Federal auditors have chosen not to pursue an investigation into Hawai'i's spending of federal welfare money, a decision validating the Lingle administration, which had been repeatedly criticized by Democrats in the state Legislature over its use of the money.

Auditors from the U.S. Department of Health and Human Services spent several weeks here reviewing the state's spending of millions in federal money meant to help women and children on welfare. The auditors informed the state Department of Human Services this month the probe was closed and they would not issue any written findings or launch a more extensive investigation.

"We knew all along that we were doing it properly," said Lillian Koller, director of the state Department of Human Services. "This does bring to a conclusion the misinformed accusations."

Democrats had faulted the Lingle administration for using $513,000 in federal welfare money on an anti-drug media campaign by the lieutenant governor's office and $625,000 to offset state money sliced from art programs. Meanwhile, a reserve of unspent federal welfare money grew to $150 million, leading social-service providers and others to urge the state to be more aggressive about spending the money on the poor.

Democrats decided to restrict the administration's use of the federal money and made it apparent the House and Senate would more closely oversee welfare spending in the future.

The federal money, about $98 million a year, is provided through a grant that is partially matched by the state. The state can spend the money in a variety of ways to promote self-sufficiency. Money left over in the reserve fund, however, is restricted to cash payments to needy families.

Koller has said the ads and the art programs were creative approaches to discourage young people from using drugs, which could lead to the kind of poor choices that keep people in poverty and on public assistance.

State Rep. Brian Schatz, D-25th (Makiki, Tantalus), said he was more concerned about the use of the money than whether the administration was technically following federal guidelines.

"The question for the public is why the lieutenant governor's office and the Department of Human Services decided that the best anti-poverty strategy they could find was to not actually give assistance to needy families, but to promote the lieutenant governor through a series of slick advertisements," he said.

Koller said the federal government encourages states to break the cycle of poverty through prevention, not just through cash payments to the poor.

"He's really missing the point. It's very sad to me," she said.