Setting the Record Straight on OHA’s Spending

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Ka Wai Ola

Colette Y. Machado, Chair, Trustee Moloka‘i and Lāna‘i

It’s time to set the record straight about the spending of the Office of Hawaiian Affairs.

Let’s be clear: OHA’s funding absolutely goes towards bettering the lives of Native Hawaiians.

Unfortunately, the media has distorted some of the basic findings of the recent state audit of OHA.

Much of the confusion stems from the auditor’s use of the term “discretionary spending.” The auditor lumped a range of our expenditures into this category, and the media twisted the auditor’s findings to suggest that millions in OHA funds were “misspent” or not directed to Native Hawaiians. This is patently false.

The issue is that the auditor deemed any funding disbursed through a non-competitive process as discretionary spending. While we agree that a competitive award process is the fairest way to distribute funds, it doesn’t necessarily provide the flexibility to meet the unique and time-sensitive needs of our beneficiaries. For example, should an organization miss an application deadline for our main competitive grants, they would have to wait another two years for the next solicitation because these grants align with our biennium budget.

Our Board’s solution to this was to provide more flexible, non-competitive processes, such as trustee allowances, CEO sponsorships and Kūlia Initiatives.

Every one of our 22 Kūlia Initiatives for the two years cited in the audit – totaling $13.1 million, which represents the overwhelming majority of OHA’s discretionary spending described by the auditor – went toward meeting the substantial needs of our beneficiaries. Moreover, all Kūlia Initiatives are discussed and approved by the OHA Board in public meetings that are subject to the state’s Sunshine Law.

The following is a list of the largest Kūlia expenditures for those two years (for a list of all 22 Kūlia Initiatives, visit www.oha.org):

  • $6 million, DHHL – In 2008, OHA entered into a contractual agreement to provide DHHL with $3 million a year for 30 years to help cover its debt service on bonds used to establish infrastructure for affordable housing on homesteads;
  • $3 million, Hawaiian-focused charter schools – Since 2006, OHA has provided annual funding to support 17 charter schools, which educate some of our most at-risk Native Hawaiian students;
  • $1.15 million for higher education scholarship programs for Native Hawaiians;
  • $896,232, UH Hilo – To support Nā Pua No‘eau, which provides educational programs to Native Hawaiians; and
  • $597,468, Lunalilo Home – to support the ali‘i trust by funding much-needed infrastructure repairs to provide safety and comfort for its kūpuna residents.

This list demonstrates that OHA is funding critical services for our beneficiaries with the greatest needs. This is money well spent.

Had the media reviewed the audit closer, they would have found that the auditor’s concerns focused on OHA’s internal processes used to distribute these funds. Our spending policies are intended to manage OHA’s trust to benefit current and future beneficiaries. But balancing our responsibility to sustain the trust with meeting our mandate to serve our community is challenging, especially when the needs of our people today far exceed OHA’s limited resources.

The only time the word “misspent” is found in the audit relates to trustee allowances. While the auditor found that these expenditures represent just a fraction of our overall spending, we agree that this type of discretionary spending invites potential misuse and needs to be overhauled. We also agree that the CEO’s sponsorship cedes too much discretion to a single individual and requires closer oversight. Most importantly, we recognize that we must manage our Fiscal Reserve more carefully. I have proposed moratoriums on these funds while the Board develops policy changes to address valid concerns.

Ultimately, the audit provides us with clear guidance to implement improvements. We are committed to updating our spending policies to be more clearly defined, objective and responsible, while also preserving some flexibility to meet the needs of our beneficiaries in a meaningful and timely manner. We understand that we need to exercise more disciplined spending. Two years ago, we initiated our Fiscal Sustainability Plan to address the long-term health of OHA’s trust, which includes addressing our Spending Policy and Fiscal Reserve. Last March, the OHA Board approved the procurement of an independent auditor to examine OHA’s financial condition and that of its LLCs. The Board Ad hoc committee on Grants and Sponsorships was created last August to address the policies and procedures of OHA’s grants and sponsorships. We look forward to sharing our progress in the months ahead with our beneficiaries and the public.