Audit raises legitimate management issues
"It's just so unprofessional."
This is how Gov. Linda Lingle summed up state Auditor Marion Higa's latest audit, which criticized the management of the state Department of Budget and Finance.
The comment was just one in a string of vituperative attacks on Higa's integrity and character that Lingle unleashed at a March 2 press conference, before the audit was released. She accused Higa of having a personal and political agenda, without offering a credible explanation of why the auditor would be so motivated.
She demanded that the Legislature, which appointed Higa, investigate the auditor and "get her refocused."
She alleged that the audit was "filled with false allegations with false impressions and it is the shoddiest work I've seen put out by any government agency. It was done with a complete disregard for the facts and not even an attempt to learn the facts."
Well, the audit is now public. It is a dense document dealing with a complex, highly technical subject. And it contains plenty of facts, including these:
• The state invested $1 billion — nearly 30 percent of its entire portfolio — in a single, risky investment product known as auction rate securities.
• The state doubled its stake in fiscal year 2008, shortly before the auction-rate market froze, making it difficult to draw from the investment at a profit.
• The Financial Administration Division administrator said neither he nor budget director Georgina Kawamura authorized this increased stake before it happened, a finding Kawamura disputes.
If it sounds like someone wasn't minding the store, Lingle and Kawamura offer this feeble defense: It was legal.
But was it prudent?
Arguably, no. Even Kawamura acknowledges that a large investment stuck in a frozen market is a bad idea. What can be argued is whether this and other examples cited in the audit are evidence that the department is an informal, casual operation, lacking proper leadership and accountability. Examples like:
• A system for tracking investments that depends, in part, on a calendar filled with color-coded handwritten notes;
• A lack of written guidelines for soliciting interest rate quotes and placing daily investments;
• An investment policy that has not been formally updated since 1999, nor reviewed in-depth since 2002, even as the financial markets and investment vehicles have changed dramatically.
The audit, conducted with the accounting firm Accuity LLP, raises legitimate questions about how competently the executive branch manages the state's money.
A sober discussion of the audit's findings would serve the public interest. In the audit itself, Kawamura presents a lengthy list of objections, which deserve due consideration.
But the administration's public comments are another matter. They vilify the messenger, claiming, with breathtaking hypocrisy, that the audit was a political hatchet job — ignoring the fact that their own hyperbole amounts to precisely the same thing. Higa, who should know better, took the bait, holding a press conference and calling for lie detector tests.
It's this sort of nonsense that undermines public confidence in our political leaders and institutions. Lingle and Kawamura, and to a lesser extent Higa, should be ashamed of themselves.
It's just so unprofessional.