019-20 $17,600 $8,850 $8,750
2020-21 $3,100 $1,750 $1,350
2021-22 $45,200 $19,500 $25,700
2022-23 $3,300 $750 $2,550
2023-24 $4,500 $2,000 $2,500
Total $73,700 $32,850 $40,850
Figure 2.4: Liquor Adjudication Board Fines
Source: Board meeting minutes. Compiled Office of the County Auditor
The Board's efforts during these meetings resulted in $40,850 in net fines over the five years.
Conclusion
The Board plays an important role in the oversight and division of duties in the enforcement
actions carried out by the Department and Commission. There appears to be no apparent
connection between travel input costs and outputs or outcomes, such as the number of cases
heard, fines collected, or any long-term organizational changes resulting from its travel activities.
The Board was most active when travel was restricted mainly due to COVID-19. A review of
meeting minutes indicates that discussions are typically straightforward, with no changes to the
Board's rules or regulations since 2006. As with the Commission, travel and training may be
beneficial to orient new members, but the value and necessity of sustained investment in existing
members should be reviewed periodically for its influence on performance and tailored
accordingly.
Finding 3: The Department Emphasizes Travel Based on Seniority Rather Than Utilizing a
Need-Based or Role-Specific Framework
Cause of the Condition
Offering travel opportunities to the most senior staff members, the Board, and the Commission is
not inherently inappropriate and based on professional judgment. However, this approach does
not prioritize training opportunities for individuals with less foundational knowledge.
Effect of the Condition
Senior members, having already developed a high level of proficiency, are likely to experience
diminishing returns, while junior members who would benefit from training to gain proficiency may
be underserved.
Recommendation 3: Prioritize Travel Using a Need-Based and Role-Specific Framework
We recommend that the Department implement a needs-based and role-specific travel allocation
framework that prioritizes training for individuals with less foundational knowledge and tailors
training content to the specific duties of department personnel, the Board, and the Commission.
This approach will ensure that training resources are used effectively to enhance foundational
skills and role-specific expertise across all groups.
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24 | Audit Results
Board and Commission Membership
Audit Activity
To determine if there are potential conflicts of interest serving on both boards and commissions, we:
• Reviewed Charter §§ 13-4(a), (c) Boards and Commissions
• Reviewed Resolution 548-24 Draft 2 Conduct Performance Audit of Department of Liquor
• Analyzed patterns of service related to Board and Commission membership
• Interviewed Board and Commission Liaison
In addition to the audit objectives previously discussed, Resolution 548-24 Draft 2 requested that
the audit focus on “Any other pertinent issues affecting the transparency and accountability of the
Department of Liquor Control.”
Overview
Citizen-led boards and commissions are designed to enhance public participation in government,
promote diverse representation, and provide independent oversight. Charter § 13-4(a) creates
five-year staggered term limits of service for Board and Commission members to encourage
continuous rotation and fresh perspectives. The members are appointed by the mayor and
confirmed by the council according to Charter § 13-4(b). Furthermore, § 13-4(c) stipulates that,
"No member shall be eligible for a second appointment to the same board or commission prior
to the expiration of two years… "
We Found
Hawai‘i County and Maui County have a similar liquor governance structure, each with both a Liquor Commission and a separate Adjudication Board. In contrast, the City and County of Honolulu and Kaua‘i County operate under a single Liquor Commission responsible for both
licensing and adjudication. This structural separation provides governance and oversight benefits but also raises policy considerations regarding continuity, appointments, and long-term service. In counties with a single commission, members must complete their term and observe a cooling-off period before being reappointed. However, in counties with both a Commission and an Adjudication Board, members can transition between roles immediately without a cooling-off period.
Conclusion Allowing individuals to serve on both the Board and Commission consecutively may limit inclusivity, reduce broader participation, and restrict the introduction of new perspectives.
However, the impacts should be weighed against the practical challenge of securing volunteers to fill vacancies.
25 | Audit Results
Finding 4: Safeguards Limiting Consecutive Roles on Commission and Board are Absent
Cause of the Condition
The Charter does not address individuals moving between the Board and Commission by
requiring a cooling-off period between roles.
Effect of the Condition
The ability to serve on the Board and Commission back-to-back limits the opportunity for diverse
public participation.
Recommendation 4: Amend Charter to Restrict Consecutive Service
We recommend the Council consider a charter amendment establishing restrictions on
consecutive service between any Board that performs a quasi-judicial function for a department
and its related Commission. An amendment should include a two-year cooling-off period.
26 | Audit Results
Quorum and Sunshine Law
Audit Activity
To determine if there was a quorum during travel, we:
• Gained an understanding of Sunshine Law (HRS 92)
• Examined travel reports and documented traveler attendance
• Reviewed Ethics and Sunshine Law training records
• Interviewed Office of Information Practices, staff attorney
Overview
The Sunshine Law exists in various forms across all states and mandates that government
meetings and decision-making processes be open to the public, promoting transparency and
accountability. This law requires advance notice of meetings, public access to those meetings,
and records of proceedings. Although closed sessions are permitted under specific
circumstances, such as for legal matters, such sessions are limited and must be justified.
Sunshine Law ensures that citizens can access the workings of government, and in some cases,
it allows public participation in these meetings, fostering openness in governmental actions.
In Hawaiʻi, the Sunshine Law is established under HRS Chapter 92 and is administered by the Office of Information Practices. This law permits specific interactions among governing body
members under defined conditions. These "permitted interactions" are carefully crafted exceptions to the general rule that public bodies' discussions, deliberations, and decision-making must occur in open, publicly accessible meetings. These exceptions aim to balance practical
governance with the principles of transparency and accountability. HRS §92-1(1),(2) provides that:
“It is the intent of this part to protect the people’s right to know,” and “The provisions
requiring open meetings shall be liberally construed.”
A critical concept in understanding permitted interactions is the definition of "board business." HRS §92-2 defines board business as:
“specific matters over which a board has supervision, control, jurisdiction, or advisory
power, that are actually pending before the board, or that can be reasonably anticipated to arise before the board in the foreseeable future.
Permitted interaction supports discussions of board business to enable board members to fulfill their duties faithfully, recognizing the increasing risks when more members participate. Criteria manage increasing risk. For example, if board business is discussed, permitted interactions related to training include:
27 | Audit Results
0 – 1 Members (No Risk)
Sunshine Law is not applicable.
2 Members (Minimal Risk)
92.5(a) “Two members of a board may discuss between themselves matters relating to board business to enable them to perform their duties faithfully, as long as no commitment to vote is
made or sought and the two members do not constitute a quorum of their board.”
2 or More Members, But Less than a Quorum (More Risk)
92.5(e) “Two or more members of a board, but less than the number of members that would constitute a quorum for the Board, may attend an informational meeting or presentation on
matters relating to board business, including a meeting of another entity, legislative hearing,
convention, seminar, or community meeting; provided that the meeting or presentation is not specifically and exclusively organized for or directed toward members of the Board. The board
members in attendance may participate in discussions, including discussions among
themselves; provided that the discussions occur during and as part of the informational meeting
or presentation; provided further that no commitment relating to a vote on the matter is made
or sought.
At the next duly noticed meeting of the Board, the board members shall report their attendance,
and the matters presented and discussed that related to board business at the informational meeting or presentation.”
When a Quorum is Present (Greatest Risk)
While traveling with a quorum is not a violation of law in and of itself, there are no permitted interaction provisions for travel when a quorum is present. Inherent conditions exist, and discussions can trigger the Sunshine Law if members discuss “board business” during the
event. This makes it imperative to reduce risk to an acceptable level. The Adjudication Board is especially vulnerable because of its small five-member makeup.
28 | Audit Results
What We Found Our review found 13 instances where quorum was reached during travel:
Quorum Reach During Travel LC = Commission LAB = Board No. Attendees Quorum Reached?
No. Event LC LC LAB LAB
1 2019-20 Annual Meeting 8 Yes 4 Yes
2 2019-20 Annual State Liquor Conference 6 Yes 3 Yes
3 2021-22 Annual Meeting 3 No 5 Yes
4 2021-22 NCSLA Annual Conference 2 No 3 Yes
5 2021-22 NABCA Annual Conference 2 No 4 Yes
6 2022-23 NCSLA Annual Conference 3 No 3 Yes
7 2022-23 Annual State Liquor Conference 6 Yes 5 Yes
8 2023-24 NABCA Annual Conference 3 No 3 Yes
9 2023-24 Annual State Liquor Conference 7 Yes 5 Yes
Figure 2.5: Quorum Reach During Travel Source: Department of Liquor Travel Reports and travel expenses Compiled Office of the County Auditor
Because the Board and Commission are subject to the Sunshine Law, they need solid
foundational training explaining when the law becomes applicable to avoid inadvertent violations.
Foundational Training
The Office of Corporation Counsel administers Sunshine Law and Ethics training. To understand
if Sunshine Law and Ethics training was being provided, auditors disseminated a spreadsheet to
Board and Commission members, asking them to determine if training was received. We noted
the following exceptions:
• 12 instances, no Sunshine Law training
• 13 instances, no Ethics training
• 12 instances, no Sunshine Law and Ethics training
This gap in training represents a significant compliance risk, as untrained members of the Board
or Commission may inadvertently violate Sunshine Law or Ethics guidelines, leading to
unauthorized disclosures or questionable decision-making.
We reviewed department agendas and meeting minutes to determine if reports were being added
to the agendas. There were 47 travel events over the five years. No debriefings were placed on
agendas. This oversight represents a missed opportunity for knowledge sharing in the "train-the-
trainer" model, where travelers disseminate key lessons from conferences or workshops to their
peers, thereby extending the value gained from attending events.
29 | Audit Results
Conclusion
Our audit found that Board and Commission members reached a quorum during travel on multiple
occasions, increasing the risk of inadvertent Sunshine Law violations. Additionally, foundational
Sunshine Law and Ethics training gaps were identified, which may contribute to non-compliance.
Furthermore, the absence of debriefing reports on meeting agendas limits knowledge sharing.
Establishing safeguards mitigates compliance risks.
Finding 5: Concerns Regarding Sunshine Law and Other Reporting Requirements
Cause of the Condition Board and Commission members attended some events with a quorum. Effect of the Condition Traveling with a quorum increases the risk to board and commission members.
Recommendation 5: Ensure Transparency and Compliance with Reporting Requirements 5a. We recommend the Department implement attendance limits for Board and Commission
members at events, restricting participation, in most cases, to less than a quorum.
When a larger travel party is deemed necessary, the Department should coordinate with
the Office of Corporation Counsel to issue an event-specific reminder to Board and
Commission members not to discuss board business.
5b. We recommend that the Department coordinate with the Office of Corporation Counsel
to provide regular Sunshine Law and Ethics training to all Board and Commission
members to ensure understanding and compliance; preferably annually.
30 | Fraud, Waste, and Abuse
Chapter 3
Fraud, Waste, and Abuse
As a practice, we remain mindful and document instances of fraud, waste, and abuse specifically
within the scope of the audit objectives.
Management reported no fraud, waste, abuse, ongoing investigations, or pending litigation that
would impact this audit.
What is Waste?
“Waste” involves needless and careless expenditures of county funds or the misuse or
mismanagement of county resources and property. Waste can be both intentional and
unintentional.
The Department of Liquor Control, Board and Commission travel audit has identified inefficiencies
in managing travel expenses primarily related to board, commission, and senior staff travel. While
the expenditures are not indicative of willful misuse to needlessly spend public funds, the
tendency to send more than a required minimum and the prioritization of sending senior members
who are well versed in their role has resulted in expenditures that are not sufficiently evaluating
the value they provide to the Department's operational goals or the broader public interest.
Although the Department does not use general fund money for its travel expenses, it is important
to consider and reaffirm that public funds provided by liquor licensees finance these activities. As
such, there is an expectation that all expenditures are necessary and provide a demonstrable
benefit to taxpayers. The current approach to travel does not adequately balance the need to
support individuals with a thorough assessment of the cost-effectiveness of such expenditures. A
more structured evaluation of the necessity and benefit of travel expenditures could lead to more
efficient use of public resources, ensuring that funds are allocated to areas that directly benefit
the public and the Department’s objectives.
In closing, the improper use of government resources or positions is commonly uncovered by
employees and the public. We strongly encourage reporting of any concerns through our fraud,
waste and abuse hotlines:
To access the complaints directory:
https://www.hawaiicounty.gov/our-county/legislative/office-
of-the-county-auditor/inquiry-and-complaint
Submit a claim:
https://www.hawaiicounty.gov/our-county/legislative/office-
of-the-county-auditor/inquiry-and-complaint/intake-form
Fraud & Waste Hotline: (808) 480-8213
Whistleblower Hotline: (808) 480-8279
Email: concern@hawaiicounty.gov
Fax Number: (808) 961-8905
Mail: Office of the County Auditor
120 Pauahi St. Ste. 309
Hilo, HI 96720
31 | Conclusions
Chapter 4
Conclusion
The audit identified areas where the Department could improve its compliance, resource
allocation and governance practices. The recommendations provided in this report are intended
to strengthen operational efficiency, ensure statutory compliance, and enhance the transparency
and accountability of travel-related decisions.
Compliance with HRS § 281-17.5
The responsibility for ensuring that fees collected by the Commission maintain a direct and
proportionate relationship to the Department’s actual operating costs, as required by HRS § 281-
17.5, ultimately lies with the Department. The Director of the Department is responsible for
proposing an operating budget that appropriately aligns fee collections with planned activities.
The Council is tasked with approving this budget. The Council’s approval of the Department’s
budget signifies a general affirmation of the appropriateness. It is incumbent upon the Department
to regularly reassess and realign its priorities, including travel expenditures, to ensure compliance
with statutory requirements and avoid any misalignment between fees and costs.
Effectiveness of Travel Fund Allocation and Utilization
Travel fund allocations, while significant, were not consistently justified or aligned with the
Department's goals. The current allocation process prioritizes seniority, with less regard to role
alignment cost-effective alternatives, and a more targeted approach to travel planning is
recommended.
Management Practices Related to Travel
The Department follows county protocols, including authorization and approval to travel, and
provides travel reports upon their return. The Department lacks a formal department-level travel
policy, including safeguards preventing inconsistencies in oversight. A formal travel policy
incorporating internal controls would help ensure travel practices align with organizational
objectives and promote responsible governance.
32 | Management Response
Chapter 5
Management Response
The audit statement is a question of whether we spent too much money. But the question should really be are we spending it wisely.
To examine the question properly, we really must look at the reality of what we have as a self-funded department. You must look at the effect on the bottom line, which is what is collected from the licensees.
WE HAVE LOWERED THE PERCENTAGE FEES ASSESSED UPON OUR LICENSEES
The percentage fees that we collect for the Department have steadily dropped over the time in question. Specifically, the percentage fees have been as follows:
FY20-21 0.007 FY21-22 0.00787404 FY22-23 0.005875102
FY23-24 0.0061025 FY24-25 0.005104746
It is hard to look at our expenditure in isolation and say there is a problem while you say our travel budget is large, from what it nets the Department and the licensees it may be a bargain. We look at our travel budget as an investment in our Board and Commission members, as well as our
staff. Things are learned in formal training but just as much is learned from the after-hour visitation of different venues and meeting with people to see what exists out there at the various locations. This is something you can’t get unless you are there.
For example, some of our members never realized until they were able to attend a training in other jurisdictions that liquor sales in some jurisdictions are banned on Sunday, or markets/chain stores may not be allowed to sell liquor like in Hawai`i. Some of the jurisdictions we have visited are equally intrigued that in Hawai`i you can go to a grocery store and buy eggs, toilet paper, and liquor since that is not allowed in their State or County.
WHAT WE DO IS DIRECTLY RELATED TO OUR MISSION
Our mission statement is “[t]o promote the health, safety, and welfare of the general public by regulating the importation, manufacture, distribution, sale, and service of intoxicating liquors.”
To that end, some factors to consider are that we are the only Department regulating three sets of laws, the Federal, State and County laws regarding liquor. We are policing an industry that spends billions of dollars in a year to promote their products. We regulate an industry on this
island which brings in hundreds of millions of dollars and promotes liquor to the community, not just to bars but hotels, restaurants, supermarkets, big box stores down to convenience stores. We regulate liquor, but also help to promote healthy use of the products to sustain harmony and
keep the industry and the community operating. The restaurants, bars, and hotels are the backbones of our visitor industry, even if they come for the scenery and nature, it’s these other activities which make our island a good place to visit. It provides life for tomorrow, not to mention
the jobs that are sustained by this industry.
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The restaurants and stores provide for the community – they sustain the community and give it life.
Even when going through rough times like COVID, we were able to hold the fees and costs down for the licensees. We were also at the forefront in the State of Hawai`i in finding ways to keep our licensees open and operating during COVID and immediately after COVID. We were
proponents of allowing “to-go alcohol” when dining-in was not allowed due to social distancing and COVID-19 requirements. We helped draft the changes to the State liquor laws to make those COVID-19 emergency changes permanent. We provided cleaning/disinfecting/sanitizing
supplies, masks, gloves, sprayers to licensees so they could continue to operate safely during COVID-19. Licensees struggled to stay in business, but we did our best to help them and the workers they employed and the suppliers they relied upon.
After COVID-19 there were additional challenges that we helped address, such as the increase of opioid overdoses in Hawai`i. In 2023, we partnered with the State Department of Health, Department of the Attorney General, the Office of the Mayor, the Hawai`i County Council, and Kumukahi Health and Wellness Center to address this concern. By July 2023, our Department provided over 700 free NARCAN doses to various bars, restaurants, hotels, clubs, and other establishments to have on premises in the event someone at their business suffered from an opioid overdose. Unlike other islands, making NARCAN mandatory wasn’t necessary on Hawai`i Island because everyone agreed to prioritize public safety and ensure the well-being of
patrons and communities.
OUR TRAINING APPROACH BENEFITS OUR COMMUNITIES
In Hawai`i, if a business wants to make, sell, serve, or furnish liquor they need a liquor
license. The Commission’s role in the process is to determine if a business should be given a liquor license. We are able to issue liquor licenses within three to six months, while in other jurisdictions it could take one year or more. We equip our members to make informed,
knowledgeable decisions by giving them the opportunity to learn and experience from other jurisdictions. They are better prepared to balance the interests of the community and the business asking for the liquor license.
If a liquor licensed business should violate our liquor rules or laws, the Board’s role is to determine if a business should be allowed to keep a liquor license or receive some other type of disciplinary action. We have seen less liquor law violations with our licensees thanks to the
training, experience, and knowledge we are able to gather, observe, and share. We are able to educate licensees and our community due to our inclusive training approach. We are proud of our proactive, educational approach with our licensees and communities instead of a traditional reactive approach to compliance and enforcement.
We consider many factors when determining travel and training. For example, the schedules of the members and staff, the timing of conferences during the fiscal year, when members get appointed and confirmed, content, experience. The Department strives to provide training to its members and staff consistent with current human resource practices of diversity and
inclusion. Experienced (senior) members are trained in trends and changes to assist with adapting and productivity and also to train newer members. Less experienced members learn the overall framework and big picture at a steady pace so as not to overwhelm. Less experienced
members learn from experienced members and by attending trainings.
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We have utilized other methods of training, including webcasts, bringing trainers to us, and online training modules. We have also been fortunate to have the Office of the Corporation
Counsel provide training to our members and staff (i.e. new commissioner/board member training, sunshine law training, ethics training, liquor law orientation, investigative training). We will continue to use that resource.
OUR CHARTER ALLOWS OUR MEMBERS TO SERVE ON THE BOARD OR COMMISSION
The Charter allows our members to serve on either the Commission or Board and that is a good thing. We have members that are experienced and knowledgeable continue to serve.
They are able to participate in the entire process: becoming familiar with the issues businesses face to obtain a license; concerns (i.e. noise, traffic) and desires (i.e. convenience, services, or jobs closer to them) of communities; becoming familiar with the issues businesses face after they
have a liquor license and what they have to do to keep the license. This flexibility is something that other jurisdictions have used as a model.
The liquor industry is highly regulated, given its history (prohibition in the United States from 1920 until prohibition was repealed in 1933). Many of its regulations exist to address specific issues and to make sure those issues do not happen again. Safeguards exist to address concerns regarding rule-making and conflict/bias. Before regulations are changed or adopted, input is gathered and public hearings are conducted. We have enacted rule changes that businesses and communities have requested as well. Additionally, our Commission and Board are provided
legal guidance on statutory interpretation.
CONCLUSION
In conclusion, I ask you is that too much money. The adage goes, if it’s not broken then
don’t fix it. The Liquor Department has not broken down, but in my estimation is a fine running department on how we handle our budget. Instead of dragging us back down, learn from our example on how things could be for all.
Respectfully,
Gerald Takase Director County of Hawai`i, Department of Liquor Control
35 | Attachments
Chapter 6
Attachment 1 – Travel Expenditures
Attachment A: Travel Expenditures. Source: EDEN Fresh Detail Reports. Compiled Office of the County Auditor. Additional data analysis available at:
https://app.powerbi.com/view?r=eyJrIjoiZDNlOWRjZDctNmQ3NC00OGFiLThjM2YtMzA0NTgzZGI5NDliIiwidCI6ImZiNjIwYWI1LThmYWItNDhkZC1iYTQ4LTg5YzAzNjcyODdlNCJ9
Notes about the data : While efforts were made to attribute charges to actual travelers, a few entries reflect miscellaneous corrections or billing errors may represent the
individual responsible for keying in the transaction or the holder of the purchasing card (P-Card) rather than the actual travel.
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Attachment 2 – Director’s Explanation of
Travel Priorities
Attachment 2: Department of Liquor Control Director’s Explanation of Travel Priorities Source: Electronic mail dated August 25, 2024, 5:57 p.m.
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Attachment 3 – Board of Ethics Minutes1
Excerpt from Board of Ethics October 9, 2024, Minutes:
1 County of Hawaii Board of Ethics October 9, 2024 Minutes. Agenda Item #5 New Business:
https://records.hawaiicounty.gov/WebLink/1/edoc/140783/10-09-24%20Regular%20Session%20Minutes.pdf Date accessed: 2/28/2025.
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Tyler J. Benner
County Auditor
County of Hawaiʻi
Office of the County Auditor
120 Pauahi St., 309
Hilo, HI 96720
808.961.8386
www.Hawaiicounty.gov
The Office of the County Auditor is tasked with promoting accountability, fiscal integrity, and openness in local government. Our work is intended to assist County government in its management of public resources, delivery of public services, and stewardship of public trust. Copies of this audit report can be obtained by contacting the
Office of the County Auditor or visiting our website: https://www.Hawaiʻicounty.gov/our-county/legislative/office-of-the-county-auditor/audit-reports