Tag: Hi’ilei Aloha LLC

WAITING OVER A YEAR: Where is OHA’s Internal Audit?

`Ano`ai kakou…  Way, way back on February 8, 2017 – before the recent State Audit was completed – the Board of Trustees approved Action Item RM 17-02, which authorized a Request for Statement of Qualification from an independent CPA firm, for the purpose of conducting an audit of OHA and its subsidiary Limited Liability Companies (LLCs): Hi’ilei Aloha LLC, Ho’okele Pono LLC and Hi’ipaka LLC.

RM 17-02 authorized an independent auditor to look at the following:

  • Contracts:
    1. Sufficiency of contract/grant oversight provided appropriately by the assigned contract manager/monitor;
    2. Deliverables were met by the contractor/grant recipient;
    3. Conflict of interest with LLC managers and directors; and
    4. No fraudulent or wasteful disbursements were made.
  • All other disbursements of funds, excluding payroll:
    1. Conflict of interest with LLC managers and directors;
    2. Compliance with internal policies and procedures; and
    3. No fraudulent or wasteful disbursements were made.
  • Quarterly reports to the BOT:
    1. Sufficient internal controls are in place to ensure the integrity of the performance indicators as reported in the quarterly reports to the BOT.

On December 18, 2017, the independent auditor requested the check registers from Hi’ilei Aloha LLC, Ho’okele Pono LLC and Hi’ipaka LLC in order to finalize the audit.  It’s three months later and, at the writing of this column, we’ve still received nothing.

As a result of the stalling, on February 7, 2018, the Resource Management Chair, Trustee Hulu Lindsey, was forced to ask the Board to approved Action Item RM# 18-02 to compel the LLC Managers (OHA’s CEO, COO, & CFO) to submit any necessary LLC documents to her so she can transmit them to the independent auditor.

However, the LLC Managers and OHA’s Administration have objected to submitting their “proprietary” information to the Resource Management Chair.  Instead, they want to submit the documents directly to the independent auditor.  However, as contract administrator for the audit, the Resource Management Chair acts as the point of contact and is responsible for oversight of the audit.  Therefore, there shouldn’t be a problem with routing documents through her office for transmittal to the independent auditor.  The Resource Management Chair and her staff are willing to sign nondisclosure agreements to address this concern.

The LLC Managers and the Administration have also expressed doubts about legal issues related to the Board’s authority to request information from the LLCs.  In response, Trustee Hulu Lindsey consulted the State Attorney General’s office and received a letter stating that OHA (the Member) has rights to the information requested, pursuant to the Operating Agreements between OHA and each LLC, and pursuant to HRS Chapter 428, the Uniform Limited Liability Company Act.  The right of access includes the opportunity to inspect and copy records during business hours.

As the highest authority at OHA, the Board of Trustees should not have to tolerate all of the excuses and stalling tactics by the LLC managers and OHA’s Administration.  The OHA Chair needs to show some courage and demand that the information we need to carry out our audit is delivered to us immediately.  After all, this is one of the areas that the State Auditor said needed to be looked at.  This obvious stall is an indication of mismanagement.  Aloha Ke Akua.

IT’S WHAT I’VE BEEN SAYING FOR YEARS: OHA needs more Fiscal Responsibility, but certain Trustees have lacked the political will

`Ano`ai kakou…  Recently, there has been a lot of critical news about OHA’s recent spending on grants, sponsorships, and Limited Liability Companies (LLCs).  But this is definitely not news to me.  It’s what I’ve been saying all along.  Here are some highlights of my past Ka Wai Ola articles during the past year:

  • January 2018 – OHA publishes a book and hands over Scholarship Program to UH. On November 21, 2017, OHA published a book on mana that took five years of staff time to print.  I’ve been waiting months for a response about where the money to publish the book came from.
  • December 2017 – Bring Back OHA Run Programs. I wrote that change will not occur unless the Trustees begin to hold our Administration responsible for their actions.
  • April 2017 – Back to Normal: Ho Hum, Business as Usual. I wrote that one of OHA’s money managers recommended that we get rid of the Fiscal Reserve slush fund.  Trustees seemed supportive, but nothing has happened since.  Now the State Auditor is calling this out!  I also wrote that we need to find a more efficient way to run our essential programs such as community grants.  The State Auditor’s February 2018 Audit of OHA (LINK: http://files.hawaii.gov/auditor/Reports/2018/18-03.pdf) vindicates my position that OHA grants are still not being monitored and mostly given to those who know who and how to ask.
  • March 2017 – Transition: Change doesn’t have to be painful. I argued that OHA must be an agency that treats our beneficiaries equally and it’s now up to the new leadership to make sure there is an even playing field at OHA.  However, this has not occurred.  I also mentioned that on February 8th, the Trustees formed an Advisory Committee to make recommendations to the Board on the scope of a proposed financial audit and management review.  This only came about because our beneficiaries demanded it and wanted an answer to the one question I’ve been asking nonstop for the last decade:  Where is all the money really going?”  This effort has met with great opposition from the Administration.

ON ANOTHER NOTE:

Mona Bernardino, who currently serves as chief operating officer of Hiilei Aloha LLC, one of OHA’s five nonprofit LLCs, recently wrote an op-ed piece to Civil Beat.  In it, she tries to shift the blame for OHA’s misspending and lack of transparency solely on the Trustees by hinting that it has to do with Trustee Allowances.  What Ms. Bernardino fails to mention is that nothing was spent on things that weren’t allowed under current OHA policies.

Also, the fact that OHA’s LLCs are shrouded in secrecy and riddled with complaints rests mostly on Ms. Bernardino’s shoulders.  Her objections to the audit of the LLCs has caught our attention for sure.

This is an election year and people like Ms. Bernardino would like nothing more than to get rid of the Trustees who have been demanding accountability.  This is what prompted her op-ed letter.  However, what she has done is open the barn door for not just the auditors, but for the Trustees to re-examine the need to have five LLCs.  I have NOT been a fan of OHA’s LLCs.  Three of them were secretly created by two former Trustees and the former Administrator without Board approval.  They were eventually approved by the Board two years after they were formed, but only because I started asking questions about them.  Aloha Ke Akua.

OHA Trustees excluded

By: OHA TRUSTEE ROWENA AKANA

Source: July 2010 Ka Wai Ola o OHA Monthly Column

Chair Apoliona goes out of her way to exclude trustees from board discussions.  For example:

DUE DILIGENCE MEETINGS

Back in April, the SEC brought a civil action against Goldman Sachs, one of OHA’s two money managers, because of “a single transaction in 2007 involving two professional institutional investors.”  Goldman assured us that they believe the SEC’s allegations were “completely unfounded both in law and fact,” and that they would vigorously defend themselves.  Every trustee had reason to be deeply concerned since, as of December 31, 2009, Goldman managed $171,649,375 of OHA’s Trust Fund.

On April 20, 2010, Goldman invited OHA to meet with them in New York on May 7, 2010 for an explanation.  Chairperson Apoliona, Trustees Machado and Stender, and CEO Namuo traveled to New York for the meeting.  I did not submit a request to travel so I don’t know if the Chair denied travel for anyone else.

On April 21, 2010, Goldman offered to provide Trustees that could not attend the New York meeting with a “live video conference feed” from their office to our boardroom.  This would allow all of us to at least listen in on the Goldman meeting.

Then suddenly, on April 23, 2010, the OHA Board Counsel cancelled the Goldman videoconference, most likely at the request of the Chairperson.  At the request of Trustee Heen, the Board Counsel wrote a legal opinion to explain his position.  The Board Counsel felt that, since Goldman refused to allow the video conference to be viewed by the public in an open meeting, OHA would end up breaking the Sunshine Law.  Since none of the trustees I have spoken to have actually seen any communication from Goldman Sachs objecting to an open meeting, I am not convinced that there was such a communication.

There were other ways to allow the trustees to listen in and still stay within the law.  For example, we could have gone into executive session during the “sensitive” portions of the broadcast.  While it wouldn’t have been the most ideal solution, Chair Apoliona has shown in the past that she has no problems taking things into executive session, even when it is not necessary except to keep the public from hearing what is going on.

It is clear to me that this was just a deliberate attempt to keep the majority of the board from hearing what Goldman had to say.  At the time of the writing of this article, there has been NO report to the Board of Trustees from Trustees Apoliona, Stender, or Machado regarding their New York meeting.

SELECTIVE DENIAL

Another example of Chair Apoliona’s selective denial happened back in 2008, when, without even the proper authority, Apoliona denied my travel to South Dakota on official business as a board member of the Governors’ Interstate Indian Council (GIIC).  I am the only non-Indian member of this national organization representing Native Americans and Alaska Natives in all 50 states.  The GIIC has supported OHA’s efforts for federal recognition with five resolutions that have been sent to Congress on our behalf.

WORKSHOPS

On May 4, 2010, the Board Counsel wrote another legal opinion about his decision to deny a Trustee from participating in a Board Workshop on April 22, 2010 by telephone.  The Trustee had been told by the Administration that it wouldn’t be a problem for him to participate over a speaker phone, but that decision was overruled by the Board Counsel, which went against OHA’s longstanding practice of allowing participation via telephone as long as the Trustee did not vote.

KAMEHAMEHA LEI DRAPING CEREMONY

On April 26, 2010, each Trustee received an invitation letter from the Hawai`i State Society of Washington, D.C. to participate in the 2010 Kamehameha Lei draping ceremonies on June 6, 2010.  Trustees have supported and attended the ceremony since 2003; including the historic first ceremony in Emancipation Hall at the new Capitol Visitors Center in 2009.  Despite this, on May 3, 2010, the Chairperson denied travel for all Trustees except for herself and OHA staff members CEO Namuo, COO Stanton Enomoto, and Special Assistant to the CEO Martha Ross.

Meetings were scheduled by the Administration to meet with Federal Officials while in Washington, D.C. – meetings that the Trustees should have attended.  This has become a common practice with this Chair.  Despite this denial, I elected to pay my own way to Washington, D.C. as I had an important meeting scheduled at the White House.

Chairperson Apoliona must stop interfering with our right to represent the beneficiaries that elected us.  Sadly, this has been going on for the last eight years.

OTHER NOTABLE ISSUES:  QUESTIONABLE SPENDING

In a May 3rd e-mail to the Trustees, Chair Apoliona explained that she was denying travel for the 2010 Kamehameha Lei draping in D.C. on June 6th, because of economic reasons, not mentioning that there were also important meetings scheduled with Federal Officials that Trustees should have attended.  Chair Apoliona wrote:

“Since 2009 Trustees have been asked to limit requests for out of state travel due to our downturn in the economy and the impact on OHA resources.  Although there is demonstration of what appears to be an ‘improving’ economy, we all continue to be vigilant and cautious.”  “…even in 2010 we should remain cautious about out of state travel costs and continue to manage out-of-State travel requests prudently.” — OHA Chair Haunani Apoliona

However, the Chair failed to mention that while she was denying Trustees’ travel, three OHA staff members went instead of Trustees.  While in D.C., OHA paid for a reception for 200 people, including entertainment.  How much did this cost our beneficiaries?  What about the “downturn in the economy?”

While I understand her reasons for being “cautious” with our spending during this economic downturn, a quick review of OHA’s recent spending shows that she is at worse a hypocrite and, at best, full of baloney.  For example, at a time when our people are living homeless on beaches, OHA authorized spending the following on June 3, 2010:

  • $100,000 to sponsor a Native Hawaiian men’s health conference in June 2010; and
  • $100,000 to sponsor an International Indigenous Health Conference.  There was no mention of how many Hawaiians were going to be able to attend this Conference.

The Administration also proposed to transfer $421,300 in education grant money to fund a “Continent Community Education” program in Hi’ilei Aloha LLC, a nonprofit that currently manages Waimea Valley.  This program would have given OHA funds to an organization outside of the Trustee’s direct oversight.  Hi’ilei Aloha would then determine who gets to travel to the mainland to educate people about the Akaka bill.  My guess is that her relative, who now works with Hi’ilei Aloha, would be doing most of the traveling, since that was the case when she worked for OHA.  This highly questionable proposal was quickly scuttled after several trustees and I brought up serious concerns at the board table, specifically that this private organization would in fact end up doing the work that OHA Trustees are charged to do.

OHA TOO TOP-HEAVY?

Just about five years ago, OHA’s budget was around $23 million.  Today, OHA’s budget has ballooned to $42,107,095.  A whopping $12,320,998 is spent on salaries and benefits.  Another $7,541,655 is spent on work that is contracted outside of OHA.  Only $1,410,130 is spent on OHA programs to assist our beneficiaries!  What’s up with that?

FALLING THROUGH THE CRACKS

I have always said that OHA’s two committee system allows too many important issues to slip through the cracks.  The system was put into place by Chair Apoliona to consolidate her control over the Board of Trustees.  Since the two committee chairs have to oversee every function of the Board, there are just too many issues for each committee chair to consider and a lot of important issues fall through the cracks.  Things are so bad now that almost nothing is being done by the committees.

The Asset and Resource Management (ARM), chaired by Trustee Stender, meets only twice a month (if there are no sudden cancellations), despite the huge swings in the stock market and the volatile nature of the world economy.  Also, the ARM committee is responsible for evaluating OHA programs and deciding whether to continue, modify, or terminate their funding, but this has not occurred for the past several years.  The State Auditor’s recent report will back this up.

In the past year, the ARM committee has cancelled or rescheduled many meetings, reducing the number of meetings we have in a month.  For example:

  • The August 5, 2009 and September 2, 2009 ARM Committee Meetings were cancelled.
  • The September 23, 2009 meeting was rescheduled to September 22, 2009.  Since there was no quorum for the September 22, 2009 meeting, it was postponed.
  • The ARM Committee meeting scheduled for May 12, 2010 was cancelled.  There were no ARM meetings in all of May 2010.

Since Trustee Stender has chaired the ARM committee, OHA has not taken its budget out into the community as required by law.

The Beneficiary Advocacy and Empowerment (BAE) committee, Chaired by Trustee Colette Machado, is responsible for developing programs which focus on beneficiary health, human services, native rights and education and evaluate all OHA programs to ensure a positive impact on our beneficiaries.  Not only has the BAE Chair failed to develop any new programs, she is actually trying to eliminate them.  Just ask members of the Native Hawaiian Historic Preservation Council (NHHPC).  In fact, since Chairperson Apoliona has chaired the Board and Trustees Machado and Stender have chaired the two Committees, virtually all OHA programs have been discontinued.

Another byproduct of this system is that the active participation of the six other trustees has been cut-off.  The only thing that the other Trustees get to do is vote on whatever is being brought to the board or committee table.  In the past, the five committee system gave the majority of the trustees the responsibility of running a committee.  Today, I believe that the saddest result of the two committee system is that several of the trustees have become apathetic.  They aren’t as interested in board affairs since they are not consulted about any subject matters prior to a meeting.  Chair Apoliona has also acquiesced trustees’ power to the CEO, which further exacerbates the problem.

Chair Apoliona always likes to say that OHA has never been better.  There is no truth to that statement.  There was a time when Trustees were passionate about the issues near and dear to their hearts; worked tirelessly to improve the lives of our beneficiaries; and when the moral of our employees were at its best.  Let us look for change in the November elections.  Aloha pumehana.

Fiscal Irresponsibility

By: TRUSTEE ROWENA AKANA

Source: August 2008 Ka Wai Ola o OHA Column

`Ano`ai kakou…  Here is an update on OHA’s recent spending:

OHA OWNED BUSINESSES

On January 17, 2008, the BOT approved a realignment of the OHA budget appropriating $4,567,511 from OHA’s Fiscal Reserve Fund to be distributed over 3-years to the Hi’ilei Aloha LLC for the operation of its subsidiaries Hi’ipaka LLC and Hi’ipoi LLC.  The operating budget for all three businesses for the July 1, 2007 to June 30, 2008 fiscal year was $2,276,882, of which we have already spent $614,809.70 as of March 31, 2008.

MASSIVE GRANTS

The OHA budget was realigned again at our board meeting on June 5th to accommodate the huge Board Initiative grants which were also approved at the same meeting.  The grants include:  (1) $1,000,000 to Kanu o Ka Aina Learning ‘Ohana; (2) $750,000 to the Lana’i Cultural Center; (3) $500,000 to Kaumakapili Church; (4) $500,000 to the Malama Learning Center; (5) $150,000 to Hawaii Maoli; (6) $300,000 to Na Maka Walu; (7) $300,000 to Papahana Kuaola; and (8) $150,000 to La’i’opua 2020.  The grand total for all of these grants is $3,650,000!

Hawaii Maoli is a permanent fixture in our budget as they are contracted by OHA to collect Kau Inoa registrations.  However, there is no accounting for all of the funds that are being spent through this organization, especially monies given to grantees that do not have a 501(c)(3) nonprofit tax status.  How much more money is Hawaii Maoli getting through fees or charge-backs from these organizations?  The trustees have no idea.

LONG-TERM DHHL LOAN

On June 5th, the board authorized the Administrator to enter into an agreement with the Department of Hawaiian Homelands to cover their debt service on a loan of $35 to $41 million for a period of 30 years starting on July 1, 2008 with an amount not to exceed $3 million annually.

DHHL is a government agency under the Governor’s budget.  The state has long neglected its obligations to house Hawaiians and it should, therefore, be the state’s responsibility to guarantee the DHHL loans – not OHA.  It is the only fair thing to do since the state receives 80% of ceded land revenues while OHA has to survive on only 20% of those revenues.  As advocates for Hawaiians, OHA should be holding the state accountable instead of funding their shortfalls.

Trustee Mossman asked whether the timing for this proposal had anything to do with the Sovereign Councils of the Hawaiian Homelands Assembly’s (SCHHA) recent opposition to OHA’s negotiated settlement bill at the state legislature.  Trustee Heen assured the trustees that there was no “quid pro quo.”  However, I agree with Trustee Mossman that the timing is awfully suspicious.  Not to mention the fact that Haunani Apoliona is running for re-election this year.  Make no mistake, I am NOT against giving grant money away.  However, in order to stay within our budget, we must cut costs elsewhere.

At present, our budget is approximately $41 million.  Add to that all of the recent budget realignments and the budget will probably climb to well over $50 million a year.  This is a ridiculous figure.  Besides all this, OHA is too top heavy with “special assistants” who are getting contracts to work on “special projects” that are taking up a great deal of our inflated budget. 

The scariest thing of all is that Apoliona is supporting the increase in spending all the way through 2012.  In other words, these realigned budgets are being approved using money that we have yet to receive.  With the economy in the “drink,” our people struggling with high gas prices and unable to drive to work or losing their homes and being forced to live under freeway overpasses and beaches, OHA continues to spend money like “drunken sailors.”  The question is why?  At present, we are already $5 million overspent in our current budget.  Wouldn’t our people understand if we explained how important it is to tighten our belts at this time?  We should be leading by example.

“Making a lot of nonprofits happy now by offering them a lot of money into 2012 and then taking that money away after the November elections because we are not able to meet these commitments is cruel, irresponsible, and a terrible way to get votes.”

EXPENSIVE ATTORNEY’S FEES

One of OHA’s attorneys for our failed ceded lands negotiated settlement with the state and the OHA v. State II case was paid a total of $414,533.84 in attorney’s fees.  A second attorney was paid a total of $423,840.16.  As you may recall, the ceded lands negotiated settlement was shot down by the state senate and OHA lost the OHA v. State II case.

OHA’s Washington D.C. law firm that was hired to lobby for the passage of the Akaka bill was paid over $2,000,000 (that we know of, a request for a monthly billing statement would be much more accurate – these numbers are conservative).  A special consultant for the Akaka bill was paid an additional total of up to $450,000.  That is a total of up to $2,450,000 (conservatively) which have been paid to lobbyists who have not been able to deliver the votes.  Make no mistake, I support the passage of the Akaka bill, but I have also suggested many times that we hire people who are able to deliver.

OHA INVESTMENT PORTFOLIO DROPS

 The Native Hawaiian Trust Fund portfolio has lost 10% of its value (approximately $39 million) in these tough economic times, and probably more at the time of this printing.  National consumer and prognostic indicators say that investors should have at least 20% of their investments in cash that can be liquidated and moved quickly.  Unfortunately OHA currently has less than 10% or $25 million of its portfolio in cash

According to a June report from one of our money managers, global equity markets fell by more than 8%, with US and European equity markets returning -8.4% and -11.7% respectively.  As of July 9, 2008, the estimated preliminary return for their share of OHA’s portfolio in the month of June was –4.95% compared to benchmark performance of –4.48%.  They also stated that the growth outlook for the US economy remains weak, as increased unemployment, a weak dollar, and further pressure on the financial markets contribute to expectations of higher inflation over the next year, with expectations beyond that more restrained.  Given all of this bad news, it is now more important than ever to bring our spending under control.

TRUSTEE HEEN’S MEMORY

On another note, I was surprised to read OHA Trustee Walter Heen’s June 13th letter to the Star Bulletin where he wrote, “I do not recall Akana ever dissenting from any of the terms (of the ceded lands negotiated settlement) that were brought before the board, including the waiver provision that she now loudly decries.”

Heen was present at all of the executive session meetings where I expressed concerns regarding the waiver provision.  Further, all of the OHA trustees, along with the administrator, received a letter from me, in advance, which explained why I could not support the settlement bill and that I would be submitting testimony to the legislature in opposition to the bill.

I hope that Heen will make sure that OHA has lined up its “ducks” next time for the 2009 legislative session since he is now part of the negotiating team.  Further, I question why OHA’s negotiating team is still negotiating with the Governor’s office when she has publicly stated that she will not reconsider her proposal – a proposal that our beneficiaries have overwhelmingly rejected.  Why not just work with the legislature?