Follow-Up on Recommendations from Report No. 18-03, Audit of the Office of Hawaiian Affairs
from Hawaii State Auditor, March, 2022 (excerpts)
… This report presents the results of our follow-up on the Office of Hawaiian Affairs’ implementation of the 39 audit recommendations made in Report No. 18-03, Audit of the Office of Hawaiian Affairs….
We determined that OHA has implemented 11 and partially implemented 13 of the 39 recommendations made in our report. An additional nine recommendations were not implemented and we determined six to be not applicable….
Why we did the audit in 2018
In 2018, we conducted a performance audit of OHA pursuant to section 10-14.55, Hawai‘i Revised Statutes (HRS), which requires the Office of the Auditor to audit OHA at least once every four years.1 We issued two reports about mechanisms used by OHA to provide monetary support to organizations and individuals. Report No. 18-03 evaluated OHA policies and actions regarding its non-competitive grants (Kūlia Initiatives and CEO Sponsorships) and the use of its Fiscal Reserve and Trustee Allowances. Report No. 18-08 evaluated OHA policies and actions regarding its competitive grants. A follow-up on OHA’s implementation of the audit recommendations contained in Report No. 18-08 was issued separately
What we found in 2018
In Report No. 18-03, Audit of the Office of Hawaiian Affairs, we reviewed OHA policies and actions regarding use of its Kūlia Initiatives, Fiscal Reserve, CEO Sponsorships, and Trustee Allowances. We found that, over time, OHA had created alternate funding processes to direct more money toward programs, projects, and individuals. Initially, those funding opportunities appeared to be guided by policies, procedures, and guidelines designed to ensure that funds were distributed fairly and equitably. We found those expenditures and other forms of discretionary spending did not undergo the rigorous vetting, monitoring, and reporting requirements of OHA’s formal grant process. Some were approved by the Administration without the Board’s approval or even knowledge.
In fiscal years 2015 and 2016, we found OHA spent nearly twice as much on non-competitive discretionary disbursements ($14 million) as it did on grants that were planned, budgeted, publicized, vetted, and monitored ($7.7 million). To fund these unplanned expenditures, OHA realigned its budget by $8 million, moving moneys budgeted for other purposes, and drawing $6 million from its Fiscal Reserve. Report No. 18-03 found OHA lacked a clear policy guiding use of its Fiscal Reserve, which had been spent down rapidly.
The report also found OHA had used its Fiscal Reserve (which, when established in 2000, was referred to as a “rainy day fund”) to pay for such things as retirement benefits for a former trustee ($56,300), a trip to New Zealand for a group that included trustees and members of the Administration to pick up a Hawaiian feathered cape and helmet ($100,000), and costs associated with an international conservation convention ($500,000).
We also found CEO Sponsorships were subject to minimal oversight and, despite written guidelines, were often approved based on the then-CEO’s personal discretion. According to OHA’s Grants Program Standard Operating Procedures, CEO Sponsorships, which had a maximum award amount of $25,000, provided funding support to eligible organizations whose missions aligned with OHA’s vision and strategic plan, whose programs and services benefitted the Native Hawaiian community, and whose events offered OHA valuable public relations and recognition benefits. However, we found that vague rules guiding discretionary spending by OHA were broadly interpreted, arbitrarily enforced, and at times, disregarded. For instance, we reported several occasions in which OHA’s then-CEO ignored “do not fund” recommendations by Administration personnel and funded CEO Sponsorships, contrary to written guidelines.
Finally, we found significant irregularities in and abuse of OHA’s Trustee Allowance process. Allowances were originally established to cover incidental expenses incurred by trustees to develop and maintain ongoing communication with beneficiaries and the general public, but had evolved to allow a broad range of expenditures. We reported OHA’s rules governing Trustee Allowances were loosely and arbitrarily enforced, leading to many instances of questionable spending. We found trustees had used their discretionary allowances to pay for things that appeared inconsistent with OHA’s mission and their fiduciary duties to Native Hawaiians, such as political donations and activities ($554), a beneficiary’s rent ($1,000), another beneficiary’s funeral-related clothing expenses ($1,000), and a trustee’s personal legal expenses ($1,500)….
Audit recommendations by status
We determined that OHA has implemented 11 and partially implemented 13 of the 39 recommendations made in Report No. 18-03, Audit of the Office of Hawaiian Affairs. An additional nine recommendations were not implemented and we determined six to be not applicable….
read … Full Report
PDF: Report No. 18-03, Audit of the Office of Hawaiian Affairs