By: OHA TRUSTEE ROWENA AKANA
Source: March 2010 Ka Wai Ola o OHA Column
Back in September of 2009, the trustees were given a draft of State Auditor Marion Higa’s Investment Portfolio Review of the Office of Hawaiian Affairs. The 48-page report to the Governor and the State Legislature had many critical things to say about OHA’s investment structure and ability to carry out its duties.
Here are just a few of the Auditor’s concerns:
- The board’s Investment Policy Statement (IPS) is inadequate to ensure potential conflicts and other violations are identified, reported, and resolved.
- OHA does not have a “whistleblower” policy or a toll-free phone line available to OHA staff and beneficiaries to report potential conflicts, violations, or other issues.
- OHA does not track general beneficiary concerns or complaints specifically related to the trust. Complaints are therefore less likely to be reported and OHA cannot ensure complaints are properly received and resolved.
The Auditor also wrote that the Trust’s lackluster performance warrants review of the advisory service’s policies, processes, and performance.
- The trust’s investments were underperforming for the majority of the review period of FY2004 to FY2008, not only failing to meet its own target earnings goals in nearly half of the quarters, but also falling below average nationwide peer performance in 18 of the 20 quarters reviewed.
- OHA did not consistently monitor investment compliance during FY2004 to FY2008. In addition, the investment advisors do not certify quarterly or annually that they are compliant with the trust’s investment guidelines.
On September 8, 2009, Chair Haunani Apoliona responded to the State Auditor and tried to address the concerns the Auditor brought up and what OHA planned to do about it. It was clear that the Chair wanted the Auditor to soften the harsh report.
However, on October 1, 2009, I received a copy of the State Auditor’s Final Report and, to no surprise to me, nothing substantive was changed. The Auditor concluded that:
- While a cursory reading of the board’s response may appear to contradict the Auditor’s findings, in most instances the board challenged secondary points but ultimately acknowledged the major points of the Auditor’s findings.
- Moreover, many of those arguments misconstrued the facts presented in the Auditor’s report.
- The Auditor’s final report contains only a few editorial changes based on the board’s response.
On October 2, 2009, an obviously irritated Chair Apoliona personally responded to the Auditor, complaining that she could have gone over the auditor’s comments point-by-point but chose to focus on the “big picture.”
In a memo dated October 23, 2009, I wrote that I agreed with many of the criticisms made by the State Auditor. Further, Chair Apoliona should focus on making the much needed changes that the State Auditor suggested. Only then can we move forward as an organization and do better for our beneficiaries.
If you are interested in reading the State Auditor’s report on OHA in its entirety, please visit the State Auditor’s website at http://hawaii.gov/auditor/Reports/2009/09-10.pdf. Until the next time. Aloha pumehana.