Budget Finance Economic Development Committee Meeting – December 2, 2025

The Budget Finance Economic Development (BFED) Committee convened at 9:04 AM to review the status of federal disaster grant reimbursements (specifically from FEMA regarding the 2023 Hawaii wildfires) and the administration and management of the Office of Economic Development (OED) grants. Chair Lee moderated the discussion, during which committee members expressed significant concern regarding cash flow pressures, the delays in reimbursement processes, and the negative impact on nonprofit partners due to restrictive funding advance policies. The Office of Recovery, Department of Finance, OED, and TetraTech provided updates, clarifying the distinction between the lengthy FEMA reimbursement model and the faster CDBG-DR HUD program.

Consent Calendar

• No routine approvals or unanimous actions were recorded in the transcript for this specific meeting.

Public Comments & Testimony

• Kalana Omawi (Citizen): Expressed uncertainty regarding the source of federal funds and asked if funds could be sought from other countries (China, Japan, Russia, Venezuela) beyond the United States/Queen Liliuokalani. Speaker stated they are generally appreciative of federal money but sought clarity. Speaker reserved time.
• Susie Tiemann (Executive Director, Lokahi Pacific): Expressed strong concerns regarding the current fiscal sponsor model. Speaker positioned the County's requirement for upfront reimbursement (rather than advances) as a barrier that treats fiscal sponsors like banks, which they cannot fund. Speaker noted that recent administration changes removed historical advance mechanisms, causing delays for projects like the Feral Animal Deer Access Grant. Speaker expressed that current processes are causing stress and potential layoffs for nonprofits and offered Lokahi Pacific's services to the County to help clarify fiscal sponsorship roles and implement necessary changes.
• Royal House of Hawaii (Aloli'i Lan Tenant/Heir): Expressed confusion regarding the agenda but sought information on funds for Royal Patent lands, asking if heirs were contacted and if a fund exists for these specific lands. Speaker questioned the management authority over these lands.

Discussion Items

• FEMA Disaster Grants (Wildfire Reimbursements):

  • John Smith (Office of Recovery) & Meredith Sanders (TetraTech): Stated that while $1.6 billion was allocated from CDBG-DR, FEMA public assistance is a reimbursement-only program requiring the County to front costs.
  • Financial Flow Positions: Members (Cook, Paulton, Johnson) expressed concern that the County must advance $40 million to $70 million in cash flow for projects before reimbursement, which can take 2-3 years. Members argued this creates a burden on department budgets and effectively allows the County to "float" federal money, potentially masking true program costs.
  • Reimbursement Status: Presentation indicated that of the total costs incurred for eligible projects, approximately $40 million has been obligated by FEMA (with only ~$2 million paid out so far), and an additional ~$36 million is expected to be obligated within the next year. Speaker noted that HEMA (State) has a backlog focused on closing COVID-19 claims, which delays wildfire reimbursements.
  • Policy & Process: Speaker (Smith) noted that new federal guidelines and the presence of a FEMA Long-Term Recovery Group (stationed on Maui) are efforts to accelerate the process, but the timeline remains multi-year. Speaker (Lee) and Member Cook expressed that the current lack of clarity on the 40 million vs. 17 million discrepancy in the provided spreadsheet was confusing, with Smith clarifying that the obligated amount exceeds incurred amounts because FEMA approves projects before all work is billed.

• OED Grants Management & Policy:

  • Grant Efficiency: Member Johnson and Member Paulton raised concerns that the grant management process has become an "Achilles heel," citing delayed reimbursements and changing guidelines mid-stream that cause hardship for nonprofits. Speaker (Johnson) questioned if the strict internal controls were driven by actual fraud cases or fear, noting that there were no specific fraud cases cited in the presentation.
  • Advance Payments Debate: Member Cook and Susie Tiemann highlighted that the inability to receive quarterly advances or upfront funding forces small nonprofits into financial distress. Speaker (Maria Ornellis/OED) and Director Milner (Finance) positioned themselves as needing to enforce strict internal controls and compliance (IRS, W9, etc.) to maintain the County's credit rating and ensure legal adherence, stating that advances are only approved with strict justification and receipt submission within 30 days.
  • Fiscal Sponsorship: Discussion revealed a disconnect where the County's definition of fiscal sponsorship requires grantees to front costs, whereas Lokahi Pacific (and other sponsors) operate on a pass-through model without banking capacity. Speaker (Tieman) and Member Johnson argued that the County is discouraging the use of fiscal sponsors by not recognizing their role, suggesting a need for policy changes.
  • Report Discrepancies: Member Paulton and Member Johnson identified clerical errors in the OED "Report Card" (BFED 2012), such as grants marked as closed with balances remaining, or reporting scores conflicting with remarks. Speaker (OED staff) acknowledged these errors will be corrected.
  • Policy Changes: Staff from OED announced a pending working group and a list of approximately 20 proposed policy changes aimed at streamlining grant processes, including potential code changes for quarterly disbursements and the introduction of a "micro-grant" program for smaller organizations. Members requested the full list of these changes and a report on non-executed grants for the next cycle.

Key Outcomes

• Deferred Decisions: No votes were taken as the agenda items were designated as "7B presentations" (informational only).
• Action Items Directed:
  • Committee will send a letter to HEMA (State) requesting updates on the deep-dive audit status for DR 4724-HI (Wildfire).
  • OED will provide a comprehensive list of the 20 proposed policy changes, a report on non-executed grants from previous fiscal years, and a corrected version of the Fiscal Year 2025 Grant Report Card including historical data (FY23-FY24) for performance review.
  • A joint committee meeting with HEMA representatives will be scheduled for the next session to address the backlog and reimbursement timeline directly.
  • The administration is tasked with convening a working group that includes grant recipients to discuss and implement the proposed policy changes, specifically regarding advance payments and fiscal sponsorship definitions.
  • OED will provide a full breakdown of departments and specific projects receiving FEMA reimbursement funds to the committee.
• Next Steps: The committee will review the submitted documents prior to the upcoming FY26 budget cycle to potentially adjust allocations based on grantee performance and compliance issues.