Tag: OHA Spending Policy

Fiscal issues Trustees need to discuss

`Ano`ai kakou…  Back in July, I travelled to New Haven, Connecticut, to attend the Commonfund Endowment Institute, Level II, at the Yale School of Management.

The Institute provides in-depth courses on how nonprofit organizations such as OHA should invest their funds in the stock market and in other asset classes such as emerging markets, natural recourses, and commodities, etc., in order to secure funds in perpetuity for future generations.

In these very uncertain times, it is important for trustees of endowment funds and nonprofits to be well educated on the details of how money-mangers are investing their funds.

The following are my recommendations for OHA based on what I learned at the Institute:

(1) Trustee Training – OHA should invite organizations such as Grant Thornton to conduct educational workshops for the board, such as one on Governance.  My feeling is that if all trustees attended seminars, like those offered by Commonfund, we would have a more active and informed board who would be able to make good decisions for our beneficiaries.

(2) Split the Money Committee – OHA’s Asset & Resource Management (Money) Committee should be separated into two committees: (1) Budgeting; and (2) Investments.  Volunteers should be asked to serve on the investment Committee.  I have made this suggestion in the past, but the response has always been, “That ain’t gonna happen, Rowena.”

(3) Trustee Involvement – Trustee engagement must be improved.  Some Trustees are passive, nonfunctioning, or afraid of speaking up for fear of being called a “troublemaker,” “micro-manager,” or “hard to get along with.”  All Trustees should be allowed to have meaningful participation in planning and not just leave everything for the Administration to decide, as has been the practice for the last ten years until 2012.

(4) Low Risk Investments – OHA should look at investing in U.S. Treasuries, Commodities, and Natural Resources as they are considered low-risk.

(5) Money Manager Contracts – The Trustees should re-examine all contracts with money managers.

(6) Control Spending – The higher OHA’s operating expenses (commitments, salaries, etc.) the more we need to concentrate on how well we do with our investments.  The trust fund will suffer if we continue to spend at the rate we are spending now.  Intergenerational funds are needed to ensure perpetual funds for the future.

(7) Inflation Funds – These funds reduce the risk of losing your investments in a down market.

(8) Surplus Funds – We should set aside funds for long term, perpetual use.  Being a quasi-governmental trust allows us to be more creative in growing a perpetual fund.

(9) Spending Policy – OHA needs to revisit the spending policy and lower its spending rate to 4%.  OHA also needs to prioritize its spending and consider separate spending policy for different types of investments.  Not prioritizing allows Trustees to fund anything or anyone they favor.

SUMMARY

In summary, the Commonfund Endowment Institute provided me with an excellent investment education.  The information shared by Yale and Harvard professors, as well as top economists and other experienced investors and money managers, continues to be very valuable to me as a Trustee.  Aloha Ke Akua.

Fiscal issues Trustees need to discuss

`Ano`ai kakou…  Back in July (2012), I travelled to New Haven, Connecticut, to attend the Commonfund Endowment Institute, Level II, at the Yale School of Management.

The Institute provides in-depth courses on how nonprofit organizations such as OHA should invest their funds in the stock market and in other asset classes such as emerging markets, natural recourses, and commodities, etc., in order to secure funds in perpetuity for future generations.

In these very uncertain times, it is important for trustees of endowment funds and nonprofits to be well educated on the details of how money-mangers are investing their funds.

The following are my recommendations for OHA based on what I learned at the Institute:

(1) Trustee Training – OHA should invite organizations such as Grant Thornton to conduct educational workshops for the board, such as one on Governance.  My feeling is that if all trustees attended seminars, like those offered by Commonfund, we would have a more active and informed board who would be able to make good decisions for our beneficiaries.

(2) Split the Money Committee – OHA’s Asset & Resource Management (Money) Committee should be separated into two committees: (1) Budgeting; and (2) Investments.  Volunteers should be asked to serve on the investment Committee.  I have made this suggestion in the past, but the response has always been, “That ain’t gonna happen, Rowena.”

(3) Trustee Involvement – Trustee engagement must be improved.  Some Trustees are passive, nonfunctioning, or afraid of speaking up for fear of being called a “troublemaker,” “micro-manager,” or “hard to get along with.”  All Trustees should be allowed to have meaningful participation in planning and not just leave everything for the Administration to decide, as has been the practice for the last ten years until 2012.

(4) Low Risk Investments – OHA should look at investing in U.S. Treasuries, Commodities, and Natural Resources as they are considered low-risk.

(5) Money Manager Contracts – The Trustees should re-examine all contracts with money managers.

(6) Control Spending – The higher OHA’s operating expenses (commitments, salaries, etc.) the more we need to concentrate on how well we do with our investments.  The trust fund will suffer if we continue to spend at the rate we are spending now.  Intergenerational funds are needed to ensure perpetual funds for the future.

(7) Inflation Funds – These funds reduce the risk of losing your investments in a down market.

(8) Surplus Funds – We should set aside funds for long term, perpetual use.  Being a quasi-governmental trust allows us to be more creative in growing a perpetual fund.

(9) Spending Policy – OHA needs to revisit the spending policy and lower its spending rate to 4%.  OHA also needs to prioritize its spending and consider separate spending policy for different types of investments.  Not prioritizing allows Trustees to fund anything or anyone they favor.

SUMMARY

In summary, the Commonfund Endowment Institute provided me with an excellent investment education.  The information shared by Yale and Harvard professors, as well as top economists and other experienced investors and money managers, continues to be very valuable to me as a Trustee.  Aloha Ke Akua.

The need for fiscal responsibility

`Ano`ai kakou…  On May, 30, 2012, the Star Advertiser reported that the state Council on Revenues lowered the revenue projection for next fiscal year, which prompted Governor Abercrombie’s administration to cut back the state’s spending.

This is not surprising.  When revenues are down, everyone cuts back on spending.  Everyone except OHA.

Trustees Keep on Spending

Our new CEO, Ka Pouhana Kamana’opono Crabbe, has been working diligently to cut our budget wherever possible and to streamline operations to save money, but there are still Trustees who insist on spending more.

This extra spending puts enormous pressure on our dwindling resources at a time when OHA has already accepted major financial commitments such as Waimea Valley, ownership of the Kaka’ako Makai Settlement Properties, and other commitments such as the $3 million/per year for 30-years debt service for the Department of Hawaiian Home Lands and funding for organizations such as Alu Like, Inc. and the Native Hawaiian Legal Corporation that have made their way into our annual budget.  These are huge amounts of revenues being contracted to these entities.  Add to this the grants and annual operational expenses and we are maxed out.

A Constant Issue

Overspending has been a longstanding problem at OHA.  In April of 2004, our money committee chair asked for a legal opinion that would allow OHA to spend more of the Native Hawaiian Trust Fund.  He even questioned whether it’s even appropriate to build the Trust at all.

I have consistently argued against OHA’s 5% spending policy and strongly recommended that it be reduce instead to 4%, at least until the economy fully recovers again.  Even Kamehameha Schools operates at a lower spending rate than 5%.

Fiscal Restraint

In these tough economic times, there are nearly a hundred nonprofit organizations asking for OHA grants each year.  While giving the money away will make OHA very popular in the short-term, we should be focusing on the long-term health of the Native Hawaiian Trust Fund.

We have worked carefully for two decades to build the Trust to over $300 million.  I would hate to see this relatively modest amount shrink down to nothing in shortsighted spending sprees that forces us to realign our budget several times a year and draw more money from our corpus (trust).  What other organization does this?

Greater Transparency

State law (Hawaii Revised Statutes §10-14.5 on budget preparation and submission; auditing, Section b) requires that: “The (OHA) board shall provide opportunities for beneficiaries in every county to participate in the preparation of each biennial and supplemental budget of the office of Hawaiian affairs. These opportunities shall include an accounting by trustees of the funds expended and of the effectiveness of programs undertaken.”

I have recommended time and time again that OHA needs to take its proposed budget out to the community so that our beneficiaries can give us their input as well as tell us what their needs are.

This was the common practice of OHA in the past and I believe it helped OHA to develop a budget that was more in-sync with our beneficiaries’ concerns.

I will continue to press OHA’s money committee chair to take our next proposed budget out to the community, as required by law, including the neighbor islands.

So which path will OHA’s leadership take?

It has long been understood that OHA is a “temporary” organization that will someday be dissolved and its assets transferred over to the new Hawaiian Nation.

So the critical policy question is: “Will OHA continue to be a ‘temporary’ organization that will give the Hawaiian Nation the assets it needs to survive or will OHA continue to spend freely and shrink the Trust Fund?”

OHA desperately needs Trustees who will make the tough decision to focus on building towards a more permanent, long-term goal instead of taking the easy and popular path of short-sighted spending.

In this election year, OHA beneficiaries should look carefully at the candidates running for OHA Trustee and choose individuals who will take OHA in a more fiscally responsible direction.

What has been sorely lacking is for Trustees to prioritize our spending and focus on the things that our beneficiaries need and NOT use OHA’s “Strategic Plan,” which is at best a wish list of too many things and does not focus on the top priorities of our people.

NOT listing priorities leaves the door wide open for certain Trustees to continue to fund anything and everything while neglecting meaningful programs in healthcare and housing.

As long as trustees keep drawing money out of our corpus, or trust fund, we are taking money away from future generations of Hawaiians.  After all, what is a nation without assets?  Aloha Ke Akua.

Building a consensus with Board members eliminates mistrust

By: OHA Trustee Rowena Akana

Source: Ka Wai Ola o OHA, December 2004

‘Ano’ai kakou… OHA’s spending policy was recently changed and now all of the Ceded Land revenues we get from the state will go straight into our operating budget. In other words, instead of depositing our income into a savings account, we’ll be putting it straight into our checking account to spend. OHA’s budget chairman wanted to find a way to get OHA to spend more money, so he called a committee meeting on August 18, 2004 and had high-powered experts do a presentation to the Board. These experts argued that the OHA’s spending policy favored future beneficiaries over current beneficiaries by allowing Ceded Land revenues to grow in the Trust. They explained that we were unfairly saving the money for future beneficiaries and not spending enough on today’s beneficiaries.

The presentation worked and on September 15, 2004, the Board passed a new spending policy. Now the $9,446,922 in Ceded Land revenues OHA will get from the state in 2005 will be spent and not saved. Theoretically, OHA should now be able to fund many new programs and help many more beneficiaries with that money.

Unfortunately, not all of the money is going directly to our beneficiaries. It appears leadership will use some of the $9.45 million to cover massive budget short-falls, which mostly included lawyers’ fees and costs relating to our lobbyist for the federal recognition campaign.

As you can imagine, the Trustees had many questions about what exactly the $9.45 million was going to be spent on. These questions finally forced the budget chair to hold a workshop on October 12th & 13th. Even after the two-day workshop, not all of the Trustees were convinced that the $9.45 million was being spent for its intended purpose – helping our beneficiaries. Despite our concerns, the revised Budget finally passed with the minimum required six-votes on November 1, 2004.

Budget workshops should be made mandatory to avoid problems like this in the future. Past budget committee chairs always held workshops before bringing a new budget to the Board. Workshops would give Trustees the time needed to have their questions answered in detail before they had to vote in committee. Right now, all of OHA’s committee chairs distribute materials for their meetings just a few days in advance. This hardly gives Trustees enough time to meet with administrative staff and ask questions, much less receive the answers we need to make prudent decisions.

The current regime could have shown true leadership if they had spent the time necessary to justify their proposal to spend the $9.45 million instead of hiring an attorney and high powered presenters to make their case and rush it through for a vote. Building a consensus with Board members eliminates mistrust and in the end, everyone is more comfortable with the decision they made, decisions based on current information and not hype artists.

I pray that the New Year will bring constructive and meaningful change, despite the fact that the Board remains unchanged after the November election. It is my hope that we will no longer need to engage in political gymnastics to get things done. We shouldn’t have to duel with leadership in order to make sure we are working in the best interest of our beneficiaries.

If leadership can work towards building a consensus and abandons its “win-at-all-cost” mentality, I feel that a more positive and productive Board will emerge. Perhaps my sentiments can best be summed up by St. Paul, who in a letter to Timothy wrote:

“We know the law is good if one uses it lawfully, realizing the fact that law is not made for a righteous man, but those who are lawless, the ungodly, the immoral, liars… and whatever else that is contrary to sound teaching.”
– Timothy, 1st Verse

Have a happy and safe holidays and God bless!