Amid OHA turmoil, Chairwoman Machado sets record straight on spending

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 toward bettering the lives of Native Hawaiians.

Unfortunately, the media, including the Star-Advertiser editorial board, 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 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, it would have to wait another two years 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 Kulia Initiatives.

Every one of our 22 Kulia 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 toward meeting the substantial needs of our beneficiaries. Moreover, all Kulia Initiatives are discussed and approved by the OHA board in public meetings, subject to the state’s Sunshine Law.

Some of the largest Kulia expenditures for those two years (for complete list, see www.oha.org):

>> $6 million, DHHL — In 2008, OHA entered an agreement to provide DHHL with $3 million yearly for 30 years to help cover its debt service on bonds used for 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 students.

>> $1.15 million for higher education scholarships for Native Hawaiians.

>> $896,232, UH-Hilo — To support Na Pua No‘eau, which provides educational programs to Native Hawaiians.

>> $597,468, Lunalilo Home – Funding infrastructure repairs to provide safety and comfort for kupuna residents.

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

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 sustaining the trust while meeting our mandate to serve our community is challenging, especially when the needs of 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 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 clear guidance for improvements. We are committed to updating spending policies to be more clearly defined, objective and responsible, while also preserving some flexibility to meet the needs of 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. Last March, the board approved the procurement of an independent auditor to examine OHA’s financial condition and that of its LLCs. The ad hoc Committee on Grants and Sponsorships was created last August to address these policies and procedures. We look forward to sharing our progress in the months ahead.

Colette Machado is chairwoman of the Office of Hawaiian Affairs board of trustees.