After holding 25 informational briefings, listening to some two dozen subpoenaed witnesses and reviewing 26,000 pages of documents, a House investigative committee looking into two state audits is moving closer to completing work that began this summer.

A report from the committee is due to the Legislature by Jan. 19. It will likely involve recommending statutory changes to the government agencies that were the subject of the audits — a 2019 audit of the Department of Land and Natural Resources special land development fund and a 2021 audit of the Agribusiness Development Corp.

But there have as yet been no firm recommendations made public, and the committee may this Wednesday schedule more briefings and more subpoenas this month.

They include the possibility of looking at contracts that were issued as part of the 2019 audits on the Honolulu rail project, even though the House resolution establishing the investigative committee does not say anything at all about rail.

Majority Leader Della Au Belatti Nov 30, 20211
Majority Leader Della Au Belatti insists that the House investigative committee that she chairs is focused on improving government operations. Screenshot/2021

To supporters of the investigation, especially its chair, Majority Leader Della Au Belatti, the work demonstrates necessary oversight of the DLNR’s special land development fund and the ADC in order to improve government operations.

It is also an opportunity to examine whether the state auditor — an office that Belatti has repeatedly pointed out falls under the purview of the Legislature — is doing its job. The initial assumption on the part of House leadership appears to be that it has fallen short, though it does not appear that State Auditor Les Kondo’s job is in jeopardy, barring new developments. He has two and a half years left on his contract, and he says he wants to continue the work.

To detractors, none more so than Kondo himself, the investigation is not doing what it should be — namely, addressing the findings and recommendations in the SLDF and ADC audits. Instead, it amounts to an unwarranted attack on him and his office, one that has impacted staff morale and productivity, he says.

A major concern for Kondo is that the House is stomping on the auditor’s constitutionally established purpose to be nonpartisan and independent, which is intended to shield it from political interference.

What The Audits Found

Both audits made critical findings of the respective agencies and made multiple recommendations.

The SLDF audit, released in June 2019, dinged the DLNR for not being more accountable for decisions involving taxpayer money. The DLNR’s Land Division lacked the staff, expertise and resources “to do anything other than continue business as usual,” the audit said.

Because of that, the Board of Land and Natural Resources — which acts on land leases and Conservation District Use Permit applications — had “little choice but to extend the leases and, by our calculations, forego $1.6 million in potential revenue.”

BLNR Chair Suzanne Case said at the time that the audit contained “useful recommendations” but also reached “a number of subjective conclusions based on the auditor’s interpretation of the public trust.”

House Majority Leader Della Au Belatti and State Auditor Les Kondo discussing the Agribusiness Development Corporation in September. Kondo argues that the committee is not paying attention to what the audits had to say. Screenshot/2021

The audit made more than a dozen recommendations to the DLNR, the BLNR and the Land Division. They included reviewing rent adjustments for all rents below fair-market value, preparing a long-range asset management plan and establishing procedures to “accurately account for” and report the activities of the SLDF to the Legislature.

The SLDF audit received little public attention. But the ADC audit, released in January, resulted in immediate demands for lawmakers to fix the ADC so that it fulfills its mission to diversify agriculture. Bills were also introduced, including one that called for folding the ADC into the state Department of Agriculture. The bill died.

While the legislation that created the ADC in 1994 called for an “aggressive and dynamic” effort to convert former plantation assets to large-scale commercial crop enterprises, the audit found that the agency had “done little — if anything” to make that happen. There was no plan, as was required by statute, and the ADC struggled to manage its land.

As well, record-keeping was a mess. And the ADC’s board of directors was faulted for providing minimal guidance and oversight.

The audit’s recommendations for the ADC included developing goals, policies and guidelines for an agribusiness development strategy, inventorying lands to assess potential in a post-plantation era and to consider having a private property management company handle some or all of ADC’s properties.

The ADC board, meanwhile, was advised to attend training on the state’s open meetings law and to annually evaluate the ADC’s executive director, who did not come off particularly well in the audit.

How The Legislature Might Act

The recommendations from the auditor’s office did not directly address the Legislature. But in their resolution creating an investigative committee, House leaders summarized several of the auditor’s top concerns, and called them “of great interest to the House” and to the public.

The resolution states that the Legislature has a duty to determine state policy and appropriate funding, and it includes ensuring proper operation and management of state programs and agencies. It also cited the state law, HRS Chapter 21, that gives the House the latitude to issue subpoenas and call witnesses.

What might the committee recommend to the House next month?

Those details are still in the works, said Belatti, but several proposals are emerging. They include possibly transferring some of the responsibilities of the ADC to the agriculture department, and improving management of the DLNR’s leasing of public lands to generate more revenue for the state.

While all but one of the 51 House members voted in favor of creating the House investigative committee, several dissidents have privately criticized Belatti as a poor lawyer who seems to be on an ill-defined fishing expedition to find something that makes Kondo look bad.

House leaders’ actions involving Kondo included a bill co-introduced by Belatti and House Speaker Scott Saiki early this year to allow the Legislature to set the salary of the auditor (it died).

Saiki also moved to cut the budget of the auditor in half (he failed) and Saiki and Belatti pushed to place five key Hawaii watchdog agencies — including the Office of the Auditor — into a new Office of Public Accountability (it died too).

But a House-ordered review of the auditor’s office went through, and in April its authors, led by former City and County of Honolulu Auditor Edwin Young, issued a so-called “audit of the auditor” that heavily criticized Kondo’s work.

Members of the investigative committee defend their work. As chair of the House Committee on Water and Land, Rep. David Tarnas said he has learned a lot from the investigative committee.

Rep. David Tarnas at a House investigative committee hearing in 2021
Rep. David Tarnas said he believes strongly in the oversight responsibility of the Legislature, and he says ADC and DLNR statutory changes are likely to be proposed in the 2022 legislative session. Screenshot/2021

“I am interested in the policy reforms coming out of this, in particular the public land leasing laws and following up on some of the work last session,” he said.

That work included the passage of House Bill 499, a controversial law that authorizes the BLNR to extend certain leases for commercial, industrial, resort, mixed-use or government use once the developers agree to make “substantial improvements to the existing improvements.”

“I want to strengthen the capacity for the DLNR to do their job, to get the lease extensions that the audit pointed out,” Tarnas said. “This is very much to the lessees’ benefit to do this, and this state is arguably losing out on some potential revenue.”

Tarnas said he personally was “not on a witch hunt,” although he understands how Kondo might feel embattled. He also notes that he recently attended a Council of State Governments West meeting on the mainland where he said he learned how critical the role of oversight is for legislators.

“It was educational to hear about best practices in other states — that other states take this role seriously and form standing committees — and to bring that back to the investigative committee,” he said.

Two other outspoken members on the committee, Reps. Dale Kobayashi and Amy Perruso, both expressed concern that the work early on focused too much on Kondo’s job performance. But both now say that they have welcomed the current focus, which is on hearing from past and present board members of the ADC and the BLNR.

A screen shot of Thursday's House hearing on audits. Pictured is Rep. Dale Kobayashi.
Rep. Dale Kobayashi says it’s important for the House investigative committee to be transparent. Because of Covid restrictions, the committee hearings have been closed to the public, although they are streamed. Screenshot/2021

“We need to get to the bottom of how to fix these agencies, and in a competent and transparent way,” said Kobayashi, a CPA and chair of the House Committee on Legislative Management. “And that was not obvious early on.”

Rep. Val Okimoto, the lone Republican on the committee, said she is optimistic that the work will lead to “positive” changes to the ADC and the SLDF by the end of the 2022 session.

“If we don’t, we have all these hours of work for the public to hold us accountable during the elections,” she said.

Asked about how much money the audit briefings cost, Belatti said that figure would be “calculated at some point.” But she emphasized that legislators do work during the interim and that the briefings are part of their job.

Kondo calls the investigation “such a waste, such an abuse.”

Is Rail An Issue?

In 2021 alone, Kondo’s office issued over 30 reports on various government agencies including the audit of the ADC. Why the focus on just the ADC and SLDF audits?

“I think for me it is the importance of land and land management,” Belatti explained.

An unanswered question is whether the House panel will look deeper into the rail audits. At an October briefing, Belatti said, her committee was made aware of omissions in the rail audits. The House resolution approved in late April that enabled the investigative committee’s work gives it the authority to look at “any other matters” besides the ADC and SLDF audits, she said.

Perruso, the vice chair of the House Committee on Agriculture, is among committee members expressing concerns over change orders on rail and Kondo’s termination of one of the contractors working on the rail audits. There is a dispute between Kondo and the House panel on whether information on the change orders should have been included in the rail audits and why Randal Lee and another contractor were terminated by Kondo after Lee raised concerns about the change orders.

That is in part why the committee has focused on Kondo’s job performance.

Rep. Amy Perruso at a House investigative committee hearing in 2021
Rep. Amy Perruso was initially concerned that the House investigative committee was too focused on State Auditor Les Kondo. More recent hearings, she says, have produced substantive information to help lawmakers try to improve the ADC and the DLNR. Screenshot/2021

“I think the bridge that you have to understand is that the procedures that the auditor uses to conduct its audits have drawn very serious questions and concerns from the committee,” Belatti said.

When Belatti uses words like “patterns of omissions” in Kondo’s work, however, he counters that she and her committee do not understand how audits work. He also points to two peer reviews during his tenure that gave his office high marks.

Kondo said that he has yet to hear anyone disagree with the actual audit findings.

“We did a good job, notwithstanding these accusations and innuendos,” he said.

Belatti dismisses Kondo’s gripes: “Les Kondo is not the center of the universe. If you look at the work of the committee, and the last set of hearings following up with board members, we follow the evidence. Mr. Kondo may not like the evidence coming out that questions his own policies and procedures, but the committee is not controlling that, the evidence is.”

If the House decides it wants to, Belatti said, more investigative committees could be formed in the future. But such work is rare.

The last time Belatti could recall such a legislative level of inquiry was the Joint Senate-House Felix Investigative Committee that in 2001 issued a report on the Felix Consent Decree of 1994 that ordered major changes in Hawaii public schools to better serve special-needs children.

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