Legislators Breathe New Life into Auditing OHA

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Keli‘i Akina, Ph.D., Trustee, At-Large

During the 2021 legislative session, lawmakers demonstrated strong interest in matters concerning the Office of Hawaiian Affairs (OHA). Legislators proposed several measures affecting OHA directly and relating to everything from development of OHA’s Kakaʻako Makai properties, to the eligibility requirements for becoming an OHA trustee.

There is renewed interest in holding OHA accountable to the highest standards of integrity and ethics. Discussions of the OHA budget (House Bill 204) saw legislators pushing for a follow up on the OHA Board-initiated audit of OHA and its limited liability companies conducted by Clifton Larson Allen (CLA) in 2019. Specifically, lawmakers want a comprehensive examination, meaning not just a routine financial statements audit, and even committed additional funding to enable OHA to proceed.

You may recall that in 2019, when OHA submitted its budget request to the legislature, the legislature conditioned OHA’s receipt of funding on the completion of a “financial audit and management review” by the state Office of the Auditor, led by Les Kondo. The 2019 budget bill was signed into law as Act 37. The Auditor used his discretion over the scope of work its office would undertake as part of the “Act 37 audit,” to focus on OHA’s LLCs. However, the Auditor chose not to finish the Act 37 audit, citing applicable government auditing standards he believed precluded completion of the work, due to OHA’s refusal to waive its attorney-client privilege over executive session meeting minutes the Auditor sought to review.

I am on record as having called on the Board of Trustees to voluntarily waive its attorney-client privilege over the redacted minutes. I did so because I believe there is overriding value in having the Auditor examine OHA’s LLCs, which are state agencies, and taking a deeper dive than routine audits. Not all audits are the same. OHA consistently undergoes annual financial statements audits, but these do not look specifically for fraud, waste, and abuse.

The dispute over the redacted meeting minutes proceeded to litigation, and a court eventually ruled that OHA did not have to unredact the requested minutes. As a result, the Act 37 audit was not completed and OHA did not receive the approximately $3 million in general funds it requested in 2019. This was a loss to all OHA stakeholders, who deserve a strong, accountable and transparent OHA. They deserve an OHA that is able to work with the legislature and other state agencies on behalf of and in the best interest of the Hawaiian community.

Fast forward to April 2021, and to deliberations between OHA and the Senate Ways and Means Committee (WAM) relating to OHA’s 2021 budget request. This time, WAM agreed to accept the 2019 CLA report in satisfaction of the Act 37-required audit.

By the end of the 2021 legislative session, if the recommendation of the WAM committee is approved by the legislature and governor, OHA’s beneficiaries may finally get answers to serious questions raised by the CLA audit. (You can view my summary of the CLA audit report, entitled “Red Flags: An Analysis of the CLA Audit Report” by email request to TrusteeAkina@oha.org.)

The OHA Board is to be commended for having commissioned the CLA audit in the first place. After all, the transactions flagged by CLA as potentially indicating fraud, waste and abuse totaled over $7 million in beneficiary trust funds. Let’s hope that this year’s legislative session will help move OHA forward in its commitment to accountability and transparency.