A city agency tasked
with leading Oahu’s economic development has not implemented many of its programs nor shown transparency in its multiyear financial budgets, a recent city audit asserts.
The Honolulu Office of Economic Revitalization,
attached to the city Managing Director’s Office, has a stated mission to build a strong economy that improves the quality of life for every community, small business and family on the island.
With the 20-person agency’s latest budget pegged
at more than $2.2 million, OER programs involve sustainable food systems and agriculture, workforce development, innovation and technology, regenerative tourism, and aiding immigrant and underserved communities.
OER was established
via a prior Honolulu City Council resolution in 2020.
Focused on the agency operations from July 1, 2020, through June 30, 2025, the Office of the City Auditor
asserts that since its inception OER has fallen short in many areas.
“Despite its creation in 2020, OER has only recently begun to establish actual program implementation,” Acting City Auditor Troy Shimasaki wrote in a Jan. 15 memorandum to the Council. “OER’s priority was to create staffing capacity over economic recovery and revitalization.”
He noted the audit
determined “a lack of transparency, particularly with program budgetary information and reporting” at OER.
“Although the (Council) established OER in 2020, the agency did not report a budget in the Honolulu Operating Budget until fiscal year 2025,” Shimasaki wrote. “In the Office of the Managing Director, the former Office
of Economic Development (OED) and OER coexisted simultaneously in staffing records until fiscal year 2025.”
He said city budget records do not list OED and OER staffing as separate from city management, even though other programs under the Managing Director’s Office report staffing separately.
“Complicating staffing counts further, budget documents and personnel numbers differ from internal OER staffing records due to funding source discrepancies,” Shimasaki wrote. “As a result, accountability and transparency related to OER’s staffing and funding was reduced.”
He asserted OER has not fully met the responsibilities outlined in the legislative resolution that created it. “While the (City Charter)
establishes eight specific
requirements for the office and its executive, our review found that OER has only accomplished or made measurable progress toward three of the eight resolution responsibilities” or 38%, he wrote.
OER has demonstrated activity in economic response and recovery,
identifying and management of funds for economic revitalization, and small business support, Shimasaki wrote.
But he noted the audit found OER “has not fully established or implemented the remaining five required functions including economic development and investment, economic improvement projects, a business resource hub, sector-specific economic support, and economic revitalization commission.”
“As a result, OER has not fully met the intent or operational scope envisioned by the resolution, limiting its ability to provide comprehensive economic revitalization leadership for the city,” he wrote.
In response to the audit’s findings, OER Executive Director Amy Asselbaye acknowledged her agency’s deficiencies.
“OER accepts the audit’s finding that transparency and budget reporting were insufficient,” Asselbaye wrote on Jan. 9. “At the same time, it is important that the public record fully reflects the scope and scale of the nearly $350 million in economic relief programs administered by OER from 2020 to the present.
“OER remains committed to strengthening transparency and improving budget and external funding reporting practices going forward,” she wrote.
The OER was established under former mayor Kirk Caldwell’s administration. “The office was tasked to coordinate the city’s near-term COVID-19 economic response and recovery efforts and guide long-term strategy and economic development, diversification, and investments for the city,” the audit states.
“Over the five-year period of FY 2021 to FY 2025, OER expended over $324.3 million, which consisted of federal, private, and city general funds,” the audit states.
The audit determined a lack of transparency in itemizing OER “salaries, current expenses, equipment, and full-time employee counts.”
But the audit could not determine budget information for OER’s general, special projects and federal grants funds for fiscal years 2021 to 2024. By fiscal year 2025, those same fund amounts partially totaled more than $2.673 million, the audit states. “OER’s
Proposed Operating Budget for FY 2025 … reported no staff, no authorized funding, and no expenditures in FY 2023 and FY 2024.”
In its budget briefing to the Council in 2023, “OER reported FY 2023 appropriations at $1.6 million and FY 2024 proposed budget at $1.9 million. FY 2023 and FY 2024 amounts were shown at zero for full-time equivalent positions, salaries, and funding sources,” the audit states.
“This discrepancy within the budget documents was due to the lack of an official re-organization making its way through the process with other city departments,” the audit asserts. “The department explained that the administration had been in the process of completing the reorganization for the last 2.5 years, and intends to complete the re-
organization after the FY 2028 budget is approved.
“As a result of the lack of organizational formality and budget integration, we found that OER lacked sufficient transparency and accountability during our review period,” the report states.
The audit also noted the slowness with which the city ramped up OER programs.
“Although OER was established in 2020, substantive program activities … did not occur until FY 2023,” the audit states. “The slow ramp-up in program activities was caused by the city administration’s focus on organizational set up over actual program implementation. As a result, program accomplishments and value to city taxpayers were slow to realize.”
The audit performed an internal risk assessment of OER’s economic revitalization program too, which prioritized organization and administration functions. The city auditor identified five risk categories arising from prioritizing organizational setup over timely program implementation.
“The two highest-risk
areas are fiscal sustainability and program effectiveness, each rated Critical,” the audit states.
“OER’s choice to prioritize staffing and capacity-
building — along with rental relief — over timely economic recovery and
revitalization program implementation led to critical risks in fiscal sustainability and program effectiveness,” the audit asserts. “It also heightened risks in transparency/accountability, financial reporting accuracy, and moderate governance/control weaknesses.”
And “despite receiving over $325.4 million in city, federal, and private funding across program areas from FY 2021 to FY 2025, OER’s program outcomes remain limited,” the audit states.
The audit makes five
recommendations to OER as well as to the Economic Revitalization Commission — the nine-member body that recommends strategies to the city to encourage economic development on Oahu.
Those recommendations include having OER establish a long-term sustainability plan; provide an annual performance report aligned with the department’s own key performance indicators; and evaluate programs and services that are shared with other city departments and the state for cost efficiency and to avoid duplication.
OER also should ensure it meets five required responsibilities including economic development.
The audit states the Economic Revitalization Commission should establish a five-year strategic plan in accordance with OER’s mandated responsibilities.
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