Auditor says Office of Hawaiian Affairs funds pet projects

  • Lisa Cataldo, left, Colette Machado, center, and Dan Ahuna listens to public testimony at an OHA meeting in Kekaha Neighborhood Center on Kauai.(Alden Alayvilla/The Garden Island, file)

HONOLULU — The state agency responsible for improving the well-being of Native Hawaiians spent nearly double the amount on pet projects than on competitive grants, the state auditor said in a report released Tuesday.

Office of Hawaiian Affairs discretionary spending included $1,900 to send someone to a rodeo competition in Las Vegas and $1,000 for a trustee’s son’s medical expenses.

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The agency’s discretionary spending totaled $14 million in fiscal years 2015 and 2016. That’s compared to $7.7 million for competitive grants. Over the same period, the agency withdrew $6 million from its fiscal reserve.

The agency doesn’t rigorously vet and monitor this discretionary spending as its own formal grant process requires, the auditor said. Its administration approves some discretionary spending without the Board of Trustees voting or even knowing about it, the report said.

Agency Chairwoman Colette Machado said in a statement the agency was committed to making changes necessary to best serve Native Hawaiians. She said she already proposed moratoriums on the use of fiscal reserve funds and trustee sponsorships.

“OHA acknowledges the auditor’s findings that we must endeavor to institute and enforce disciplined spending through clearly defined, objective and responsible policies and protocols,” Machado said. “This will better enable OHA to uphold its solemn trust obligations to our beneficiaries.”

Other examples of questionable spending cited by the report included $1,000 for a beneficiary’s rent and $1,000 for another’s funeral-related clothing expenses.

The report asked whether providing funds to an individual Native Hawaiian for personal expenses was consistent with the trustees’ fiduciary duty to many other beneficiaries. The report also asked whether such spending was consistent with state law.

Some of discretionary spending went to community initiatives with broad public support, such as $300,000 to help the Polynesian Voyaging Society’s worldwide canoe expedition.

The auditor’s report indicated the free-wheeling spending was affecting the agency’s broader financial health.

The agency’s fiscal reserves — which according to guidelines established in 2003 are designed to provide funds in the event of emergency — peaked at $23 million in 2006.

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Between 2011 and 2016, the board allowed the annual maximum of $3 million to be withdrawn from the reserves, leading the balance to plummet more than 80 percent from $15 million to $2 million.

The auditor recommended that trustees hold each other accountable for actions “inconsistent with their collective fiduciary duties and responsibilities to trust beneficiaries.” It suggested that the agency consider requiring board approval for all grants and other funding.