Fire Prevention Funds Spent on Operations Instead, Honolulu Audit Shows

The City Council’s Budget Committee is set today to discuss an audit that showed that a Honolulu Fire Department fund to support fire prevention efforts islandwide was instead allegedly used to finance the department’s operations, staffing and new fire equipment purchases with little to no oversight.

In an audit report issued in August, the Office of the City Auditor asserts HFD’S Fire Plans Review Revolving Fund, or FPRRF—established and created via a 2012 city ordinance as a repository for fire plan review fees—does not have adequate safeguards in place, as required by city law, to prevent fraud, waste or error in the use of public funds.

By city law, the fire plans review fee is required to earmark 10 % of the building permit fee payable to the City &County of Honolulu.

In turn, those collected monies may be expended for HFD’s fire prevention activities relating to public education, fire investigations, plans checking, permit processing, fire inspections, certifications and training.

But in an Aug. 22 letter to the mayor and Council, Acting City Auditor Troy Shimasaki said his agency found that over a five-year period, from fiscal years 2020 to 2024, the fire department’s FPRRF “is not structured or administered in accordance with city ordinance requirements.”

“Ordinance 12-4 required that the city establish a revolving fund to receive and disburse fire plan review fees, ” he wrote. “Instead, the fees are deposited and managed within the city’s Special Projects Fund, which was designed for state contract revenues and does not provide the safeguards and review requirements for revolving funds.”

He added, “The Special Project Funds structure limits transparency and oversight, and leaves critical financial information—such as fund balances, revenues, expenditures, and staffing decisions—unreported to the ( City Council ).”

Shimasaki noted his office determined “HFD relies significantly on the fund to supplement its operations.”

“We found that between 12 to 19 percent of annual Fire Prevention Bureau (FPB ) spending between (fiscal years 2020 and 2024 ) was paid from the FPRRF, which occurred outside the city’s annual budget process, ” he wrote.

“During this period, HFD added unbudgeted staff and maintained between 4 and 9 staff annually, and spent nearly $1 million on unbudgeted equipment purchases without Council oversight or approval, ” he said.

He added “inconsistent accounting and the absence of clear reporting led to conflicting assessments of whether the fund operated with a surplus or deficit in multiple years.”

In a written response to the audit’s initial findings, HFD Fire Chief Sheldon K. Hao noted his department understood the use of the FPRRF. “We will continue to look inward and identify areas of improvement, celebrate our successes, and learn from our mistakes, ” he wrote in a July 25 letter to the auditor.

To that end, the audit—initiated via a Council-­approved resolution in January, and performed from February to June—highlights apparent discrepancies in the use of fire plan funds, including special fund purchases in which $984, 527 in fire plan review fees paid for unbudgeted equipment purchases.

According to the audit, for fiscal years 2020 to 2024, the FPB spent $2.02 million on salary-related costs.

The audit found approximately $500, 000 in special funds were used for nonholiday overtime, including $356, 911 over the five-year period ; standby pay at $140, 567 ; and provisional costs for retirement payout of accumulated vacation pay, pegged at $2, 575.

Internal knowledge of the FPRRF—particularly over how much money was actually accounted for within the fund by HFD—was also highlighted.

The audit notes, for example, that there are two years—fiscal years 2020 and 2024, respectively—where there is disagreement between HFD and the city’s executive budget books as to whether there was an annual deficit or surplus.

“FY 2020 appears to be a nearly break-even situation when comparing accounting, ” the audit states. However, “FY 2024 has a huge disparity of approximately $427, 000 in whether it was a net revenue year or the largest annual deficit year in our review.”

During fiscal year 2024, the FPRRF received revenues of over $1.14 million, and spent more than $1.08 million, the audit states.

FPB, during the same time period, spent over $7.21 million—an amount comprising over $5.97 million from the city general fund and over $1.24 million in Special Project Fund monies.

In his letter, Hao said his department would “coordinate with the city Department of Budget and Fiscal Services (BFS ) on a solution to address ” FPRRF issues.

But in an Aug. 8 response to the audit, BFS Director Andy Kawano stated, in part, that although a past Council adopted Ordinance 12-4, which authorizes the establishment of the FPRRF, “prior administrations never established it.”

“While we are uncertain as to why, a supposition may be made that Ordinance 12-4 allows the funds to be automatically appropriated for the allowed use, ” he wrote.

The Council hearing is scheduled to begin at 9 a.m. at 530 S. King St.

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