A stinging state audit of the Office of Hawaiian Affairs accuses trustees of failing to provide the leadership needed to improve the conditions of Hawaiians and to uphold their fiduciary duties, and faults certain trustees for using their annual allowances for personal gain.
The report also says the administrator’s 1999 reorganization of the agency has led to a crisis, resulting in an exodus of key staff, and that OHA’s lack of an employee grievance process opens the organization to lawsuits.
Though the fourth state audit of OHA since 1990 remains confidential, those and other concerns are outlined in a package of rebuttals from OHA submitted yesterday to state auditor Marion Higa.
OHA Chairwoman Haunani Apoliona says she’s not making any excuses for concerns that have merit, and is focusing on the facts.
"These are flags that OHA saw coming," she said. "All of us trustees take this audit very seriously. We really want to take corrective actions. We really want to stabilize the Office of Hawaiian Affairs."
An official 30-page response approved by six trustees and signed by Apoliona disputes some of the charges, but overall pledges to take corrective measures and to hire an internal auditor to track the agency’s progress in meeting its mandate.
That rebuttal also points out OHA’s recent successes, such as the growth of the investment portfolio, OHA’s continued support for home loan and individual development account programs for needy Hawaiians, and the former U.S. solicitor general’s endorsement of the United States’ trust obligation to Native Hawaiians.
However, instead of receiving one response from OHA, Higa is receiving three responses in addition to the board-approved one. One is from Clayton Hee, who was board chairman last year, and another is from Rowena Akana, who headed the board in 1999.
Also attached to the official response is a 13-page response from OHA Administrator Randall Ogata and Hee that is signed by Hee, Akana, Oswald Stender and John Waihe‘e IV.
Hee says that response is endorsed by five trustees.
However, Stender says he does not endorse that report and merely signed it in accord with Akana’s wishes that he support their right to add the document to the package.
"I regret signing it because I don’t endorse it," he said.
Waihe‘e says he signed Ogata’s response to show his support for the document even though he voted to approve the official response.
According to Ogata’s response, the auditor charges that:
Trustees have not adequately planned for the improvement of beneficiary conditions.
Trustees failed to uphold their fiduciary duties and poorly managed the public land trust.
Trustee expense accounts are used for personal gain. The audit found that one trustee used $1,000 for beauty salon expenses and another used $8,000 on interest-free loans to family members.
Protocol funds are inappropriately used.
Failure to hire international investment managers resulted in a loss of over $2 million.
Underperforming managers are not terminated in a timely fashion.
The grant and Native Hawaiian Revolving Loan Fund programs are poorly managed.
Ogata’s reorganization has led to a state of crisis. Not all staff may be qualified for newly assigned positions under the reorganization.
A staff exodus plagues OHA.
Lack of a grievance process places OHA at risk of litigation.
One point of contention is the audit’s charge that OHA lost $1.3 million because of a delay in firing an OHA money manager who was accused of underperforming and trading 60 percent outside his contractual parameters.
OHA’s budget and finance committee recommended firing a money manager last May but his contract was not actually terminated until August. The audit also mentions another money manager who it says was underperforming.
In his response, Hee says Clint Bidwell made a profit of more than $150,000, and that Denis Wong is among the highest-performing money managers.
Apoliona said committee recommendations will be taken up by the full board in a timely manner under her leadership.
Apoliona said the agency should clarify the language defining the purposes of the annual $7,200 expense accounts. They may also set up a reimbursable allowance plan that would require trustees to report such expenditures more frequently.
