Wednesday, January 24, 2001
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Posted on: Wednesday, January 24, 2001

OHA trustees awaiting auditor's report

By Yasmin Anwar
Advertiser Staff Writer

The Office of Hawaiian Affairs is bracing for the release of a state audit that is expected to raise tough questions about how some trustees used their personal allowances, how they managed an investment portfolio while it was losing money last year, and how they may have lost track of money during an agency consolidation.

Launched a year ago, the latest audit involved months of interviews and examinations of financial records and other documents, as well as a questionnaire that asked OHA employees how they have fared in a 1999 reorganization that merged 11 departments into four divisions.

Frenchy DeSoto, who lost her bid for re-election as trustee last November and was questioned at length by state auditors last year, said she hopes the audit will expose lack of accountability.

"They were shuffling money from one department to another without board approval, asking the Legislature to fund positions and not filling the positions," DeSoto said. "Now we’re going to see once and for all how many thousands of dollars have been moved around without the former board minority knowing."

However, she also expects the audit to take issue with how she and some other board members used their annual $7,200 personal allowances, which the trustees receive in addition to their regular $32,000 salaries. The head of the board of trustees makes $37,000 a year.

DeSoto, who was board chairwoman in 1997-98, says she was questioned about a 1998 incident in which she used $3,000 from her personal allowance to pay for her daughter’s travel to Minneapolis for a bone marrow transplant.

DeSoto said she reimbursed her account a week later. Her daughter has since died.

"If we did wrong, they ought to tell us we did wrong," DeSoto said.

Can't spend money for personal use

According to OHA, the purpose of the annual trustee allowance is to "develop and maintain an ongoing communication network with beneficiaries and the general public; to promote a broader understanding of Hawaiian issues and encourage participation in the resolution of those issues."

Trustees are not supposed to spend the money on personal items and services.

"The expectation is that trustees will use good reasonable judgment," said OHA Chairwoman Haunani Apoliona.

As of yesterday, top OHA officials had not received a draft copy of the audit. But on Friday state auditors gave them an informal briefing on the main findings.

State Auditor Marion Higa said she could not say exactly when OHA will receive the actual draft report. "I hope it’s soon," she said.

OHA has 10 days to respond to the written draft before a final report is published and released to the general public. By law, OHA is audited every four years.

The last report, published in 1997, applauded OHA for its long-term investment strategy, though it did find fault OHA because auditors were unable to find a formal contract between the agency and its financial broker. Nor did OHA ever establish a master plan that would have laid out its long-term goals, the audit found.

Yesterday, OHA officials declined to comment on what they had been told by state auditors: "We can better address the issues after we see the written report," Apoliona said.

Apoliona, who took over as chairwoman of the board this month, said trustees will take measures to fix any problems cited in the report.

She said the audit is "another wave" in the stormy wake of last year’s U.S. Supreme Court decision last February that invalidated Hawaiian-only elections for OHA.

More than 20 percent of OHA’s 100 employees have left the state agency since the 1999 reorganization, which sought to make the agency more efficient by merging departments, although all did not quit because of job dissatisfaction.

Reorganization makes it difficult to track money

On the other hand, others documented their dissatisfaction with OHA.

"It has been my misfortune to watch dedicated and capable people thrown, tossed or forced out because their skill and ability did not fit’ new plans," wrote former OHA policy analyst Lynn Lee in her resignation letter of May 30, 1999

At the time, Apoliona, DeSoto and Molokai trustee Colette Machado complained that the reorganization had made it difficult, if not impossible, for trustees to track whether money was being spent on the 11 programs budgeted by the Legislature.

But the board majority supported the new system. In retrospect, former Maui trustee Louis Hao says, "it was a bad move."

Another issue that state auditors examined last year was the loss of $5.9 million to OHA’s investment portfolio, according to some who were interviewed. OHA’s former investment consultant Morgan Stanley Dean Witter attributed the loss to the board’s delay in terminating the contract of an OHA money manager, whom they accused of making money-losing trades in a robust economy while trading outside the guidelines set for him.

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