OHA audit reveals lack
of ‘comprehensive plan’

The report finds $2.4 million
in late or defaulted loans

A state audit slams the Office of Hawaiian Affairs for its "casual administration" of funds and a business loan program, and for failing to have a "comprehensive plan" to better serve native Hawaiians.

In a report released this week, state Auditor Marion Higa said that after 25 years in operation, OHA "is still struggling to put its own house in order and remains casual in the administration of funds over which it has a fiduciary duty of loyalty to its beneficiaries."

"Overall, OHA has shown little improvement in meeting its obligation to improve the conditions of all Hawaiians," wrote Higa, who audits OHA every four years. "Until it focuses on development of a comprehensive master plan as a priority, OHA's leadership role and trust obligations to its beneficiaries will remain unfulfilled."

OHA's administrator Clyde Namu'o criticized the audit as "overstated."

"The auditor made sweeping statements that were not justified in the rest of the audit," he said.

"The comprehensive plan is not a panacea to identify all of the problems in the Hawaiian community," Namu'o said. "We have not published a document, but we are addressing 95 percent of the elements identified as needs of native Hawaiians under the law."

He said OHA's comprehensive plan would be published by the end of the year.

In 2001, Higa ripped the independent state agency even harder, accusing trustees of failing to provide needed leadership, poorly managing its public land trust and its business loan program, and overspending its budget by 100 percent. That audit also faulted certain trustees for misuses of expense accounts for personal use to cover beauty salon expenses and interest-free loans to family members.

The latest audit also found many of the same weaknesses including "questionable" expenditures from the trustees expense accounts, the protocol fund and petty cash.

Higa was perhaps hardest on the issue of a comprehensive plan and said that without one OHA is "still ill-equipped to fulfill its fiduciary duty."

Higa acknowledged that OHA developed a strategic plan for 2001-2007 but said "a strategic plan that lacks the underlying foundation and vision of a master plan lacks adequate direction."

The latest audit also found continuing "deficiencies" and "deep-rooted problems with the administration" of OHA's 15-year-old business loan program known as the Native Hawaiian Revolving Loan Fund.

As a federal lending program, the fund is administered by OHA and supported by funds from both OHA and the federal Administration for Native Americans. The fund offers loans of $75,000 or less on favorable terms to native Hawaiian entrepreneurs who do not have the credit to secure funding through conventional means.

The audit found the "program continues to experience high default and delinquency rates." The audit found that as of January 2004 there were 121 loans outstanding totaling more than $3.3 million and that more than $2.4 million, or almost 73 percent, were in default or delinquent.

Of the 121 loans, the audit found that 62 were in default, meaning payments on the loan had stopped, and 20 were delinquent, meaning that payments were continuing but past due.

The audit acknowledged that loans were granted to high-risk candidates, but it criticized OHA for "irregular financial reporting" and lax monitoring of payment status.

Namu'o defended the administration of the fund, saying that if the auditor excluded loans OHA had written off, only 10 to 15 percent of the outstanding loans would be delinquent.

OHA, which was created by a 1978 constitutional amendment, oversees assets worth more than $320.6 million held in trust for the benefit of native Hawaiians. The agency receives money from the state as payment for ceded lands, and derives income from the earnings on the trust fund. OHA has an investment portfolio of more than $350 million.