Posted on: Wednesday, March 1, 2006
Audit slams city on managing debt
By Robbie Dingeman
Advertiser Staff Writer
The city auditor yesterday criticized the city administration for its growing debt and described certain financial practices as "fragmented, lacking comprehensive management, planning and accountability."
But city officials called the report "an example of an audit gone bad."
The audit said:
Responsibilities for the city's debt have been fragmented between two departments and the city has no comprehensive plan to resolve debt management practices. Further, the audit said the city will be spending 20 percent of the budget on debt payments as early as 2008.
There is limited accountability for making exceptions to the city's debt policy such as using bond funds for short-term expenses, such as employee salaries and teak furniture for the Honolulu Zoo employee lounge.
The city should issue an annual report on all of the city's debt for the City Council and taxpayers.
City Councilman Charles Djou said the audit proved "the city has a debt and spending problem. ... The city has maxed out all of its credit cards and it's time to realize that we are incurring bills the taxpayers can't afford."
Mary Pat Waterhouse, director of the city Department of Budget and Fiscal Services, said, "We have serious concerns about the conduct of the audit and the veracity of its findings. The audit staff's unfamiliarity with the subject matter produced a report rife with errors, omissions, misrepresentations, unsubstantiated comments and flawed conclusions."
City Chief of Treasury Edlyn Taniguchi said the audit:
Confused investments with bond and debt activities, a fundamental error.
Ignored several administration requests to provide a definitive scope-of-audit statement.
Didn't understand the significance of bond rating categories, which led to inappropriate comparisons between AA-rated Honolulu with AAA-rated municipalities.
Omitted the City Council's role in Honolulu's debt management.
Mistakenly concluded that competitive bond sales are preferable to negotiated bond sales.
Reach Robbie Dingeman at rdingeman@honoluluadvertiser.com.
