Time is running out to resolve rail audit

Time is running out to resolve a series of disputes between the Hawaii State Auditor and staff at the Honolulu rail project, and that time crunch may limit how much the public will learn about what has gone wrong with rail.

With a pricetag of $9 billion, the Honolulu rail line is the largest public works project in state history. It is also so vastly over budget that the city appealed to the state Legislature for financial bailouts in 2015 and 2017 to cover billions of dollars of cost overruns.

As part of the most recent $2.4 billion bailout bill last year, lawmakers instructed state Auditor Les Kondo to issue subpoenas if necessary to drill down into the financial management of the rail project to determine whether the money being poured into the project is “being managed and used in a reasonable manner.”

That bailout bill, better known as Act 1, also instructs the auditor to find out where the city plans to find the money to pay to operate and maintain the rail system, which is expected to cost upward of $130 million per year. HART does not have money to cover those costs, and it is unclear from where funding to operate the 20-mile rail system will come .

The auditing process thus far has been messy in a very public way. Since his staff began work last year, Kondo has twice gone to meetings of the board of the Honolulu Authority for Rapid Transportation to describe for the board what he calls “interference” in the audit process by the rail authority.

Kondo said he learned in May that HART employees are required to record their interviews with the auditor, which Kondo said sends a signal that “Big Brother is there, Big Brother is listening. Whether intended or not, the implication in my opinion to the employees is that they better toe the company line,” Kondo told the HART board.

HART also has taken months to respond to some inquiries, Kondo said, and in two cases reported that it could not locate specific documents the auditor requested. The rail authority also is withholding from the auditor the minutes from years of HART board meetings that were closed to the public.

According to Kondo, HART’s response to the rail audit goes beyond the ordinary defensiveness a government agency might exhibit while facing outside scrutiny.

He called the recordings of staff interviews “unprecedented” in the conduct of an audit, and told the HART board in May that “I just don’t think it’s a good precedent, and it doesn’t look good to have this requirement in place.”

Kondo asked the board and HART staff to stop recording the auditor interviews, but HART Executive Director Andrew Robbins said the recordings were recommended by HART’s lawyer.

Recording the interviews is intended to protect HART staff, Robbins said, noting that the auditor also records the interviews, which has prompted some complaints from HART staff members. None of the HART staff members has complained that HART is recording the sessions, he said.

Robbins said he does not transcribe or listen to any of the recordings of the audit interviews, and the recordings are stored in a secure electronic file. Robbins and the rest of the HART management do not have access to the recordings, he said.

“I want to say that the HART staff fully understands the law, Act 1, we understand that the state auditor and his office and his consultants have a job to do, and we support that and we’re working very hard to cooperate,” Robbins told the HART board last month. “I think the issue that we are struggling with a little bit is that people have day jobs.

“This is a very complex project, over $8 billion, and to comply with the voluminous requests of documents, not only from the state auditor but from the city auditor, the (Federal Transit Administration) and others, we’re doing the best we can, and it’s just really difficult on our staff to snap to it, if you will, and meet every deadline,” he said.

Robbins said that as of late September, HART had provided all but six or eight documents the state auditor requested. Two of those documents cannot be found, he said.

When board members asked about the issue of executive session minutes in September, Deputy Corporation Counsel Randall Ishikawa told the board he had drafted a memorandum dealing with that and the related issue of confidential communications between the board and its legal counsel.

However, Ishikawa said information should be discussed only in a closed-door executive session, and the board did not have enough voting members present to vote to hold an executive session. The issue will come up again at a HART board meeting in November, said board Chairman Damien Kim.

Meanwhile, Kondo is running out of time. Act 1 requires that the rail audit be submitted to lawmakers in late December, and because of that schedule Kondo said he does not plan to use his subpoena power to press HART to be more forth­coming.

“In a different situation, if we had the luxury of more time, perhaps we might consider it, but because we believe agencies by statute or by law are required to cooperate with the audit and provide access to information and provide access to people so we can talk to them, I don’t feel that there should be a need to issue subpoenas,” Kondo said in an interview.

“So, we’re going to just proceed and report whatever we get, and if we don’t get cooperation or we get these little obstacles that are put in our way, we going to report it,” he said.

DIGGING DEEPER

Not everyone agrees with that approach. State Sen. Jill Tokuda, one of the key architects of a 2017 bill that eventually evolved into Act 1, said she was “shocked” to learn Kondo could not get executive session minutes from the HART board. Tokuda said the auditor should issue subpoenas if necessary.

Tokuda, (D, Kailua-­Kaneohe), recalled working on an investigation with the state auditor into the state Bureau of Conveyances in 2007 that involved subpoenas, and also involved confidential information that could not be made public.

“It’s not like there hasn’t been precedent,” she said. “To me, these executive session tapes are just the beginning, and that’s what HART has to understand. It’s about asking the first questions and the first layer to understand where do we go next on this, because at the end of the day it is about ensuring true accountability to understand how our taxpayer money is being utilized.”

Corie Tanida, executive director of Common Cause Hawaii, said government agencies should be open and transparent in general, and in this case the public is asking for accountability.

“I think the fact that the Legislature has called for an audit on such a short timeline, obviously there’s some concerns, so shouldn’t the agency be even more responsive to kind of quell these concerns?” she asked.

The auditor “is doing a job on behalf of the taxpayers, and that’s because HART has sort of gotten itself into this position,” said R. Brian Black, executive director of The Civil Beat Law Center for the Public Interest, “The Legislature felt there was additional oversight needed and wanted the auditor to take a look. For HART to now be less cooperative, it creates questions.”

AUDIT CLASHES

This is not the first time city transit officials have clashed with outside auditors or consultants who examined the finances of the rail project.

Former HART Executive Director Dan Grabauskas went so far as to call a press conference in 2016 to attack a report by the city auditor days before that report was scheduled to be released to the public.

At his press conference, Grabauskas declared that “I’d say this so-called audit is a joke, but it hasn’t been funny. It’s a mess.”

That report said HART needed to take a number of steps including strengthening its controls over financial information reporting. “Absent the improvements, we anticipate additional shortfalls and cost overruns will occur,” the audit said.

Grabauskas resigned months later, and the rail project later announced additional cost overruns that required a $2.4 billion bailout the following year.

In the earlier days of rail before HART was formed, city officials who were planning the rail project also resisted inquiries by an outside consultant hired by former Gov. Linda Lingle to study rail’s finances in 2010.

That consultant, Infrastructure Management Group Inc., complained at the time about “the almost total refusal of the city to meet with it, to share documents, and to allow the (consultant’s) team members to meet and confer with key city and city consultant personnel in the course of our work.”

In this case, Robbins said HART has been “bending over backwards” to cooperate with the audit. In an interview last week Robbins said his staff provided all of the documents the auditor requested apart from one or two records that HART could not locate.

However, HART does not control the handling of the executive session minutes, which is a matter for the HART board to resolve, he said.

Kondo said he is unsure how comprehensive the audit will be in the end.

“Are we going to be able to do our job? We’re going to do a job. Is it going to be as thorough and complete as if we had unfettered and timely, complete access? I’m going to guess it’s probably not, but I cannot tell you for an absolute fact because I don’t know what we don’t know,” he said.