Repair holes in drinking water fund

The state Department of Health is under fire yet again for its fiscal practices, but this time it’s for not spending tens of millions of federal dollars earmarked for improving Hawaii’s aging drinking water infrastructure.

The spending shortfall resulting from a dysfunctional system has the U.S. Environmental Protection Agency threatening to stop funneling federal dollars to the state or take back funds if the DOH does not improve management of Hawaii’s Drinking Water Revolving Fund.

Mismanagement of the revolving fund has prompted some operational changes at DOH and that initial response to ensure funds aren’t lost is encouraging. But real progress will have to be measured in more dollars wisely spent and, ultimately, improved infrastructure to ensure safe drinking water for years to come.

In trying to eliminate inefficiencies and delays in loaning revolving fund monies to the counties for projects, the DOH is employing the Lean Kaizen improvement process, a methodology often used in the private sector.

The improvement program, which began last month, dissects the process by which counties are ultimately approved for low-interest 20-year loans, said Keith Kawaoka, DOH deputy director for environmental health. It aims to cut unnecessary steps to get the job done “better, faster and cheaper.”

EPA funds are paying for the Lean Kaizen improvement program — not state dollars — which is good news.

The revamp cannot come soon enough. As of the end of 2014, $100 million in federal and state funds sat unspent in the revolving fund, according to the EPA. Federal funds are matched 20 percent by the state and are deposited into the revolving fund and loaned to the four counties to make repairs.

The state estimates that $1 billion in repairs are needed over the next two decades to keep Hawaii’s drinking water systems functioning and the drinking water safe. So to let readily available federal funds sit idle is irresponsible — especially given the constant demands on a tight state budget from Hawaii’s many departments and agencies.

During the past six years, Hawaii has used between 71 and 86 percent of its federal water funds that were available, a rate well below the national average, according to the EPA. Hawaii is ranked fifth from the bottom among all the states when it comes to fund utilization.

The Health Department aims to improve that ranking and said that this year, it finalized eight loans worth $48.6 million, and in 2016, it expects to execute 11 contracts worth $69.8 million.

Kawaoka said he “inherited” a troubled revolving fund program hobbled by internal and external problems. Internally, there was a “disconcerting lack of collegiality” among staff working in the Health Department’s water branches, according to a consultant’s study completed in October.

Engineers and finance staffers didn’t understand each other’s roles, Kawaoka said, and that is being addressed in baby steps, including moving some of their desks together as part of a 90-day experiment to promote open communication.

Externally, there have been projects that were vetted and approved for loans, but ultimately dropped by the counties, which may not have been ready to do the work, according to Kawaoka. That prohibited the fund from drawing down.

The mismanagement of Hawaii’s Drinking Water Revolving Fund comes on the heels of recent reports of questionable spending in the Health Department’s HI-5 recycling program, which ended up spending $553,374 — 611 percent more than originally planned — for an audit in 2008; and its color-coded food safety program, which had to hire a second vendor for $158,000 to redo an online database after spending $170,000 on “poor performance” by its first vendor.

Kawaoka said the Lean Kaizen improvement process will eventually be implemented in the recycling program and other areas.

As for the drinking water revolving fund, improvement is crucial — use it or lose it. “The EPA is on our back,” Kawaoka said. And it should be, until measurable upgrades come to pass.