About the Author
The members of Civil Beat’s editorial board are Pierre Omidyar, Patti Epler, Nathan Eagle, Chad Blair, Jessica Terrell, Julia Steele, Lee Cataluna, Kim Gamel and John Hill. Opinions expressed by the editorial board reflect the group’s consensus view. Chad Blair, the Politics and Opinion Editor, can be reached at firstname.lastname@example.org.
Editor’s note: The Civil Beat Editorial Board and other reporters spoke with Hawaii State Auditor Les Kondo last week. He began with explaining how the office has changed since he was appointed to his post by the Hawaii Legislature in 2016. Our interview has been edited for length and clarity and with an eye toward saving some of it for separate stories.
My hope is that one of the things that we’ve done is we’ve improved our communication, about what an audit is, trying to educate people about what we do. Which is interesting because I think not everybody and maybe not most people really understand — legislators, departments, the public, maybe even you folks to some degree — don’t understand what my office does. So I think one thing that we’ve done during my tenure is we’ve tried to improve our communication by doing brochures to educate people. Our reports before were pretty dry. There were no pictures. There were no graphics. It was a lot of text and really hard to read text.
So what we’ve tried to do is to create reports that have a little more interest. And, you know, some people criticize it because it’s too magazine-like. But at the same time, at least from my perspective, we have two writers, we have a graphics professional. So they make our reports look really good. They come up with ideas like sidebars and text boxes. They make graphics.
We have summaries that we include. Our reports are primarily for the Legislature. We understand that they are busy, especially during session. They have tons of stuff that they have to digest. So we’re trying to give them different ways that they might be able to get into our report. You know, a quick snapshot of what we found, why it’s important to understand what we found, how does that impact whatever? And then if they actually have the time or their staff has the time to read reports, then even better.
You find it frustrating that you have to do so much to get attention to the work? That there’s not enough attention to the outrageous reports in the work that you do?
I think the answer is yes. I think that part of the challenge is — maybe it’s my fault — that we don’t do a good enough job of educating people about what we do, the importance and the resource that we really provide to the Legislature. I think most people think that we’re a bunch of accountants and CPAs that are looking at financial statements, and we don’t do any of that. But we are responsible for the financial audits of — I think the number is 22 state departments and state programs — including the state’s financial audit. We contract all of those out to independent CPA firms, so we don’t do any financial audits in-house. So there’s that misunderstanding, I think, from the get-go as to what our role is.
We have tons of work, statutorily directed work. Our bread and butter is performance audits. That really is the most important information that we can provide you folks, the public, the legislators. But by statute we’re required to do reports when the Legislature wants to mandate new insurance coverage. By law, we have to do an assessment of that coverage, of that proposed insurance coverage. If the Legislature wants to regulate a new profession, we have to do an assessment as to that proposed regulation.
We do reports that are really important, and I don’t think people really understand the importance. We look at special funds, revolving funds, trust funds and trust accounts of every state department on a rotating five-year cycle. And what these funds are, these are little pockets of money that are outside of the general fund appropriation process. There are monies that are coming in, let’s say, from TAT — the transit accommodation tax — going into a little pot that the department holds that will fund certain programs that are specific to the department.
The relevance of this today and during the pandemic was there’s a billion, with a B, of monies that are held in these special funds, revolving funds, trust funds and trust accounts that the Legislature generally may not have visibility into. They don’t lapse, so they sit there and they build up.
Sylvia Luke, the House Finance Committee chair, has been very critical in particular of the special funds. And she worries that, as you indicated, there’s a whole pile of money there. Do you think there are significant pots of money the Legislature isn’t keeping a good handle on?
I think that’s why we’re charged with doing these. We call them the SRT fund reports, the special fund, relief fund, trust fund. I think that’s why we’re mandated to do those reports, because I don’t think the Legislature has as much visibility into those pots of money, those special funds, revolving funds, etc. The departments that hold these monies, they’re supposed to report every year to the Legislature how much they have in these different funds.
Our bread and butter is performance audits.
Their reporting is not accurate. Every year we report that they didn’t report this money or that money. And what they don’t report is tens of millions of dollars and maybe hundreds of millions of dollars. The answer is yes. I think there are monies that the Legislature is not fully aware of that are held by these departments in these different kinds of funds.
I was sitting with some legislative leaders a while ago. They were highly critical — that you were pointing to funds that were spoken for and the money wasn’t really available for sweeping. And perhaps they thought that that made them look foolish or something like that for not addressing that issue.
Well, I did hear the complaint. I think if people read the report and read the summary, I think we tried to make it very clear that we weren’t suggesting these monies were there to be swept. We were giving it to the Legislature as a starting point if they felt that they needed to find moneys to fill whatever budget holes that were there. So I feel like that was very clear in the report. We were doing a quick and dirty work.
You know, at that point, we were just doing my mandate to my office. And I think my entire office’s feeling was whatever we can do to help, all hands on deck kind of thing. So we tried to figure out where we might be able to add value given at that moment where we thought, boy, the state is basically shut down. We’re working from home. Tourism has come basically to a screeching halt. So we were trying to anticipate that there was going to be some budget shortfalls and where they might be able to find some of this money. And in the past the Legislature has swept funds. Legally and illegally. In the past, the Legislature has suspended tax exemptions, tax credits, tax exclusions.
So after hearing the comments, we went back and we issued a supplemental report. We went back to first the attorney general to ask legally, can they sweep the funds and the attorney general — to the attorney general’s credit — they turned around a response relatively quickly, in a few days. So they identified the funds that the Legislature could sweep.
My personal feeling was at that point, we should have all been trying to solve the same issue, which was the state probably needed to find monies to keep programs going. Anyway, so we did do additional work. The first part of that criticism — I was disappointed because I didn’t think that people read our reports carefully enough, because if they had, they would have understood that it was a starting point. That was the intent of it, a starting point for the Legislature to consider looking at this, looking at those funds more closely.
You had an extraordinary year this year with your differences with the House speaker and a special committee being appointed (to examine the state auditor). And you’ve told the public that you never knew what the fundamental issue was that led the speaker to just turn on you like that. Is any of that resolved or is that all still just left hanging out there?
I still don’t know. But to answer your question directly (Speaker Scott Saiki) issued the working group’s report, which was just garbage. And then we issued a response — which I reread last night, and I thought, boy, that was a good response. But after that I haven’t heard a word. Some legislators have communicated with me to say, “Congratulations, well done, keep it up.” You know, those kind of supportive comments, but nothing official — certainly not from the speaker or any of those folks that are in his inner circle.
So then the speaker put out a press release recently that he had organized this legislative committee, this investigative committee. And the way they worded it was to investigate the audit of the (Department of Land and Natural Resources special development fund) and the Agribusiness Development Corp. So are they investigating the audit or are they investigating the agencies?
I don’t know. Somebody asked me, is this a second bite at you or second whack at you and me and my office? And I said, I don’t know, but I don’t think so. I mean — and maybe I’m just too naive and have the rose-colored glasses on still. I just think we’re done on this issue. Whatever the issue was, I think, (Saiki) convened the working group. They did whatever. And honestly, our office is terrific. The people in it are just dedicated. Certainly any office can be better. But the criticisms that they were raising, they were just not based on anything. But I assume that our response has put that to bed.
But in that report, some of the things that were mentioned was that your office did not appoint executives with proper experience, and that there were delays and untimely reports. Saiki specifically mentioned unnecessary litigation involving your office, specifically with the Office of Hawaiian Affairs audit. Those sound like serious charges. Is there nothing to that?
I feel like this is a kind of a water under the bridge thing. He did whatever he was trying to do. And we responded. And I feel like it’s kind of done.
In a nutshell you’re saying that it really didn’t have any traction.
It was based upon just garbage. They tried to analogize it to an audit. It ain’t anything close to what we do. I mean, our audits are independent and objective. We follow government auditing standards. It’s based upon fact. And that fact is double-checked, independently reviewed by someone in my office. Every line of that report has a link to a document, whether it’s a summary or actually a document that supports that sentence in that report. And so when we issue a report, we are very confident that at least the facts, they are solid.
We all can disagree about what those facts mean. And that’s where you get to use your professional judgment. But (Saiki’s) report or that working group report, none of that — none of that. They didn’t talk to anyone in my office, me included, which is just mind-boggling to me.
I think you saw that in our response, (they were) asking for thousands of pages of documents, confidential personnel records, etc. And I responded saying, what’s the authority? Please explain how this fits within the scope of what the speaker claims to have organized this group to be? And I never got a response to that.
So they went about it in a way that to me is very sneaky. Instead of coming to talk to me, just to say, “Hey, here we are, this is what we’re going to do. This is how we’re going to do it.” None of that. Did they attempt to talk to any of my employees? They attempted to talk to one. And that employee said, “Happy to talk to you, but I’m going to tell Les what we talked about.” And they said, “No, thank you.”
So that just means to me that there was an agenda. It wasn’t an opportunity to really try to provide information.
Really, to me, it’s kind of a dead issue. At least I hope it’s a dead issue.
Is there a way to make more of those audits come in on time? Because having them in at the beginning of the session obviously will definitely shape the way people look at various issues. Is there a better way to do this, to get this stuff done?
A lot of the reports that the working group in that exhibit claim that we either were late on or had not done, we were not going to do those. And what I mean by that is they listed many reports that were requested by a single House resolution. But the statute clearly requires us to do the work when it’s a concurrent resolution, not a single House resolution. We’re a resource for the Legislature, not a resource for the House or the Senate. And we don’t have enough capacity really to be doing all this work for a legislator or a body. So it’s very misleading from my perspective that they list all of those reports.
Now, in terms of the timing, you’re right. A lot of them are (due) not 20 days before session, which to me is the end of the calendar year. A lot of them are Jan. 10, Jan. 14. We had the Agribusiness Development Corp. audit, I think on Jan. 14 of this year. Some of that timing is on us. Maybe some of it is dictated because the agencies are short-staffed or, in this past year, they were struggling to deal with the pandemic and working remotely. But there are times when some of that is on our writing, in our process to make sure that things are accurate and solid.
All that said, I’ve never had a legislator complain to me about the timing or about the content of reports. So if they are somehow handcuffing legislators because they’re coming to them seven days before session instead of 20 days before session, I’ve never heard it.
I saw bills this past session about the ADC. So clearly the report was issued soon enough before session where legislators could and did craft bills to address some of the findings in the audit.
How is state government doing in response to the audits? Are they fixing things up when you tell them to? Are things getting better?
We don’t have a stick or a mechanism to force people to do what we think they should do to improve their program. We audit their program. We’re assessing their performance. And at that point, we issue the report and we’re kind of sort of done.
We come back in a few years to assess implementation of recommendations. So every year we ask the department, where are you on implementing the audit recommendations? But they give us a self-assessment, partially implemented, not implemented, fully implemented in about two or three years. We actually go back — and we do actually go back to them — and it’s not self-assessed anymore. We’re actually looking and asking questions to determine whether or not they have implemented the recommendations. So that’s our process.
And at that point, the Legislature now has the opportunity to adjust policy, for instance, change the law to require certain things. So that’s the part where there’s a little disconnect. We issue really good reports with really good recommendations, in my opinion. Yet it just kind of falls off the cliff. You raised the speaker’s working groups or whatever looking at the special land development fund and ADC. We haven’t had a legislative briefing on either of those reports. Those are both mandated by the Legislature. So it wasn’t a self-initiated audit.
With the ADC, we offered to meet with the board in an entrance conference, exit conference. They declined. I had understood from a representative that they were going to have a special meeting specifically to talk about the audit. And I told her, if you have a chance to convey this, we’re happy to come and talk to the board about it. We want them to understand what we’re seeing, why we’re seeing these things, why we’re recommending these things. I’m not sure the board ever had that meeting to talk specifically about the audit.
The recommendations are suggestions as to how you fix these problems that we’ve identified. But the findings, those are the problems you got. You’ve got to address the findings.
I’m a little disappointed that even the department or the program didn’t take the opportunity to try to understand. And we’re always available to come and chat with the department or the program or the Legislature about what we’re doing, what we wrote, what we found. In those two specific reports, we’ve never had a briefing with the Legislature or those departments about the findings.
Do you find there’s other examples where the Legislature has acted, has responded to your findings and said, OK, we’re going to change things and did change things?
Certainly for some of the other reports like some of the sunrise-sunset reports. For instance, there was a sunset review of athletic trainers. And we said that a regulation was going to end. So we said it should continue. And so there was a bill that was introduced to continue. But that’s not an audit that’s addressing audit findings.
You did say earlier that this just doesn’t go sit on a shelf, that it will come around and that there will be a follow up from your office.
It doesn’t sit on a shelf from my office’s perspective, but that doesn’t mean that it doesn’t have further life on someone else’s shelf.
I guess I’m fundamentally getting to the point: Is the Legislature responding to what the auditor’s office does?
Folks have to understand how important our offices are and the role that we play, the resources that we are for the Legislature. I would think that the Legislature should consider addressing some of the not good things that we raised and some of it is policy related.
A good example is ADC. We said that ADC doesn’t know its mission. ADC is not fulfilling its mission. And what I mean by that is that it was created in 1994 when we had the closure of sugar and pineapple. It was intended to be a super-power organization that was going to facilitate the development of diversified agriculture in the state, to be that economic leg that the state was losing. It wasn’t to buy land and get small farmers on the land, which is now what they’re doing. That mission may have changed in the 30 years or whatever it’s been since it was formed, because you’re going to find (that) is gone, long gone. Those are questions that we tell the Legislature because this is what we find and it goes to them to decide.
When you come out with your audit report, do you find that the local media generally is doing a good job of capturing what you found as well as the response to it? And by extension, what can we do better as a media organization to cover your office?
Sometimes you guys do a good job. Sometimes you don’t. Sometimes you don’t understand what the big deal is and you report about something that’s not the big deal. Every audit is not “scathing.” OK, there are some that are scathing. OK, ADC is a scathing audit and it deserves to be scathing.
I think it’s important for reporters to read at least the summary before they call. I don’t feel like it’s my job to educate the reporter from the start all the way to the finish line. Somebody can do a little legwork before they call me so they can have some questions. And that’s why the pictures are in (the audits), because hopefully it gets people in there and they can read a little sidebar or whatever and maybe they’ll understand a little more. But it really frustrates me a lot when somebody calls cold and it’s like, “OK, tell me what this report says.” Well, read it and then call back because I got other things to do.
I think it’s important for reporters to read at least the summary before they call.
But that all said, you guys are really important for us because, if not for you guys, no one would ever (hear about the audits). Whether it’s good or bad, you folks often are our voice, and not just Civil Beat but the other media outlets.
But I don’t like the “gotcha.” If you’re calling me, I’m laying it on the table for you. I’m not hiding anything about what we said, what we found, whatever. You want to ask me a question, I’m going to answer you the best I can.
I can stand behind every one of the reports that we issue. I have no problem standing up on the soapbox and yelling about what we did, what we felt and why we felt it and why it’s supported and why it’s important.
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