An investigation of the Office of Hawaiian Affairs conducted by the accountancy firm Clifton Larson Allen found dozens of instances of questionable spending.
The report ultimately identified about $7.8 million in spending that’s potentially fraudulent, according to an analysis of the CLA report by OHA Trustee Keli’i Akina, a longtime critic of OHA’s spending. That includes $2.6 million for a contract for the Native Hawaiian constitutional convention that lacked proof of how the money was spent.
The CLA report comes about two years after a similarly critical state audit highlighted the need for internal spending controls. In the wake of that audit, OHA sought to reform some of its policies and commissioned CLA as a third-party investigator.
CLA did not identify any OHA expenditures as fraudulent or criminal and the investigation was not technically an audit. The firm did identify several instances of potential conflicts of interest and potential violations of state law and OHA’s own rules.
The CLA analysis was delayed in part due to difficulty accessing OHA’s documents. The final analysis notes numerous instances of missing evidence.
“OHA was unable to produce some or all of the deliverables required by the contracts; therefore, CLA was unable to determine whether fraudulent/wasteful disbursements were made for many items selected for testing and whether the deliverables were ever completed by the contractor or the evidence of deliverables were not kept by OHA.”
For example, all 10 OHA expenditures known as CEO sponsorships that the firm evaluated “did not contain sufficient evidence that OHA monitored or evaluated the grant activities,” which is a legal requirement. One was a $25,000 check to an organization called Supporting the Language of Kaui — “there was no evidence of review or approval of this sponsorship,” the report said.
“In addition, most of the grant files did not contain sufficient documentation to show that OHA verified the organization was eligible,” under another law.
Missing documents also raised questions about whether the procurement process was followed and whether expenditures were proper.
“Several of the disbursement files for pCard purchases did not contain evidence that OHA’s pCard process was followed, including missing receipts, documents justifying travel expenses, or a Statement of Completed Travel,” the report said.
The investigation also identified several accounting best practices that aren’t being followed, contracts with potential conflicts of interest and strange circumstances surrounding some expenses.
“Two disbursements were approved by former OHA CEO, Clyde W. Namu’o after he was no longer an employee of OHA,” one section says.
A spokesman for OHA didn’t immediately return a request for comment Monday.
But OHA Chairwoman Colette Machado and Trustee Dan Ahuna said in a statement on OHA’s website that the report reviewed spending between 2012-2016 and the organization has implemented many reforms since then. They noted that staff turnover meant some current staff weren’t familiar with the contracts analyzed.
“The recommendations of this report confirm that OHA is moving in the right direction. In fact, a number of the recommendations of this report are similar to those of recent state audits. As a result, some of (the) recommendations have already been implemented or are in the process of being implemented,” they said.
“We understand that more needs to be done to regain the trust of our beneficiaries and the general public,” they added, saying that an OHA board committee intends to come up with a plan to implement the report’s recommendations in January.
Akina had a far different take.
“This report shows that there are serious problems that must be resolved at the OHA. The agency owes it to the public to look into every potential instance of waste, fraud and abuse and to make referrals to appropriate authorities where necessary,” he said Monday.
“Some people may say that $7.5 million is not a large amount. But it reflects problems found in only a tiny fraction of the financial transactions at OHA between 2012 and 2016. The audit sampled only 2% of all disbursements during that period. We really need to determine whether there’s a broader pattern.”
In contrast, Machado and Ahuna contend that because the expenditures were selected through professional judgment and not randomly, “it is inappropriate to extrapolate sample results across all OHA contracts and disbursements during the review period.”
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