Editorial: Beset Office of Hawaiian Affairs should comply with audit

The Office of Hawaiian Affairs, which has been under scrutiny in recent years over management of its resources, has pushed up against the state Office of the Auditor in the latest inquiry into its operations.

Now the Legislature, which mandated that performance audit, and OHA beneficiaries, who deserve more transparency from those handling their assets, need to push back.

The standoff was announced Monday by state Auditor Les Kondo, who suspended the ordered audit into OHA’s limited liability companies (LLCs). The LLCs were created as a means of holding its assets, such as Waimea Valley, and pursue outside, higher-risk ventures without individuals being held liable for them.

Kondo asserted that the agency’s governing Board of Trustees denied his office access to complete and unredacted minutes of its meetings.

Based on the law that authorizes the auditor’s work, OHA is accountable to deliver what has been requested. Hawaii Revised Statutes Section 23-5(1) unequivocably states that the auditor “may examine and inspect all accounts, books, records, files, papers and documents and all financial affairs of every department, office, agency and political subdivision.”

There’s no allowance for shielding information from the auditor through redaction, as OHA has done in this case. Kondo had the option of preparing the audit based on the information he had, stating its limitations.

He opted instead, correctly, to press the issue by concluding instead that he was prevented from doing a reputable job.

Certainly, there could be data points that are considered proprietary and thus could be redacted later from general public view. The auditor himself, however, cannot be confident in his understanding the potential problems without full information at the outset.

In their official response, OHA Chairwoman Colette Machado and Vice Chairman Brendon Kaleiaina Lee issued a written statement decrying Kondo’s decision to “play politics with critical general funds for Native Hawaiians.” That’s because, they said, the Legislature had placed a condition that the audit be submitted before it releases the second fiscal year of OHA’s general funds.

In fact, OHA should reconsider its redactions to the auditor. In the statement, Machado and Lee cited attorney-client privilege for the information not being disclosed in executive session minutes. The trustees will have to defend that decision to lawmakers, who should summon them, along with the auditor, to the state Capitol where each side will make its defense.

The auditor seems to have the stronger case. The call for an audit did not arise in a vacuum. There is already considerable concern about OHA among lawmakers and the public.

In the resolution calling for the report, legislators cited a 2018 audit as flagging “spending irregularities and possible breaches of the Office’s fiduciary duties.” Also, “the transactions, accounts, procedures and performance of the LLCs created and used by the Office of Hawaiian Affairs were not included” in the scope of that earlier audit.

In its testimony, OHA noted that its LLCs pay for their own independent audits, and data from those are included in OHA’s basic financial statements.

But relying on those is not good enough. The state is accountable to taxpayers for the money provided for the operation of OHA. Simply waving off direct legislative oversight of LLCs by the state’s own auditor, would be derelict.

The ones who should feel most concerned are the Native Hawaiian beneficiaries of the trust. They are being left in the dark by all of this, which is intolerable. It’s time to turn on the lights at OHA.