The state agency set up to help convert Hawaii’s agriculture lands from plantations producing mainly pineapple and sugar for export to more economically viable farms growing a variety of crops has failed in its mission, an audit released Thursday found.

The assessment of the Hawaii Agribusiness Development Corp. comes at what some see as a critical time for the state’s tourism- and military-dependent economy as the COVID-19 pandemic has underscored the need to diversify.

Jimmy Nakatani, executive director of the Agribusiness Development Corp., reportedly told auditors that a plan required by law is not necessary because he has everything in his head. Stewart Yerton/Civil Beat

The corporation was set up more than 25 years ago to help do that by reinvigorating Hawaii’s agriculture industry, which had once been a pillar for jobs and income.

However, the Hawaii State Auditor said that has not been happening.

In a characteristically scathing assessment, the auditor found that neither the corporation nor its board even know what the state agency’s duties are. Even basic duties, like creating a plan required by law, have been ignored, according to the audit.

“ADC has not become the entity the Legislature envisioned – one that would develop an agriculture industry to stand as a pillar of the state economy, alongside tourism and the military,” the audit said. “After nearly 30 years, the economic void created when plantations ceased production remains mostly unfilled.”

Along with its ambitious mission, the corporation has broad powers, including the ability to buy and hold land and water resources, and to conduct market research.

In recent years, the Legislature has appropriated more than a quarter of $1 billion to the ADC, including about $23.4 million for operations and $238 million for capital investments. But it has been difficult at times for lawmakers to determine where that money had gone and how well the corporation had been fulfilling its duties.

As Civil Beat reported in April 2018, some lawmakers were upset that the ADC at that time had not even been submitting annual reports to the Legislature as required by its enabling statute.

When lawmakers at the time called for an audit, the agency’s executive director, Jimmy Nakatani, told lawmakers he was too busy for such scrutiny. Scott Enright, the then-state Department of Agriculture chair, also resisted the audit on grounds that ADC personnel were too busy.

But, the audit found, whatever else Nakatani was doing to make an audit too onerous, it did not appear he was running a tight ship.

Records Are In Disarray Or Do Not Exist

“We had difficulty pinpointing exactly why ADC struggles with managing the lands it has acquired since 2012, in part because the corporation’s record keeping and filing system are in disarray,” the audit reported.

“Documents were piled under desks and kept wherever space allowed. Staff hastily assembled tenant files after we requested them, but the files they provided were disorganized and often missing important documents, such as board approvals, license agreements, and proof of insurance,” it added.

Documents essential to day-to-day operations of a corporation that manages land and properties, like inventories of land holdings and tenant listings, didn’t exist, the auditor found.

The auditor also found the agency has not produced a legally required plan “that would define and establish the goals, objectives, policies, and priority guidelines for the corporation’s agribusiness development strategy.”

The reason, according to the auditor: “The executive director thinks such a plan is unnecessary: ‘I have everything up here,’ he said, pointing to his head.”

In the corporation’s response, published as part of the audit, Nakatani defended the agency, saying that some purported problems were irrelevant. While Nakatani admitted the agency doesn’t have the plan required by law, he said that doesn’t prevent the corporation from making good deals when buying land.

He also said it is an enormously difficult task to transform Hawaii’s agriculture sector.

“Transitioning former pineapple and sugar lands into diversified uses is not simply a matter of digging up pineapple plants and putting lettuce in its place,” he wrote.

The full audit report can be found here.

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