Red tape stalls state payments, hurting smaller businesses

A move to bring the Hawaii Tourism Authority into compliance with state law has caused some of the agency’s contractors and vendors to get paid months behind schedule, causing hardships for smaller businesses and events.

In May, HTA notified its contractors and venues that the state Department of Accounting and General Services (DAGS) was assuming sole authority over disbursements and issuance of checks from HTA’s tourism special fund.

The transition was part of an effort by state lawmakers last session to increase HTA accountability, said state Sen. Glenn Wakai (D, Kalihi- Salt Lake-Aliamanu). Wakai, chairman of the Senate Economic Development, Tourism and Technology Committee, said Act 235 had given HTA the power in 2005 to issue its own checks from the tourism special fund.

However, Wakai said, HTA began violating state law when it continued the practice after June 30, 2015, when Act 102 re-enacted language that reestablished the tourism special fund in the state treasury.

“This past session, we told DAGS that they needed to bring HTA back into their purview,” Wakai said.

Wakai said state senators had sought to pass resolutions requiring HTA to send their payments through DAGS, but deferred the measure after HTA board Chairman Rick Fried and HTA President and CEO George D. Szigeti testified that they planned to transfer the responsibility of payment of services to DAGS.

The “methodical, time-consuming process” took several months to complete and DAGS started cutting checks for HTA only in July, said Marc Togashi, HTA vice president of finance. “Some of the payments went out late.”

State Comptroller Rod Becker said that “processing payment transactions in the state’s disbursing system required HTA personnel to utilize coding, forms and documents that were not used by HTA previously.”

Becker said DAGS does not have a backlog of payment vouchers and that those received in good order from departments and agencies typically result in checks being issued in two to four business days.

Still, Becker said, the transition of an agency operating outside the state treasury to inside the treasury “is very rare so there is no standard to judge how HTA did in comparison to others.”

Togashi sent a letter to HTA vendors and contractors Thursday notifying them that the transition to DAGS had caused HTA to make some payments late. In the letter, Togashi said outstanding payments were either awaiting review and processing by DAGS or were close to being submitted by HTA.

Togashi said the delays were a one-time deal. Even so, they were particularly hard on smaller businesses and events, who don’t have large budgets.

One vendor, who did not wish to be named, told the Honolulu Star-Advertiser that HTA’s payment was already 90 days late.

“We’re small so that’s a substantial hit,” the vendor said. “It’s not fair. If I’m late on my general excise tax, the state charges interest and fees.”

HTA board member Fred Atkins asked HTA staff to address complaints at the Thursday board meeting.

“The delays really hurt the smaller ones. I’m hearing stuff like, ‘We had to put the airfare on my credit card,’” Atkins said.