Allegations that the Council for Native Hawaiian Advancement mismanaged a $1.6 million Office of Hawaiian Affairs contract have surfaced as the dispute over a much larger Hawaii Tourism Authority contract heads beyond the four-month mark.

Documents show that an OHA review found CNHA noncompliant in 2020 in its handling of Emergency Financial Assistance Program funds, which morphed into COVID-19 relief. According to public records obtained by the Honolulu Star-­Advertiser, OHA told CNHA on July 23, 2020, that it had found 37 noncompliant recipients in a random survey of 50 grant applicants — representing 20% of 256 total disbursements.

CNHA CEO Kuhio Lewis told the Star-Advertiser that at the time he disputed OHA’s finding of noncompliance, ultimately terminating the nonprofit’s contract with OHA during its first year while also declining an offer approved by OHA’s board of trustees to manage an additional $2.17 million in COVID-19 relief funding for Native Hawaiians.

Supporters of CNHA say the latest allegations are only emerging because of the organization’s quest for the lucrative HTA contract for marketing in the U.S., likely valued at more than $100 million over a multiyear period. The awarding of the contract has become a high-stakes battle.

“While there was a disagreement in terms of (the OHA program), I hate to say it but there is just this anxiety within the industry about our organization having any place in the industry and that is the uphill battle that we know we are facing,” Lewis said. “We have been taking the high road in every occurrence that has come around.

“The forces are great that are working against us,” he said. “I hate to call it systemic racism but in many instances that is what it feels like. We are constantly under attack for trying to do what we believe the community has been calling for, which is change.”

However, supporters of the Hawai‘i Visitors and Convention Bureau say that the OHA documents are proof that CNHA is not qualified to retain the HTA award.

Keith Vieira, principal of KV &Associates, Hospitality Consulting, said given the scope of the OHA findings, HTA never should have selected CNHA. The award to CNHA, which was worth more than $34 million in the first two years, was supposed to commence with a contract starting June 30, but the process has been mired in controversy and uncertainty.

“Here you have an area that they have expertise in and they couldn’t come anywhere near compliance. Now, HTA is looking at giving them a contract in an area where they have zero expertise,” Vieira said. “It’s one thing when you have an OHA compliance review, it’s another when you are talking about our state economy and we are going to entrust that spending to them.”

Vieira said CNHA does not have enough tourism experience to administer the U.S. tourism contract, which is HTA’s largest piece of business.

Based in Kapolei, CNHA describes itself as a nonprofit with a mission to enhance the cultural, economic, political and community development of Native Hawaiians. The group says its services include financial counseling and providing grants and loans targeting underserved communities in Hawaii.

Lewis said CNHA has experience in destination management, which is a big part of HTA’s U.S. contract. He said the award transition team is standing up a consortium of Native Hawaiian and tourism leaders called the Kilohana Collective to handle the tourism contract. CNHA’s transition team includes some tourism heavy-hitters, including its chair Douglas Chang, general manager of the Ritz-Carlton Residences, Waikiki Beach.

Vieira, however, said CNHA’s transition team has changed since it submitted its proposal, which in his view suggests instability. He said it’s also problematic that CNHA’s proposal to HTA did not have all key employee leadership roles filled. CNHA has argued that it wanted the flexibility to hire professionals, potentially including HVCB employees, who could not make commitments to them until they had the contract.

HTA and state Department of Business, Economic Development &Tourism Director Mike McCartney, in his role as head of the purchasing agency, must issue a ruling on HVCB’s protest and decide if CNHA keeps the HTA award. McCartney declined to comment and it’s unclear what role if any CNHA’s history with OHA will play in his decision-­making.

OHA declined to comment on its dealings with CNHA, saying, “OHA does not publicly comment on a grantee’s status.”

According to public records obtained by the Star-Advertiser, OHA’s July communication cited problems with CNHA’s documentation of addresses, household members, income status, bills, and Native Hawaiian status. OHA’s concerns included instances where CNHA gave an applicant money for a bill that had a zero balance or issued payments for more than the applicants made or paid someone whose income had increased.

OHA noted an instance where reimbursement was earmarked for rent, but the payment went to utilities. In another case, OHA said CNHA had marked the application “not recommended to pay,” but issued payment anyway. The documents show that OHA said a payment also was issued to a household member of an applicant without proof that they lived in the same household as the applicant.

OHA also gave examples of applicants who were paid without completing financial literacy training, which was an early requirement of the contract, which was later amended at CNHA’s request after the COVID-19 lockdown.

In a Nov. 6, 2020, document obtained by the Star-Advertiser, OHA CEO Sylvia Hussey sought to have CNHA complete a corrective action plan and agree to a compliance monitoring process. However, at the same time, she also outlined a plan for OHA to draft and execute a new $2.17 million contract with CNHA — the new agreement to distribute relief included stricter requirements, but also upped CNHA’s administrative compensation to 25%.

Lewis, who worked for OHA for eight years before leaving for CNHA, said he declined the new, more-lucrative agreement and terminated the first agreement early at the direction of his board.

“This was about just being too far away from each other in terms of how to serve community,” he said.“While it was pivoting, they were pivoting, the situation got exacerbated. We were getting emails from people telling us about their situations — it just takes a toll.”

Lewis said CNHA distributed more than $700,000 of the $1.6 million two-year contract before terminating it.

“We received over 4,000 applicants and awarded to just under 300”; however, he added that if OHA had considered less-stringent requirements, more money could have been distributed.

Lewis said CNHA addressed the OHA findings, which led to the nonprofit receiving final payment for the first year.

He said it was unfortunate that terminating the agreement left 250 applicants who had been approved for funding by CNHA in limbo since the funds had not yet been disbursed. He said CNHA issued each a $100 Foodland card.

Lewis said he understands that the applicants got support from Hawaii Community Lending, the entity that OHA selected to replace CNHA.

Sterling Wong, CNHA’s senior director of advocacy and communications, who was OHA’s interim COO when CNHA’s OHA grant was under review, said “CNHA’s record during the pandemic was an absolute success.”

“During the middle of COVID, they stood up Pop-up Makeke (an online marketplace centralizing Hawaii’s small businesses). They stood up those city and DHHL (Department of Hawaiian Home Lands) programs that were at the point of the spear during the middle of the pandemic in serving our community.

“I think that inspired a lot of people to come over here. They were the ones making all the change.”

Wong said the pace of distribution was one that many cities and counties across the country struggled with, especially in the early part of the pandemic. He said CNHA managed some $24.7 million for DHHL and about $100 million for the city.

William J. Aila Jr., who is chair of the Hawaiian Homes Commission, said in an email, “DHHL is very pleased with the work that CNHA has provided to the department in managing millions of dollars in federal funds intended to serve the native Hawaiian community.”

Honolulu Mayor Rick Blangiardi supported CNHA’s proposal for the HTA U.S. tourism contract. Blangiardi said in a letter of support, “We have had tremendous success working with Kuhio Lewis and CNHA in providing emergency financial assistance (Rent &Utility Relief) to Oahu’s residents facing unprecedented hardship due to the COVID-­19 pandemic.

“We were notified by the U.S. Treasury that Honolulu was in the top three cities in the U.S. in the distribution of these funds. I am very confident in his meeting the challenge of this RFP,” Blangiardi said.