A Review of the Capital Improvement Project Allotment Process and the Memorandum of Understanding Between the Department of Education and the Department of Budget and Finance - Fact Sheet

 

Fact Sheet

Q. What is the capital improvement project allotment process?

A. The capital improvement project allotment process is initiated by the submission of the allotment request, and basically consists of the following four steps, which are as follows:

  1. The expending department submits an allotment request to the Governor, through the Department of Budget and Finance, for the release of funds for a capital improvement project;
  2. The Department of Budget and Finance reviews the allotment request to ensure conformity with statewide planning goals, objectives, and priorities, and each expending department's elP implementation plan, and makes a recommendation to the Governor to release funds;
  3. The Governor issues an allotment advice to the expending department, approving the allotment of a legislative appropriation for the capital improvement project;
  4. The expending department then proceeds to expend or encumber the funds allotted for the capital improvement proj ect.

Q. Is the capital improvement project allotment process established under statute?

A. No, the capital improvement project allotment process is established under executive memoranda issued by the Governor. The Legislature, by statute, authorized the Director of Finance to establish an allotment process for capital improvement projects that is separate from the quarterly allotment system that the Legislature established by statute for operating expenditures.

Q. What is the document that expending departments use to list their capital improvement project priorities?

A. That document is the elP implementation plan, which is submitted by each expending department to the Department of Budget and Finance generally by mid-August each fiscal year, and which the Director of Finance uses to review allotment requests. The implementation plan lists, in order of departmental priority, all authorized projects for which the expending department plans to request allotments in that fiscal year.

Q. What are the statewide planning goals, objectives, and priorities, which the Director of Finance uses to review a department's allotment request?

A. They are the goals, objectives, and priorities found in the Hawaii State Planning Act.

Q. What is the "Memorandum of Understanding Between the Department of Education and the Department of Budget and Finance for the Allotment of Capital Improvement Project Funds and Other Fiscal Matters"?

A. The Memorandum of Understanding is an agreement between the Department of Education and the Department of Budget and Finance that was entered into on June 28, 2006, and took effect from July 1, 2006. The terms of the agreement cover several types of fiscal matters, among them, the capital improvement project allotment process, deposits of funds into the State Educational Facilities Improvement Special Fund, debt service calculation, employee benefits calculation, funding of collective bargaining increases, federal funds, and other fiscal issues. The Memorandum of Understanding is automatically extended without further action by the departments each July I, unless terminated in accordance with the terms of the Memorandum of Understanding. In the event of a conflict with any written budget execution memorandum or policy, the terms of the Memorandum of Understanding controls.

With regard to the capital improvement project allotment process, the Memorandum of Understanding sets out four major provisions, as follows:

  1. The two departments agree to use the capital improvement projects priority list provided by the Department of Education as the basis for determining capital improvement project priorities for allotments for the year;
  2. The Department of Budget and Finance provides the Department of Education with an estimate of the total amount of moneys to be available for the Department of Education's capital improvement projects for the year;
  3. The departments discuss procedures and a schedule for the allotment of the Department of Education's capital improvement project moneys, and the departments respond to each other's requests in a reasonable time; and
  4. If the Governor does not authorize allotment of moneys for a capital improvement project on the capital improvement priority list, the Department of Education may then submit additional allotment requests following the sequence in the capital improvement priority list.

Q. What is the Department of Education's CIP Priority Matrix?

A. The CIP Priority Matrix is a planning related form that the Department of Education developed and uses to prioritize its capital improvement projects. The matrix is a rectangle divided into five rows of priority levels and four columns of alphabetized categories, for a total of twenty cells. The four categories are:

  1. Health, Safety, Security, and Emergency
  2. Classrooms
  3. Support Facilities
  4. State & District Facilities

The placement of a project into one of the twenty cells of the matrix determines its priority with relation to a project placed into another cell. The matrix governs the universe of all projects, so all projects will fall somewhere within the matrix. The order of priority within the matrix proceeds in a zigzag pattern, that is, from left to right, and top to bottom, as indicated by the ordinal numbers in the table below:

  A B C D
1 1st 2nd 3rd 4th
2 5th 6th 7th 8th
3 9th 10th 11th 12th
4 13th 14th 15th 16th
5 17th 18th 19th 20th

Q. What is the Department of Education's assessment of its experience with the Memorandum of Understanding?

A. The Department of Education is reportedly quite happy with the Memorandum of Understanding, based upon its experiences with the allotment process, both before and after use of the memorandum was instituted. The Department of Education indicated that the Memorandum of Understanding has increased the efficiency of the capital improvement project allotment process by providing predictability and increased certainty in the allotment process.

Q. What is the position of the Department of Budget and Finance with respect to applying the processes of the Memorandum of Understanding, with regard to the capital improvement project allotment process, to other state agencies that have many capital improvement projects predominantly funded by general obligation bonds?

A. The Department of Budget and Finance indicated it will give its best faith efforts to implement the processes of the Memorandum of Understanding for use by other state agencies immediately upon the effective date of any such legislation to adapt those processes. However, the Department of Budget and Finance views the Memorandum of Understanding as an administrative function and reports it will lose some of its administrative flexibility if the processes of the Memorandum of Understanding were legislatively mandated to apply to other state agencies.

Q. In addition to the Department of Education, which state agencies have many capital improvement projects predominantly funded by general obligation bonds?

A. The Department of Accounting and General Services, the Department of Land and Natural Resources, and the University of Hawaii.

Q. What is the position of these state agencies with respect to applying the Memorandum of Understanding with regard to the capital improvement project allotment process?

A. Their positions appear to range from opposition, to neutrality, to mild support, at best. They indicated that they do not find any fault with the present allotment process that requires a legislative remedy.

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