OHA: Office of Hawaiian Affairs

OHA Audit

OHA Response to Audit of the Office of Hawaiian Affairs’ Competitive Grants and Report on the Implementation of 2013 Audit Recommendations

HONOLULU (June 1, 2018) – The Office of Hawaiian Affairs (OHA) appreciates that the state audit released today recognizes that “[t]he amount of grants that OHA budgets for each year is significant.” The more than $21.5 million in total OHA grants for the two fiscal years covered by this state audit and the February state audit substantially contributed to improving the lives of Native Hawaiians. These grants were awarded to more than 260 programs and events that, among other things, helped low-income Native Hawaiians rent and own homes; provided reading and math assistance to at-risk youth; trained Native Hawaiians to obtain higher-wage employment; and helped manage loʻi and fishponds to feed our communities.

The state audit released in February reviewed OHA’s non-competitive grants. Today’s audit focused on our two competitive grants programs: our event grants, called ‘Ahahui Grants, and Community Grants, which combined constituted more than $7.5 million of the $21.5 million in total grants OHA issued in fiscal years 2015 and 2016. In addition, today’s audit reported on our implementation of the auditor’s recommendations from 2013.

OHA appreciates that today’s audit acknowledges that our community and events grants are “well-managed,” and that OHA has made significant progress in addressing concerns identified in the 2013 state audit, fully or partially implementing all but one of the 23 recommendations from the previous report.

However, we recognize that the purpose of this audit is to identify areas of improvement so that OHA can continue to fulfill our mandate of bettering the lives of Native Hawaiians. Formal Board and administrative initiatives already underway to review and update OHA policies and procedures, including those related to our grants program, will consider the findings and recommendations from today’s audit.

In closing, OHA remains committed to improving the overall administration and reporting of funds that we disburse to the Native Hawaiian community and to providing increased transparency and accountability to our beneficiaries.


OHA Response to the February 2018 State Audit, Report No. 18-03

Setting the Record Straight on OHA’s Spending

By OHA Chair Colette Machado

It’s time to set the record straight about the spending of the Office of Hawaiian Affairs.

Let’s be clear: OHA’s funding absolutely goes towards bettering the lives of Native Hawaiians.

Unfortunately, the media, including the Star-Advertiser Editorial Board (February, 15 2018), have distorted some of the basic findings of the recent state audit of OHA.

Much of the confusion stems from the auditor’s use of the term “discretionary spending.” The auditor lumped a range of our expenditures into this category, and the media twisted the auditor’s findings to suggest that millions in OHA funds were “misspent” or not directed to Native Hawaiians. This is patently false.

The issue is that the auditor deemed any funding disbursed through a non-competitive process as discretionary spending. While we agree that a competitive award process is the fairest way to distribute funds, it doesn’t necessarily provide the flexibility to meet the unique and time-sensitive needs of our beneficiaries. For example, should an organization miss an application deadline for our main competitive grants, they would have to wait another two years for the next solicitation because these grants align with our biennium budget.

Our Board’s solution to this was to provide more flexible, non-competitive processes, such as trustee allowances, CEO sponsorships and Kūlia Initiatives.

Every one of our 22 Kūlia Initiatives for the two years cited in the audit – totaling $13.1 million, which represents the overwhelming majority of OHA’s discretionary spending described by the auditor – went towards meeting the substantial needs of our beneficiaries. Moreover, all Kūlia Initiatives are discussed and approved by the OHA Board in public meetings that are subject to the state’s Sunshine Law.

The following is a list of the largest Kūlia expenditures for those two years:

  • $6 million, DHHL – In 2008, OHA entered into a contractual agreement to provide DHHL with $3 million a year for 30 years to help cover its debt service on bonds used to establish infrastructure for affordable housing on homesteads;
  • $3 million, Hawaiian-focused charter schools – Since 2006, OHA has provided annual funding to support 17 charter schools, which educate some of our most at-risk Native Hawaiian students;
  • $1.15 million for higher education scholarship programs for Native Hawaiians;
  • $896,232, UH Hilo – To support Nā Pua Noʻeau, which provides educational programs to Native Hawaiians; and
  • $597,468, Lunalilo Home – to support the aliʻi trust by funding much-needed infrastructure repairs to provide safety and comfort for its kūpuna residents.

Infographic

See the spreadsheet below for a list of all 22 Kūlia Initiatives.

This list demonstrates that OHA is funding critical services for our beneficiaries with the greatest needs. This is money well spent.

Had the media reviewed the audit closer, they would have found that the auditor’s concerns focused on OHA’s internal processes used to distribute these funds. Our spending policies are intended to manage OHA’s trust to benefit current and future beneficiaries. But balancing our responsibility to sustain the trust with meeting our mandate to serve our community is challenging, especially when the needs of our people today far exceed OHA’s limited resources.

The only time the word “misspent” is found in the audit relates to trustee allowances. While the auditor found that these expenditures represent just a fraction of our overall spending, we agree that this type of discretionary spending invites potential misuse and needs to be overhauled. We also agree that the CEO’s sponsorship cedes too much discretion to a single individual and requires closer oversight. Most importantly, we recognize that we must manage our Fiscal Reserve more carefully. I have proposed moratoriums on these funds while the Board develops policy changes to address valid concerns.

Ultimately, the audit provides us with clear guidance to implement improvements. We are committed to updating our spending policies to be more clearly defined, objective and responsible, while also preserving some flexibility to meet the needs of our beneficiaries in a meaningful and timely manner. We understand that we need to exercise more disciplined spending. Two years ago, we initiated our Fiscal Sustainability Plan to address the long-term health of OHA’s trust, which includes addressing our Spending Policy and Fiscal Reserve. Last March, the OHA Board approved the procurement of an independent auditor to examine OHA’s financial condition and that of its LLCs.  The Board Ad hoc committee on Grants and Sponsorships was created last August to address the policies and procedures of OHA’s grants and sponsorships. We look forward to sharing our progress in the months ahead with our beneficiaries and the public.

View OHA discretionary spending: List of grants comprising OHA’s $14 million in “discretionary spending” for FY15 and FY16, as described by the state Auditor.

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