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OHA expected Misuse of trust funds. Poorly managed programs. Lack of leadership and planning.
to fare poorly in
state audit
OHA's replies to a draft
indicate that the audit finds the
organization badly managedBy Pat Omandam
Star-BulletinAnd an organization in a state of crisis.
Those are some of the findings expected soon in an audit of the Office of Hawaiian Affairs being completed by state auditor Marion Higa for the state Legislature.
The draft audit remains confidfential but much of what is in it can be found in OHA's official reply to the draft report, as well as in responses by OHA Administrator Randy Ogata and trustees Rowena Akana and Clayton Hee. Those responses show the OHA trustees disagree with some of the auditor's findings and disagree on how they should respond.
"I believe the state auditor provided OHA the opportunity to strengthen itself with the assistance of outside scrutiny," said Chairwoman Haunani Apoliona.
Apoliona, other trustees and staff worked the past two weeks to gather facts, correct misinformation, note improvements and strengthen recommendations made in the draft audit. When released, it will be the fourth state audit in OHA's history, following reports in 1990, 1993 and 1997.
Among the findings in the draft report is that the nine-member board did not provide OHA with the leadership and direction needed to improve the conditions of Hawaiians. Examples include a failure to establish priorities, an outdated master plan, inadequate planning for expenditures and a lack of coordination with other key plans and policies.
In addition, the auditor says trustees failed to uphold their fiduciary duties and poorly managed the public land trust. They also used expense accounts for personal gains, inappropriately used protocol and petty cash funds, and failed in their dealings with money managers, which affected the performance of the agency's $375 million investment portfolio, the report says.
Apoliona, in OHA's official response approved Friday by a 6-3 board vote, said that the board has not breached its fiduciary responsibilities and that corrective action to many issues began prior to the release of the draft audit.
She said the report shows a need for an internal auditor, which she will propose hiring during the first quarter of 2002. She disagreed with some findings regarding OHA's money managers.
"The auditor claims that OHA's failure to hire international managers resulted in a loss of over $2.1 million had the contracts been executed earlier," she said. "We would suggest that the auditor's assumptions are retrospective."
Hee, in a letter Monday to Higa, explained that OHA's intent was to invest in international equities only when the investment was profitable. International investments performed poorly from 1995 through 2000 and in hindsight, it would have been much better if OHA had not invested in any international equity last year, said the former board chairman. OHA invested $34 million in international equities last September. Finally, Higa's draft report found the ongoing reorganization to four OHA divisions from 11 led to a state of crisis because the reorganization was inadequately planned.
The report says that not all of OHA's staff may be qualified for newly assigned positions, and that the exodus of key staff plagues the agency. There's also a lack of a grievance process that places the agency at risk of litigation, it said.
Office of Hawaiian Affairs
