Some say it’s not an “audit,” but a “report.” Others say it doesn’t “show fraud,” but “indicators of potential fraud.” However people talk about it, you owe it to yourself to look at what the latest audit of OHA actually says.
The firm CliftonLarsonAllen (CLA) examined 2% of all contracts and disbursements OHA and its LLCs entered into from July 2012 to June 2016. They Red-Flagged 17% of them for “potentially fraudulent, wasteful or abusive expenditures.” Here are some of their findings:
- The Akamai Foundation, on behalf of Naʻi Aupuni, received a $2.6 million grant but OHA was unable to give the CLA auditors any supporting invoices, receipts or billings to demonstrate what costs were actually incurred by the grant awardee.
- A $1.6 million contract was awarded to WCIT to produce the Conceptual Master Plan for OHA’s Kakaʻako Makai properties but according to CLA, the purpose of this contract was not accomplished.
- A $250,000 contract was awarded to Kuauli ʻĀina Based Insights LLC to “examine the original source deeds of former Hawaiian Kingdom Government and Crown Lands sold” from 1845-1859. The contract bypassed the required procurement process.
- OHA gave a $200,000 grant to ʻAha Kāne while the OHA CEO at that time, who founded ʻAha Kāne, was serving as an Advisory Chair to the organization.
- Reed Smith LLP received a $200,000 professional services contract to provide legal advice regarding Native Hawaiian self-governance and Hawaiian language immersion education. The main provider of the services contracted for was an OHA employee whose employment with OHA ended shortly before the contract was awarded.
- Absolute Plus received $185,000 to provide reports to the Board on each Trust Fund Advisor and the entire trust fund, yet OHA could not provide CLA with the reports, or any evidence that the required work was performed.
- OHA gave $150,000 to ABW Holdings, LLC for a lease guaranty OHA had signed on behalf of Kauhale, LLC when it defaulted on its commercial lease at Waikīkī Beachwalk.
Not a Clean Bill of Health
While the CLA report “did not identify actual instances of fraud, waste and abuse,” the truth is that CLA cannot, and was not asked to make, a formal determination of fraud since it is not a law enforcement entity. CLA did what they were hired to do, which is point out indicators of potential fraud. CLA stated, “Because our engagement was limited to the matters described in the contract, fraud and/or financial irregularities may exist within the organization that we may not have identified during the performance of our procedures.”
Clearly, the auditors did not give OHA “a clean bill of health.” The Honolulu Star-Advertiser editors put it this way: “Audit should set off alarms at OHA.” And Hawaiʻi News Now reported: “Auditors find a mess when they look into Office of Hawaiian Affairs spending.”
There are serious questions which must now be answered:
- Where are the contract deliverables that the audit could not find?
- Where is the large amount of documentation that OHA could not produce for the auditors?
- Will OHA trustees look into cases with serious indicators of potential waste, fraud and abuse?
- Will the trustees make appropriate referrals to government agencies and law enforcement bodies?
The worst thing OHA could do is downplay the audit and fail to hold responsible parties accountable. Beneficiaries need to insist that OHA trustees follow through and complete the work the audit began.
Let’s not sweep the independent audit under the rug.