The Hawaii State Auditor has released the final version of an audit slamming the Office of Hawaiian Affairs for mismanaging millions of dollars.

The semi-autonomous state agency controls a $600 million trust dedicated to benefiting the Native Hawaiian community. But the state audit says that OHA spent $14 million on discretionary expenses, compared with $7 million on formal grants.

“This form of giving is inherently unfair to OHA’s many other beneficiaries who are in need of financial assistance but are unaware of who and how to ask for help,” Les Kondo, the state auditor, said in a press release. 

State Auditor Les Kondo speaks about the OHA audit at the Territorial Building, 5th floor.

State Auditor Les Kondo speaks about the Office of Hawaiian Affairs audit Tuesday, saying the agency’s problems are “top down and bottom up.”

Cory Lum/Civil Beat

Kondo said the problems with OHA aren’t limited to either the chief executive officer and members of the Board of Trustees — they’re “top down and bottom up,” he said.

The CEO sometimes approved spending against the recommendations of the staff.

Trustees tripled their individual allowances from about $7,000 to about $22,000 — which are supposed to help fund communication with beneficiaries — and used them for all kinds of expenses such as travel upgrades and fine dining.

Often there wasn’t a process to make sure that someone benefiting from the trust money was actually Native Hawaiian.

“When we asked trustees about how we verify that it is in fact a Native Hawaiian… many trustees told us, ‘I know. I just know,’” Kondo said.

He wants OHA to adopt numerous reforms, including holding  regular training on the trust’s fiduciary duties, although he acknowledged at a press conference Tuesday that he wasn’t sure if the training would be effective.

The agency also needs to be more open about where its money goes.

“OHA should be a lot more transparent, should provide a lot more transparency into how their money is spent,” Kondo said.

Colette Machado, who chairs the OHA Board of Trustees, responded to the audit by citing the agency’s ongoing efforts to reform its spending. But she also defended the agency’s spending by noting that even if it was discretionary, the expenses met the broader mission of helping Hawaiians.

“OHA must balance meeting its fiduciary obligations with the unremitting calls for kokua from our people,” she wrote in a letter to Kondo.

Office of Hawaiian Affairs OHA Chair Colette Machado meeting.

Office of Hawaiian Affairs Chairwoman Colette Machado said the agency has ongoing efforts to reform its spending.

Cory Lum/Civil Beat

Machado said in a press release Tuesday that she asked the board to put a moratorium on the use of certain funding streams until reforms are adopted.

Comparison To Draft Audit

Civil Beat obtained and published a copy of a draft audit in January which has been delayed for several months. Both OHA and Kondo criticized the unauthorized release, and Kondo called for a state ethics investigation into the leak. 

The final version of the report is very similar to the draft copy that was released to news media last month.

One difference is that the auditor removed the names of people who benefited from trustee allowance expenses.

Kondo refused to say why, saying that it was simply an “auditor decision.”

He wouldn’t talk about what changed between that draft and the final version, contending that’s not public information.

“It’s not my job to provide the transparency that the agency should provide,” he said.

Little Mention of LLCs

The audit didn’t include an in-depth analysis of limited liability companies created by the Office of Hawaiian Affairs. The nonprofits have been criticized for lack of transparency.

Kondo said Tuesday that the LLCs were out of the scope of the audit. He said his agency wanted to drill down on three types of ways that OHA is spending its money to illuminate how the agency is operating more generally.

“OHA must balance meeting its fiduciary obligations with the unremitting calls for kokua from our people.” — OHA Chairwoman Colette Machado

Kondo said if he had more time and resources, “I would have loved to dig into the LLCs. They raise questions.” 

OHA is commissioning a separate, internal audit that Trustee Keli‘i Akina says will identify the “root causes” of OHA’s mismanagement, as well as illuminate spending by the nonprofits.

“The State Auditor’s report is just the tip of the iceberg,” Akina said in a press release Tuesday.  

“While the state audit has provided OHA with useful guidance, its focus was narrow, and provides merely a starting point. It shows that we have to dig deeper.”

Read the full audit below:

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