Dan Grabauskas, who heads the Honolulu Authority for Rapid Transportation, made a preemptive strike Thursday by criticizing a yet-to-be-released city audit expected to be highly critical of him and his agency’s handling of the $6.6 billion commuter rail project.

Grabauskas held a press conference at HART’s headquarters Thursday to bash City Auditor Edwin Young and his staff for bowing to the wishes of Honolulu City Council members who Grabauskas said had asked Young to rush the results of his investigation despite HART’s concerns that there were serious flaws and inaccuracies in the findings.

The audit is expected to be released to the public Saturday, but a confidential draft has been circulating among members of the City Council, and Civil Beat obtained it Thursday.

HART Executive Director Dan Grabauskas gives press conference on auditor’s report coming out tomorrow. 14 april 2016

HART Executive Director and CEO Dan Grabauskas said Thursday an audit of the city’s $6.6 billion rail project shouldn’t be taken seriously.

Cory Lum/Civil Beat

Among the findings is that HART executives were aware of potential budget shortfalls created by increasing costs to the rail project as early as 2012, but did not inform City Council members for more than two years.

Grabauskas said that finding, as well as many others in the audit, are overblown, unsubstantiated or flat-out wrong, and did not incorporate HART’s responses. He questioned the integrity of Young and his office for leaking the report before HART officials had an opportunity to fully vet and challenge the findings.

“I’d say that the so-called audit is a joke,” Grabauskas said. “But it hasn’t been funny. It’s a mess.”

“I have been briefed on Mr. Grabauskas’ diatribe and am disappointed that he has chosen to misrepresent and mischaracterize our discussions and the history of this audit.” — City Auditor Edwin Young

The early draft of the audit paints a picture of a public agency plagued by sloppy record-keeping, the lack of clear management guidelines and cost estimates based upon “professional judgments” that appear to be nothing more than educated guesses, resulting in unreliable financial data being reported to the public and federal officials.

Although the draft audit finds no evidence of misappropriated funds, it does find indications of financial mismanagement when it comes to justifying some expenditures.

It suggests HART paid more attention to construction schedules than construction costs. HART has paid out tens of millions to contractors for project delays caused by lawsuits and additional millions for costs that escalated during more than a year that construction was stopped.

The draft audit also suggests HART’s dubious financial projections will likely result in additional construction cost overruns and increase the amount of taxpayer subsidies required to operate and maintain the system once trains begin running.

Among its recommendations is that HART improve efforts to address operations and management issues and explore subsidy sources.

One section of the draft audit finds rail officials were not completely forthcoming in December 2014 when they first informed the HART Board of a $910 million cost overrun and a $41 million shortfall in expected General Excise Tax surcharge revenue.

What HART officials also didn’t tell the board at the time was that detailed estimates were being developed that would result in substantial additional utility-related expenses, the draft audit states.

Auditors also found HART was unable to justify $46.1 million of the $130 million in project “enhancements” the agency announced to the board last October.

In one instance when auditors questioned some $20 million for additional station escalators, they found the proposed costs were literally penciled in when HART provided a handwritten sheet containing two estimates — one for $17 million and the other for $25 million, the draft audit states.

And, auditors said they were unable to verify whether some increased construction costs were reasonable because HART lacked a consistent method for calculating those costs.

“HART’s processes have impeded its ability to construct and complete the project economically, effectively and efficiently,” the draft audit states.

Grabauskas pleaded with reporters Thursday to take a thorough look at HART’s response to the auditor’s findings when the final report is issued. He said HART’s response will point out “substantial defects” in the findings, almost all of which the agency disagrees with.

HART Executive Director Dan Grabauskas gives press conference on auditor’s report coming out tomorrow. 14 april 2016

HART Executive Director Dan Grabauskas called the press conference Thursday two days before the final audit is expected to be released to the public.

Cory Lum/Civil Beat

Grabauskas also asked reporters to question the circumstances surrounding how the audit is playing out and whether politics are at play.

He even described a private conversation he had with Young during a March 31 meeting to review the audit’s findings. Grabauskas said Young told him that he was under “tremendous pressure” from City Council members to release the audit by April 15, despite the fact that he had until July to complete the report.

“I said to him that doesn’t sound like an independent auditor to me,” Grabauskas said. “And he said, ‘Well, it’s what I have to do.’”

Grabauskas was did not provide any documentation to back up his characterization of that conversation, and Young did not respond to requests for an interview Thursday.

Instead, Young issued a statement via email saying that the final audit report was scheduled to be released to the City Council on Friday and made available to the public on the city auditor’s website Saturday.

“I have been briefed on Mr. Grabauskas’ diatribe and am disappointed that he has chosen to misrepresent and mischaracterize our discussions and the history of this audit,” Young said. “The City Council Chair has been briefed on what actually transpired and I will defer to his comments. Our office will continue to maintain our professionalism and will not respond to the HART Executive Director’s unprofessional conduct.”

Honolulu City Council Chairman Ernie Martin declined to comment through a spokeswoman, who said the he was waiting to read the auditor’s final report and HART’s response to the findings before speaking to the press.

Martin has called for Grabauskas’ resignation in light of all the struggles the rail project has experienced over the past couple years. Martin also called for the resignation of Don Horner, who was the chairman of the HART Board of Directors. Horner resigned from the HART Board on Monday.

Grabauskas would not comment on Martin’s call for his resignation Thursday. He also did not answer questions about Horner’s resignation.

Read the draft audit here:

Draft-Rail-Audit (Text)

Read HART’s rebuttal presentation here:

HART-Audit-Response (Text)

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