Hawaii lawmakers drop state audit as part of Office of Hawaiian Affairs bill

The state Legislature is poised to cancel one audit of the Office of Hawaiian Affairs in exchange for another as part of the multimillion-dollar OHA budget bill.

The action was approved Monday by conference committee after the Senate Ways and Means Committee previously agreed to accept the 2019 audit conducted by the national accounting firm Clifton Larsen Allen in lieu of the incomplete state audit of OHA’s limited-liability companies.

The committee not only restored funding previously held back because of the incomplete audit, but allocated an additional $200,000 to OHA to complete a follow- up of the CLA audit.

The audit canceled by lawmakers was a source of controversy after the OHA board of trustees refused to give state Auditor Les Kondo copies of unredacted closed-door executive session meeting minutes.

Last year OHA sued Kondo over the audit, which was mandated by the 2019 state Legislature as a condition to OHA’s receipt of general funds that year.

Office of Hawaiian Affairs Trustee Keli‘i Akina said Friday that he is troubled by the move to drop the LLCs audit.

“This is a great loss to OHA‘s beneficiaries,” Akina said in a news release. “There are numerous questions of accountability and transparency which will go unanswered without the state legislative audit. All Hawaii residents should be alarmed that a public institution and government agency can operate without the highest level of scrutiny.”

Kondo’s unfinished audit focused on OHA’s use and oversight of its LLCs, seven companies that were created between 2007 and 2015 to hold OHA assets, such as Waimea Valley, and to pursue outside business opportunities and other higher-risk ventures.

“OHA should voluntarily allow the state auditor to confidentially examine all records needed for the audit, including complete minutes of closed-door executive sessions,” Akina said.

Akina added, “Nonetheless, it is fortunate that our legislators are willing to restore OHA funding on the basis of the CLA audit. And they are to be commended for providing additional funding for a follow-through investigation on that audit’s findings.”

The CLA audit contract, awarded in 2017, called for an examination of both OHA and its LLCs with an eye toward identifying areas in the agency’s procurement process at risk of fraud, waste and abuse. When it was released in 2019, the audit flagged transactions worth $7.8 million as potentially fraudulent, wasteful or abusive.

“The CLA review simply did not focus on the LLCs. That is work that should still be done,” Akina said Friday.