UPDATE March 27, 2015: PKF Report: "OHA Will Run Out of Funds"
by Andrew Walden
How many ways can Trustees of the Office of Hawaiian Affairs get it wrong?
Trustee Peter Apo told the January 13-14 meeting of the OHA Committee on Asset & Resource Management (ARM), “We're in enough trouble with OIP already. …if we proceed with this meeting there's going to be a complaint filed and then we're going to have to respond.… the very discussion we are having now is illegal. We are right now in violation of the Sunshine law. We’re having discussions about items that were not agendized. We have five Trustees sitting at the table. It's very difficult to rise to another level of accountability, public accountability. We are not used to that. We're going to have to get used to it….”
The non-agendized item? A secret report from local accounting firm PKF Pacific which apparently informs Trustees that they are burning up the OHA Trust fund and will run out of money if they continue to spend trust assets at the current rate. PKF’s Rodney Lee calls the report, “a full financial analysis of OHA.” OHA CFO Hawley Iona calls it, “a high level overview of where we are now with our fiscal year fifteen budget…” – but Trustees don’t want the public or OHA beneficiaries to see it.
OHA’s current authorized budget is $49.6M, but according to the minutes, the ‘core’ operating budget is only $35M based on spending 5% of the trust each year. Drawing the trust down by spending more than ‘core’ has reduced OHA’s trust fund from figures cited by ARM Chair Rowena Akana--$400M in 2000--to $360M in 2014. To keep the Trust intact, some Trustees recommend dropping budget spending to 4.5% or even 4% of Trust assets. OHA CEO Kamanao Crabbe January 27 quotes the PKF Report recommendations: “eliminate the fiscal reserve spending, reduce spending by one percent….”
Illegal or not, Trustees debated the PKF Report in executive session Jan 13 and 20 for a total of 2 hours and 11 minutes and had an extensive public discussion January 27—without releasing the report itself. Why keep the report from the public? Akana explains, “some of the content could be libelous, if people got a hold of it.”
“Libelous”, of course, is Trustee-speak for “accurate.” And the akamai reader knows libel is still libel even if only the nine Trustees and their staff “get a hold of it”. Moreover, “libelous content” is not one of the justifications for the use of Executive Session under HRS 92-5.
In spite of the secrecy, public minutes from ARM meetings provide some insights into the PKF Report. At the January 13-14 ARM meeting, PKF accountant Rodney Lee explains his rationale for recommending Executive Session: “it … asks very pointed questions that will be posed in the executive session and that's why we recommended that it be that way. Those that are really for the Board to decide and understand. These are not easy questions….”
ARM Chair Rowena Akana chimed in, “… it should be in executive session because of the content of the findings.”
“Content” including “pointed questions” that are “not easy” are also not justifications for the use of Executive Session under HRS 92-5.
What did the debate over PKF reveal about the drain on the OHA Trust?
Iona: “Trustees have authorized total staffing level at 179 Full-Time Equivalent positions…our core only funds 166….”
Notably, HB665 and SB782 would have locked these 179 positions into collective bargaining units, making it exceedingly difficult for OHA to reduce staff in order to stop looting the trust fund. The bills are dead until next session.
Iona: “…there are several areas of expenditure growth since, say about 2010 that administration has taken a closer look at … personnel as well as programs and contracts…. Contracts often fluctuate depending on need, any kind of advocacy related work that we've had either on the national level that the board as authorized also gets into our contract costs.”
After what Lee termed a “lively discussion” in a 96 minute executive session at the January 27 ARM meeting, discussion spilled out into the public section of the meeting.
Akana explains: “… it is important for us, as a board, to focus in on certain priorities that we can see and make a difference in over the next two years…. because our monies are limited and because we, obviously, are spreading ourselves so wide, that there are no real markers in the kinds of things that we've been able to achieve, where people can say, "you guys have done this." I'm not talking about research. I'm talking about actual things that we can say that we made a serious commitment in the community….”
14 Years Without Guidance
Akana: “…Trustees have had disagreements with our staff many times over various things and it is not their fault, because the Board has, in the last fourteen years, has not given real, direct guidance on how they want to proceed, and so left to their own devices, they decide among themselves how they're going to do whatever….”
35 years ‘Accomplishing Nothing’
Akana: “…look at page seventeen of Rodney's presentation and, you know, it says, ‘OHA today, items for consideration’ and ‘Who is OHA serving? Is OHA going to turn into a political advocacy group for every issue for Native Hawaiians or are we going to organize ourselves as a broad based organization where we can address all problems?’ This was said in 1980 by one of the first Trustees Joe Kealoha and when you look at this statement, it's kind of true now isn't it? I mean, where are we going to focus, or are we out there focusing on everything? You know, accomplishing nothing. And so here we are, this is 2015, and so we don't want other people to be sitting in our chairs ten years from now saying what were those guys doing? You know, they never went anywhere from 1980 to 2015 and we're right back where we started….”
Parachuting In to Grab for 3 Million Dollars
Akana: "…cut out all the excess spending or the ‘wish list’ kind of things or what we used to call ‘parachutes’ where people would just drop them on the Board at any old time, not go through a grant process or anything, but just all of the sudden there is a need, so ‘okay let's fund this’ and it's an emotional whim. And this is where the fiscal discipline has to apply. And so, for the three million that we set aside in the reserves, there has to be criteria outlining what that three million can be used for and that will stop the wish list of grabbing it for any old thing….”
What to cut?
Akana: “ … our people said there were three most important things to them was health, education, and housing. And those three things still remain at the top of the list. Number four was looking at the return of trust lands. But as we think about priorities that we need to set as Trustees, nation building is very important, but it is not the most important thing to our people right now. You can't think of nationhood if you have no house, if you're living on the street or family are in tents, and so I really would like the Trustees to start thinking about the priorities….”
Apoliona: “…sometimes (spending) goes beyond (the OHA Strategic Plan) because of the other things that Trustees do at the table. If Trustees never do that at the table, maybe it wouldn't be, but hey, policy makers are policy makers. And things happen and things come up….”
Akana: “This is going to be so difficult for Trustees who have not really used this discipline before because we fund everything….”
Akana: “…the grants division will grant a grant based on the criteria they have and does it fit the Strategic Plan. That was my point in the beginning. So anything on there, could be canoe, could be build a shed for somebody down at the beach to house their surfboards or whatever, you know, because as long as they can somehow tie this to that, okay. So the grants people say okay, that fits….”
Kakaako Was Held Hostage to the Fake Indian Tribe – So OHA Should Cut Spending on Charter Schools
Apo: “…So here we are negotiating the ceded lands settlement, two hundred million Kaka'ako, and in the eleventh hour, that bill gets inserted in Act 195 (mandating the Kanaiolowalu Roll). Okay? You either have to agree with Act 195 or we may not give you the two hundred million dollar settlement. That's how we got into Act 195. We had no control over that unless you wanted to turn down the settlement and so when we move forward and I don't know how many millions of dollars we're into that now, so those things happen, you know. I'm not saying that it's right or wrong, but we are going to be constantly hit with these parachutes that don't come from us. The charter schools, they're not, as was pointed out, you know, we kind of, I think, persuaded ourselves that that was really important. That was another couple million dollars. It all adds up.”
Waihee: “…there have been things we funded that do not fit in our Strategic Plan and we fund them anyways…. I mean like Na Pua No'eau and charter schools, they flat out told us it doesn't fit in our Strategic Plan….”
Crabbe: “…Unfortunately, Na Pua No'eau's, you know, goals do not, you know, really fit our specific strategic results….”
Akana: “…we should make a very serious attempt to do it because we're running out of money.”
Hulu Lindsey: “…but I also think that if that is going to be our decision, we need to contact those agencies way ahead of time so they can plan their budgets. You know, so let's just say Na Pua No'eau, they get big money from the federal government ….”
Akana: “…it is not our responsibility to fund everything that comes across the table, because it's not fiscally possible to do that. So Trustee Lindsey is correct in saying that we need to start notifying these agencies now that the Board is going to reassess their budgeting and based on the priorities set by the Board, we will be funding these things and you cannot continue to count on us to pick up everything.”
Blame Klein for OHA Trustees Sunshine problems?
At the January 14 ARM meeting, fingers point at OHA General Counsel Robert Klein:
Akana: “It's unfortunate that our Board Counsel now makes contradictory opinions when in the past he's, in my opinion, has put this Board in jeopardy in many, many cases. Two that are glaring now, one is a complaint at OIP. One resulted in the State Auditor calling out one of our Trustees who was advised by our Board Counsel to take a vote that she should not have done. So it is troubling to me that our own Board Counsel has given us conflicting opinions depending who is asking for those opinions. So it bothers and troubles me greatly. … If I had my druthers, I would continue this meeting because I know that we've done it in the past, it's been ‘kosher.’ We even have an opinion from the same lawyer….”
Mililani Trask: “When I read the decision of the OIP which found this board in violation twice of Sunshine Law, I went back to your records. Your records demonstrate clearly that your Board Counsel advised you to act in a certain way. He was called to advise you on the Sunshine Law. You followed his advice and as a result you, the elected officials, Trustees of this office, have been found guilty of two violations of the Sunshine Law. It is significant, colleagues, because you're elected officials here. It wasn't your fault and I could see it when I read the record because of the advice you got. I agree with Trustee Rowena Akana because I myself was a Trustee and repeatedly this problem came up. But one thing I want to say to you is that even though your counsel gives you advice that is poor, when you follow it, you are violating Sunshine Law. Your attorney, wisely, filed for an appeal because where an attorney advises their client to violate the law, and then a decision comes down whether from Ethics or OIP, the client is responsible and the attorney has prima facie evidence of malpractice. That's what happens when an attorney advises you to do something that violates the law.”
UPDATE March 27, 2015: PKF Report: "OHA Will Run Out of Funds"