A harshly critical draft audit found the Office of Hawaiian Affairs spent millions of dollars loosely and without proper oversight.

The draft report by the Hawaii State Auditor questions whether the public agency has met legal requirements and suggests OHA is failing its trust obligation to improve the well-being of the Native Hawaiian community.

Among the findings: OHA trustees tripled their personal allowances and are spending them on questionable expenses such as fancy dinners, international flights, seating upgrades, religious ceremonies, political events and medical expenses for the relative of a trustee.

The results of the initial analysis portray an agency where a handful of officials have power to disburse large sums of money with few checks and balances. Some even told auditors that it’s hard to say no to funding requests that they know don’t meet requirements.

Anthony Quintano/Civil Beat

Voters created the public agency 40 years ago as part of a broader push to address historic injustices against Hawaii’s native people.

OHA, a trust valued at $600 million that relies on a combination of public trust land revenue and other funding, also now provides more than $14 million annually in grants to qualified individuals and groups. The agency also provides scholarships and loans for the Hawaiian community and advocates on their behalf.

But OHA has long been plagued by costly infighting and criticized for poor fiscal management. Recent lawsuits involving OHA have cost more than $1.7 million.

Civil Beat obtained a copy of the draft audit, which has been delayed several times and does not yet include OHA’s response. The OHA Board of Trustees met in executive session Wednesday to discuss the analysis.

Draft Is ‘Subject To Change’

Hawaii State Auditor Les Kondo asked OHA officials to meet to discuss the draft report in the first week of February. He noted the discussion would have to be public.

On Wednesday, Kondo told Civil Beat that he had no comment on the content of the report. But he emphasized that it is a draft, “subject to change.”

The audit lambasted both Chief Executive Officer Kamana’opono Crabbe and members of the Board of Trustees for misusing funds. The auditors said Crabbe repeatedly approved thousands of dollars in expenditures that OHA staff had recommended against.

“Most of us were leading with our hearts (rather) than with our heads,” one trustee told auditors.

Board members used thousands of dollars of their allowances for a long list of questionable expenses, including the following:

funding for a recipient to compete in the Miss Rodeo America pageant in Las Vegas;

one trustee helping to pay for medical expenses for another trustee’s son; and

paying for legal fees associated with a lawsuit between OHA trustees.

Despite obvious misuse of trustee allowances, no one has been sanctioned.

One trustee told the auditor that the board has no “desire” to sanction trustees.

Another said, “I think our sanctions are kind of weak, and we are not doing our job of calling out certain trustees who have a tendency of going outside the box. We should, really, be the ones to execute these sanctions, and we are not doing that.”

Update: After this article was published, Kanoe Ahuna, wife of OHA trustee Dan Ahuna, told Civil Beat they didn’t know the donation for medical expenses came from Leina‘ala Ahu Isa’s trustee allowance. Isa said she paid the money back when she realized it wasn’t an appropriate expense.

Key Findings — Trustee allowances have tripled over the years despite many questionable expenses and no consequences for breaking the rules. — OHA spent nearly twice as much in recent years on non-competitive, discretionary grants than the agency did on grants with a clear process. — The chief executive officer has overruled staff recommendations to provide funding for organizations that don’t qualify. Source: Hawaii State Auditor Draft Audit Report No. 18-03 February 2018

Colette Machado, chairwoman of the OHA Board of Trustees, said Wednesday in a statement, “OHA is extremely disappointed with the unauthorized release of the draft audit before we could fully review the report and provide a formal agency response to the Auditor, and before the Auditor has had the opportunity to review our response and issue its final audit.”

But she added that “OHA appreciates that the role of the Auditor is to provide an independent and objective analysis of OHA to assist us in better fulfilling our mandate of improving the conditions of Native Hawaiians. We also understand that the daunting challenges our beneficiaries face – as well as our sweeping mandate – require our commitment to continuous improvement and progress.”

OHA, she added, has already begun addressing some of the issues identified in the audit. For example, it recently created a committee to recommend changes in policy for grants, sponsorships and trustee allowances. Another committee is looking at the use of OHA’s fiscal reserve and spending policies.

The Board of Trustees voted last year to hire an independent auditor to conduct its own in-depth analysis of the agency’s finances and management.

OHA Trustee Keli‘i Akina said, “While I am not at liberty to comment on the specific contents of the state audit before it is officially released, it indicates the need for OHA to get its financial house in order. OHA’s independent audit is an important step in that direction.”

Loose Spending Controls

The draft audit found that the pool of discretionary spending was nearly twice as big as formal grants in 2015 and 2016. The noncompetitive awards aren’t publicized and have to be initiated by someone within OHA.

That means millions of dollars are being spent loosely and given to those who “know how and who to ask.”

“Not only do these irregularities pose risks — both great and small — to the Native Hawaiian Trust Fund, they appear to violate OHA trustees’ solemn trust obligation to their beneficiaries that they will administer the trust fairly, equitably, and without self-interest,” the audit says.

OHA has used money from the Native Hawaiian Trust Fund to pay for “retirement benefits for a former trustee, political events, an international conservation convention, as well as a beneficiary’s rent, other beneficiaries’ funeral-related clothing expenses, and a trustee’s personal legal expenses.”

“When we asked OHA trustees, the chief executive officer (CEO), and other officers about these and other questionable expenditures, the consistent justification provided was that the money helps a Native Hawaiian or Hawaiian beneficiary,” the draft audit says.

Cory Lum/Civil Beat

OHA has spent down its fiscal reserve quickly, disbursing hundreds of thousands of dollars on grants, even though the fund isn’t supposed to be used for grants. In one case, $56,300 went to a former OHA trustee to cover retirement benefits.

In some cases, trustees acknowledged that expenditures weren’t appropriate but essentially shrugged.

“Most of us were leading with our hearts (rather) than with our heads,” one trustee told auditors.

The fiscal reserve spending included nearly $600,000 to an elderly care facility called Lunalilo Home and Trust.

“Another trustee believed it was wrong to use the fiscal reserve for capital improvement work at Lunalilo Home, but added, ‘Who would go on record opposing senior housing?'” the audit says.

“Another trustee told us many of the requests in our sample did not meet the Fiscal Reserve guidelines, ‘but the reality is the demands and needs of our people are great.’ The trustee added that they are aware ‘there’s that pot of money or bucket of money sitting here,’ indicating that it was tempting to use when trustees receive numerous funding requests from beneficiaries.”

Abuse By CEO And Trustees

The audit found OHA’s chief executive officer also repeatedly overruled staff recommendations to give money to organizations that didn’t meet guidelines. Poor management also allows some organizations to get money twice.

But even more troubling was the lack of regulations on OHA trustee allowances, which are supposed to cover incidental expenses.

Trustee allowances used to be just $7,200 annually but have tripled to $22,200. There aren’t clear guidelines about how the money can be used, so the money covers a wide range of expenses.

Among the expenditures: helping someone fly to the Cook Islands for a cultural exchange program; a flight upgrade on United Airlines; access to Hawaiian Airlines Premium Club; and tickets to the Polynesian Football Hall of Fame Dinner.

Cory Lum/Civil Beat

The audit says that even though the allowances are a relatively small part of OHA’s budget, “they are indicative of the office’s vague rules guiding its discretionary spending, which are broadly interpreted, arbitrarily enforced, and at times disregarded.”

The money has also been spent on religious and political activities like fundraising for Mayor Alan Arakawa on Maui County and thousands for God’s Ohana Day on Molokai.

There often isn’t verification that the allowances are being used to help Hawaiians.

“When we asked trustees if they verified requestors’ Hawaiian ancestry, one trustee replied that he may ask the question on occasion, but if the requestor’s name is Hawaiian, he doesn’t make an inquiry. Another trustee told us that trustees are not qualified to make that determination, while another did not ask. The remaining six trustees told us that they just know who is Hawaiian.”

Sharp Reaction To The Audit

The findings are likely to figure heavily in the OHA election this year as several candidates campaign to unseat current board members.

Keeaumoku Kapu, a community advocate from Maui, said the findings have prompted him to run for an OHA seat.

Brendon Kalei’āina Lee, a candidate and president of the Kamehameha Alumni Association, wrote in an email that he is “outraged and appalled at the way our trust funds are being spent. Beneficiaries deserve better. It’s clearly time for change on the OHA board.”

William Aila, a well-known public official who is also running for the board, says the findings emphasize the need for term limits for trustees. “You don’t have the time to develop a sense of entitlement,” he said.

State lawmakers also weighed in.

Rep. Kaniela Ing, who leads the House Committee on Hawaiian Affairs committee, called the audit disappointing. “Some of us really stick our necks out fighting to fund Native Hawaiian programs, and this sets us back,” he said.

Read the full draft audit below: