We recently issued an audit report on the City and County of Honolulu’s (City) fraud risk management practices, which determined the grantee did not adequately develop a fraud risk management framework for the Coronavirus Aid, Relief, and Economic Security (CARES) Act funding provided for the Emergency Solutions Grant (ESG) program to prevent, detect, and respond to fraud (Audit Report No. 2024-LA-1002, issued August 6, 2024). This audit follows that recent work, in which we audited the City’s ESG CARES Act program with the objective of determining if improper payments existed.
The City made some improper payments in its ESG CARES Act program because it did not always follow HUD’s requirements. Specifically, the City and its subrecipients did not (1) determine that 233 landlord signing bonus payments totaling $714,512 were reasonable and necessary, (2) prorate the rent amount for partial months resulting in $51,235 in overpaid rent (projected to be $248,572 in overpayments based on our statistical sample), and (3) ensure there were no duplication of benefits for three program participants totaling $10,100. We also determined that HUD communicated draw deadline dates to grantees that were inconsistent with guidance it publicly issued, causing the City to draw $1.9 million in grant funds after the deadline. These conditions occurred because we determined that officials of the City and its subrecipients were not aware of some of HUD’s requirements for the ESG CARES Act program and did not have controls for preventing a duplication of benefits. In addition, HUD used a single draw deadline for grantees, which conflicted with the three separate expenditure deadlines that it established, but did not issue formal written notice so that all grantees, subrecipients, and the public would be aware of the single deadline. These results reduced the number of participants that could have been served by the program, intended to reduce or mitigate homelessness, and impacted the City’s ability to maintain program and payment integrity of the ESG CARES Act program. Although the ESG CARES Act program has concluded, the City could make some of the same types of improper payments in the annual ESG program and other HUD-funded programs it operates, since these programs allow expenses for similar activities.
We recommend that the Director of HUD’s Honolulu Office of Community Planning and Development instruct the City to (1) determine whether the $714,512 paid for 233 signing bonuses under the ESG CARES Act program were reasonable and necessary, (2) develop and implement written policies and procedures for the ESG program to ensure that rents are prorated for the first month for tenant-based rental assistance, (3) repay HUD from non-Federal funds $51,235 in overpaid rent to landlords, (4) develop and implement written policies and procedures to prevent duplication of benefits, and (5) review the rental assistance payments made for the ESG CARES Act program to identify other possible duplication of benefits with other rental assistance programs that the City operates.
Recommendations
Community Planning and Development
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Status2026-LA-1002-001-AOpenClosed$714,512.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Determine whether the $714,512 paid for 233 signing bonuses under the ESG CARES Act program were reasonable under the program participant’s particular circumstances, and not more than necessary to house the program participants or repay HUD from non-Federal funds.
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Status2026-LA-1002-001-BOpenClosed$197,337.00Funds Put to Better Use
Recommendations that funds be put to better use estimate funds that could be used more efficiently. For example, recommendations that funds be put to better use could result in reductions in spending, deobligation of funds, or avoidance of unnecessary spending.
Develop and implement written policies and procedures that include internal controls for the ESG program to ensure that it, and its subrecipients, prorate the rent amount for the first month for tenant-based rental assistance. Since the City did not prorate rent, there was an estimated overpayment to landlords of $248,572 that could have been put to better use.
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Status2026-LA-1002-001-COpenClosed$51,235.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Repay HUD from non-Federal funds $51,235 in overpaid rent to landlords because the first month of rent was not prorated.
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Status2026-LA-1002-001-DOpenClosed
Develop and implement written policies and procedures that include internal controls to prevent any duplication of benefits for the ESG program participants with other programs, specifically for rapid rehousing and homeless prevention.
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Status2026-LA-1002-001-EOpenClosed$10,100.00Funds Put to Better Use
Recommendations that funds be put to better use estimate funds that could be used more efficiently. For example, recommendations that funds be put to better use could result in reductions in spending, deobligation of funds, or avoidance of unnecessary spending.
Review the rental assistance payments made for the ESG CARES Act program to identify other possible duplication of benefits with other rental assistance programs that the City operates. The $10,100 in duplication of benefits identified during the audit could have been put to better use.
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Status2026-LA-1002-001-FOpenClosed$1,933,693.00Funds Put to Better Use
Recommendations that funds be put to better use estimate funds that could be used more efficiently. For example, recommendations that funds be put to better use could result in reductions in spending, deobligation of funds, or avoidance of unnecessary spending.
Develop and implement written policies to ensure that any changes to the expenditure and draw deadlines for the ESG program are provided in a formal document, such as a CPD notice. In this case, implementing these controls would provide clear guidelines to the grantee and help prevent the disbursement of $1,933,693 that was drawn after the draw deadline.
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Status2026-LA-1002-001-GOpenClosed
Issue clarifying guidance to ensure that ESG grantees that operate tenant-based rental assistance programs, prorate the rent amount for the first month based on the lease agreement start date.
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Status2026-LA-1002-001-HOpenClosed
Issue guidance requiring ESG grantees develop and implement internal controls to prevent any duplication of benefits with other Federal rental assistance programs for the ESG program participants, specifically for rapid rehousing and homeless prevention.