MAI KA LUNA HO'OKELE - FROM THE ADMINISTRATOR

The OHA Budget

Clyde Nāmu'o, OHA Adminstrator

This document is intended to provide readers with background and other information that will aid in the review of the OHA budget.

As a quasi-public institution, the Office of Hawaiian Affairs (OHA) prepares its budget in accordance with Hawai'i Revised Statutes Section 10-14.5. Pursuant to the statute, OHA is required to provide opportunities for beneficiaries in every county to participate in the preparation of each biennial budget. To comply with the requirement, OHA has posted a summarized version of its proposed budget on the OHA web site for public comment and input.

As a state agency, OHA is required to prepare a biennium budget. The biennium budget is prepared every two years, for the ensuing two years. The current proposed biennium budget covers the periods from July 1, 2009, through June 30, 2010 (FY 10) and July 1, 2010, through June 30, 2011 (FY 11).

What is a Budget?

A budget is a financial operating plan that allocates limited revenues among competing expenditure requirements for a given time period. As a state agency, OHA can not spend more than is budgeted.

What are OHA's Sources of Revenues?

The sources of revenues available for spending include the following:

• General Fund appropriations from the State of Hawai'i

• A portion of revenues generated from Ceded Lands received annually from various State Agencies conducting business on Ceded Lands

• A portion of the Native Hawaiian Trust Fund (NHTF), which includes revenues received primarily from past-due settlements received in the past and dividends and interest earnings thereon

• Federal Funds

• Other miscellaneous program income

How much can OHA spend?

The amount of monies that can be budgeted and spent each fiscal year is based on the Spending Limit, which is determined by the OHA Spending Policy. For budgetary purposes, monies are considered spent when actual disbursement or encumbrance of funds is made. An encumbrance represents a formal commitment (usually evidenced by a contract or purchase order) to acquire goods or services not yet received. At the end of each fiscal year, any monies that have not been spent (disbursed or encumbered) lapse, either back to the general fund or the NHTF, and are no longer available for spending. Trustees are not allowed to spend funds beyond the Spending Policy calculated amount.

General fund appropriations are determined by the Legislature during each biennium and have approximated $3 million annually.

Current payments of ceded land revenues received from the State of Hawai'i have been set at $15.1 million, until further legislative action.

The amount of monies to be withdrawn annually from the NHTF is limited by the Native Hawaiian Trust Fund Spending Policy, as amended. Generally, the spending policy limits the annual withdrawal to no more than 5 percent of the average fair market value of investments, as defined. The annual withdrawals for the ensuing biennium approximate $20 million and $19 million for FY10 and FY11, respectively.

Budget Components

While the total budget is limited by the spending limit, the budget is further segmented and broken down by cost centers, which are defined as a units or organizations for which costs are accumulated or computed. For OHA, cost centers have been defined primarily as Hale or departments. Each Hale or cost center is provided with its own budget that is further broken down into various cost components. For presentation purposes, the various Hale have been summarized into major divisions including Board of Trustees, Support Services and Beneficiary Advocacy and Empowerment. Each of the divisional budgets is then broken into the following components:

Payroll and Personnel Expenses

Personnel Budget includes the budgeted costs for both salary and fringe benefits. Fringes are set by the State of Hawai'i and typically include benefits such as a comprehensive health care insurance, life insurance, retirement programs, sick leave, vacation leave and paid holidays. The fringe rates are determined by the State of Hawai'i and assessed as a percentage of salary costs.

Operating Expenses

Equipment Budget includes tangible property (excluding land and buildings) with a useful life greater than one year. Primarily includes costs for items such as computers and printers and other office equipment, as well as the related repairs and maintenance for those items.

Supply Budget includes the cost of office and other supplies, promotional items and postage and freight.

Grants and Contracts Budget includes the cost of grants and sponsorships, and services on a fee contracts, including legal services.

Travel Budget includes the costs of all travel incurred for both in-state and out-of-state trips.

Other Budget includes all costs not reported in other budgets. Significant items included in the Other Budget include facility and overhead costs such as rent, utilities and insurance. Other costs include printing and advertising, training and development costs, dues and subscriptions and other expenses.