Leading voices across the state have joined the call to audit the Honolulu rail project, which is good news. However, such an audit must also include two key components to make it effective.

First, it should be done independently, by an outside third party with experience investigating rail projects. It is tempting to ask the city or state auditors to conduct such an audit, but their role, if any, should be to just help the contracted independent auditing firm in any way they can.

Second, the rail audit must look specifically look for fraud. The Honolulu rail project has never undergone an audit looking specifically for fraud, and this is long overdue. Suspicions of malfeasance have increased as the price tag for the project has gone well beyond what its proponents promised. In just the last three years, the estimates have jumped from around $5 billion to more than $10 billion — and that might still be lowballing the final tally.

Of course, many audits and reviews already have been performed on the rail project, but none of them were really looking for fraud. Responding to public concern, the Honolulu City Council recently took up a resolution calling for an “economy and efficiency” audit, but that resolution would not, in its current form, specifically seek out fraud either.

Senate president Kouchi, Congresswoman Hanabusa, Sen Dela Cruz and Sen Brian Schatz.

The author says that the audit called for by Hawaii leaders is inadequate.

Cory Lum/Civil Beat

Moreover, the proposed audit would be tasked to the Honolulu city auditor, whose office is nominally independent but still part of the city government, which could create the appearance of impropriety. This is not to cast aspersions, but rather to note the problem of perception.

Perhaps more important, Honolulu City Auditor Edwin Young said at a Council hearing earlier this month that his office is not even allowed to do forensic audits.

“Investigators are usually deputized, so they carry a badge and a gun,” he told the Council’s Budget Committee. “We’re not deputized; we don’t carry a gun; we’re not trained in formal investigation. So as auditors, we can point out the potential scenarios …, but once we identify actual fraud, we’ve got to back out of it and turn it over to the investigators.”

‘Red Flags’

The city auditor’s office also lacks adequate staff to conduct an in-depth investigation into what ails the rail — at least in a timely manner. City Auditor Edwin Young told the City Council’s Budget Committee it could take until December 2018 for his office to complete such an audit.

Young admitted that he came upon “red flags” of illegal activity when conducting his performance audit of the rail last year, when Daniel Grabauskas was still executive director of the Honolulu Authority for Rapid Transportation. However, he didn’t follow up on them, and even if he had, he said, there were no mechanisms in place to do anything about them.

Despite hearing this, the Budget Committee ditched the idea of investigating the rail for fraud, and instead focused on auditing only its finances.

No doubt, rail’s finances are important: The inability to control them, obviously, is why the calls for a forensic audit have been growing louder. But making sure fraud hasn’t been a factor in those finances-gone-awry is not a minor consideration, especially when we’re talking about billions of dollars. Waste, after all, cannot be contained if fraudulent behavior is occurring.

Waste cannot be contained if fraudulent behavior is occurring.

At the state level, our legislators apparently also have agreed that the rail project should be audited more thoroughly than in the past, with House Speaker Scott Saiki saying Thursday that the audit he and his colleagues will be calling for at the upcoming special session would review “not just finances, but also management and operations of HART.”

That is fine and, to a point, commendable, but the audit Saiki and his colleagues are proposing also would not look specifically for fraud.

They also are proposing that it be conducted by the state auditor, which, again, raises issues about adequate staffing, and, similar to any city audit, could be perceived as a conflict of interest.

Ideally, the state auditor will be authorized — and be allocated the funding — to delegate the work to an outside, independent auditing firm with adequate staffing and the necessary technical expertise. Only then could any audit be taken seriously as a reliable guide to rail’s past and future.

Hawaii residents have already sacrificed much money, time and inconvenience to accommodate the Honolulu rail project, which in the end might not even serve the goals it was intended to achieve. Having seen the project spin so expensively out of control, and at such great social cost, we all deserve an independent, reliable, honest investigation into what’s been going on behind the scenes of the rail project, to find out what has been going wrong, and make the best decisions regarding its future.

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