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Tuesday, March 06, 2018
Crabbe: Who is the Auditor to Judge ME?
By Andrew Walden @ 3:33 AM :: 4597 Views :: Ethics, OHA

Think Tech Hawaii: OHA Audit The View From the Otherside (Talk Story)

Join John Waihee and Kamana‘opono Crabbe, Ka Pouhana - CEO of OHA, as they discuss the Audit on OHA, The Office of Hawaiian Affairs.

Response: Sam King II and Keli'i Akina: OHA Audit Works for Betterment of Hawaiian People

  *   *   *   *   *

Crabbe: Who is the Auditor to Judge ME?

by Andrew Walden

What does Office of Hawaiian Affairs CEO Kamana’opono Crabbe REALLY think about the recent audit of his department?  

After speaking with Crabbe February 6, 2018, the Auditor reports

OHA offered its written response to the draft report on February 7, 2018, which is included as Attachment 1. OHA appears to generally agree with our findings and recommendations. OHA represents that it has already taken steps that address some of the findings.

“Generally Agree”?  That’s not what Crabbe said in a February 26, 2018 video interview with former Governor John Waihee III.  

Crabbe’s long-winded comments can be simply translated:  Who is the State Auditor to Judge ME? 

Here is a transcript, beginning from the 7:30 mark.  Waihee and Crabbe finally get to the point at the end, highlighted in yellow.

  *   *   *   *   *

Waihee: Who authorized that audit?

Crabbe:  Its authorized by the State—the State legislature. 

Waihee:  Is this a regular thing, that every four years….

Crabbe:  Every four years.   And so in the past for a number of years OHA has complied.  And I think part of that is, again, trying to clarify OHA’s distinction as a Hawaii public State trust  versus a State agency.

Waihee:  Having spent a little bit of my life at the creation of OHA,

Crabbe:  That’s correct.  You were there at the beginning.

Waihee:  I find this discussion somewhat tilted in the sense that OHA was always looked upon at least in its origin as a Hawaiian agency.  Really as the fourth branch of government.

Crabbe:  Of government.  That’s correct.

Waihee:  As opposed to being an agency under the Governor….

Crabbe:  Correct.

Waihee:  Under the governor and the Executive Branch.  Have you been able to maintain that kind of separation?

Crabbe:   As the fourth branch of government, distinct and separate from underneath the executive branch, which is the Governor. As the Office of Hawaiian Affairs through the State Constitution, Hawaii Revised Statutes Chapter 10, we have what you call semi-autonomies powers.  And its really up to the Board of the organization to assert those powers.    

Waihee:  This is set out for you in the law, correct?

Crabbe:  The Constitution.  That is correct.

Waihee:  I also want to be really clear that the fact that you may be like a fourth branch or not in the executive branch—that you still have a fiduciary duty to Native Hawaiians.  I mean your mission in a sense gets even more important. 

Crabbe:  That’s outlined or mandated in Chapter 10.  So we must comply as much as possible.   In out mission it clearly state that the assets, the resources, the funding goes not only to improve the conditions for native Hawaiians but really to perpetuate, protect native Hawaiian rights, to preserve, to continue native Hawaiian culture and history for native Hawaiian people.  We have an enormous mandate because, being the fourth branch of government, we’re kind of like a micro-government for Hawaiians….  

Waihee:  Right.

Crabbe: … in terms of economic health, education, culture….

Waihee: At least you’re gonna be the advocate for Hawaiians in the executive branch and in the legislative branch…

Crabbe:  That’s true.

Waihee: …that’s part of your mission.  Let me ask you a question.  Was this audit on only funds that were from the General Fund that the Legislature gave you or did they look at your operations?  What was it on?  What’s the connection between the legislature and this audit? 

Crabbe:   Right.  To provide some context, a majority of OHA’s funding comes from the native Hawaiian Trust and that’s a separate funding that the OHA over the years through settlements with the State we have our own funds.  So we have spending policies that draw down from that fund in addition to annual payment from the State of $15.1 (million).  

Waihee:  So then the existing funds that you have are not part of – you don’t go through the legislature for that, to ask them for anything.  

Crabbe:  That’s correct.  We don’t.

Waihee:  And then the legislature, in addition, gives you $15.1 (million).  Now that $15.1, so people understand, $15.1 million, is a substitute for what the Constitution mandates—which is 20% of all ceded land revenues. 

Crabbe:   That is correct.

Waihee:  Now my understanding is that $15.1 (million)would be like a third of what 20% of ceded land revenues are.

Crabbe:  Right.  Based on the research we did with the financial review in 2012 and 2016, based on that analysis we would agree and concur that $15.1 (million) does not measure up to the 20% of the public trust land revenue. 

Waihee:  As a delegate to the 1978 Constitutional Convention, someone who was dealing with the issue of ceded land revenues and native Hawaiians and everything, it was at least the constitutional delegates position and intention that those ceded lands revenues—that 20% revenue was separated from the General Fund.    

Crabbe: That is correct.

Waihee:  If you ask people who were there and I guess even today the intention was that these were funds that actually belonged to native Hawaiians. 

Crabbe:  Right, Right.

Waihee: So this is something that you supposed to be processing ….

Crabbe:  Right.  And I think it should be stated that it is a result of the Admission Act, the State Constitution, it is the State’s obligation, through the public lands trust, to use a certain amount of funds, specifically to help improve the conditions for native Hawaiians. 

Waihee:  And I think for people out there, they should know that when we talk about ceded lands and the ceded lands monies and trust, we’re talking about lands that actually belonged to the native Hawaiian Government….

Crabbe:  That was illegally overthrown. 

Waihee:  That was illegally overthrown.  Right and so when the United States returned these lands back to the people of Hawaii, or the government of Hawaii at that time, territorial government, there was a mandate that the fact that these lands originated as native lands that the mandate would be a recognition that by saying at least one of the five purposes would be for the betterment of native Hawaiians.

Crabbe:  Its proportion too.  That 20% figure was over time and so I would agree that there’s a legal basis, a historical basis for ….

Waihee:  …well there’s also a moral basis…

Crabbe:  ..and a moral basis….

Waihee:  …for this to happen.  We’re going to take a small break.  And when we come back I want to discuss with or talk to you about what the audit ostensibly found.  And how we are dealing with it…..

(Break 15:00 to 16:15)

Waihee:  OK so there’s been a recent audit.  Tell us what did the audit cover.  I mean what does it tell you.

Crabbe:  The current audit spans specific years, 2013 to about 2017, 16.  About three or four years.

Waihee:  And what did they look at?  The entire organization?  All the funds? Or …

Crabbe:   They looked at three areas.  One was fiscal reserve spending.  

Waihee:  We ought to say something.  So one was fiscal reserve spending.  When you say ‘reserve spending’ you are dealing with the funds that you have set aside for investments and for future corpus.

Crabbe:  Right.  That is a distinction.  So the fiscal reserve funds really come out of the native Hawaiian trust fund.  So that is not money that is taxpayer money or General Fund money.

Waihee:  This is not money that you have invested and earned income off of as well as moneys that were due you because of state wrongs.  

Crabbe:  Right.  That is correct.  As a result of past settlements over past years,  from the 90s to the 2000s,  that understanding is that the proper use of the land trust would have to go to native Hawaiians.  And Office of Hawaiian Affairs, established  through the Constitutional Convention of 1978, is that receptacle.     

Waihee:  So these are funds that you are totally responsible for.

Crabbe: We are totally responsible.  

Waihee: These reserve funds is one category.  What are the other categories?

Crabbe: The other ones are CEO sponsorships--again those come out of our own funds, again nothing having to do with general Funds or taxpayer funds--and then Trustee funds. 

Waihee:  So that’s the third one, the Trustee funds. 

Crabbe:  That is correct. 

Waihee: These are funds that the Trustees have discretion over.

Crabbe:  That is correct. 

Waihee:  …What did the audit ostensibly find and tell me what is your response to it?

Crabbe:  There are a number of findings, the one was very clear is that there should be greater clarification and improvement of our policies.  Sometimes they thought it was too broad for interpretation.  And so we would have to improve on our policies….

Waihee:  That’s your policy on how to use the reserve funds, Trustee funds and discretionary funds.

Crabbe:  The reserve funds, Trustee funds and discretionary funds.    

Waihee:  None of these funds come from the State.

Crabbe:   Right. Yes.

Waihee:  I guess you would be happy—and anybody would be happy to see if somebody’s got a better mousetrap.  I don’t think that’s the issue.

Crabbe:   And I think we have always been transparent about complying – being transparent and accountable.  When you look at our total budget, we do receive General Funds.  And the General Funds really are for some of our programs like the native Hawaiian legal corporation.  So we match funds with the State and OHA’s money.

Waihee:  So let me make this real clear so the people out there can understand this.  What happens is that the General Funds that comes in—a lot of it anyway—that is appropriated by the legislature—this is not part of the $15.1 (million).

Crabbe:  Right.  That is not.

Waihee:  The $15.1 (million) is the fake 20%.       

Crabbe:  That is correct. 

Waihee:  Right.  And so these funds are set aside mainly for other programs that you match.  

Crabbe:  That is correct.  That is correct. 

Waihee:  So none of that was part of discussion… 

Crabbe:  None of that was part of the discussion.  We felt that was very important to clarify.  For example, we also use funds for a fund to help out homelessness for native Hawaiian communities.  So we provide a statewide grant that specifically goes to helping aid for homeless, prevent people from going…from moving into homelessness.  And again, we match our funds with the state funds from the General Fund.   

Waihee: …the recommendations that have to do with procedure and stuff … but it seemed like the auditor was starting to judge content.

Crabbe: Yes.

Waihee:  Am I correct on that?

Crabbe: We would concur.  There was a subjective perception that they felt maybe was put out in the audit that was sensationalized or overly embellished.  

Waihee: Lets get some numbers.  My understanding is that …well first of all my understanding of how anytime that reserve funds are used, my understanding is that it takes an extraordinary vote of the Trustees to do that—this is not a simple majority policy.

Crabbe: No not at all. So any funding or request for funding through the fiscal reserve goes through a vetting process by our staff in accounting and sometimes they come from different programs and lines of business throughout the organization.  We go through a vetting process.  We put it in an action item. And it has to go to the RM Committee for one vote and then to the full board so all the Trustees are involved.    

Waihee: They’re all involved.  But normally it takes an appropriation it takes out of nine trustees you need five votes.  For this you need six.  You need a greater majority.

Crabbe:  That is correct. 

Waihee:  And you really can’t remove these funds without the participation of the Trustees. 

Crabbe:  You cannot.  You cannot.  Any approval, it must be of a majority of six votes of the Board to approve.

Waihee:  Alright.  So now the audit seems to have talked about  $14 million dollars.

Crabbe:  $14 million.

Waihee: Out of all the millions and all the funds that you are responsible for.  The focus of this sensational audit was $14 million.   

Crabbe:  $14 million.

Waihee:  Now, my understanding that out of that $14 million almost $10 million of it went to State agencies. 

Crabbe: Went to State agencies.  For example, we have a historical agreement between the office of Hawaiian Affairs and the Department of Hawaiian Homelands.  So we provide an annual allotment of $3 million per year to help with their debt consolidation loans which allows it to provide infrastructure, project planning so they could put homes on the land for native Hawaiian beneficiaries 50% or greater.  

Waihee: So this is like they give you $15 million, you give them $10 million back.  And that’s what this (audit) is talking about.  So to the extent that anybody got money that shouldn’t have gotten money, it was the State.

Crabbe:  It was the State.  And it all went to benefit native Hawaiians. 

Waihee:   Alright.  And then there was about another $4 million left.   But I understand that at least most of it—$13-plus million—was actually the result of Trustee action.  

Crabbe:  That is correct.  That is correct.  We funded about 22 initiatives, Department of Hawaiian Homelands is one, the Lunalilo Trust for elderly care for native Hawaiian kupuna is another.  It went to fund charter schools, native Hawaiian charter schools.

Waihee: So did any of that money go to somebody’s favorite contractor—get a non-bid contract?

Crabbe: No.  Not at all.  These are purely…. Some of them we fund annually like Hawaiian Homelands, charter schools.  Others were based on need, based on the demand to either help organizations sustain their operations or looking at how they provide services to the native Hawaiian community.

Waihee:  So.  OK this is a very important point… all the money that was the subject of this so-called audit went to native Hawaiian beneficiaries.

Crabbe:  That is correct. 

Waihee:   So nobody did something.

Crabbe:  No one got a favoritism for a particular contract.  Al of it went back to reinvest in our people, build greater capacity in our communities….

Waihee: And the judgment as to who should get the money was done by yourself and the Trustees. 

Crabbe: Yes.

Waihee: Who actually are entrusted with the requirement.

Crabbe: With that responsibility, yes.

Waihee:  So what maybe happening here—this is what struck me—what is actually my motivation for having this discussion today is … What makes the legislative Auditor – a non-elected, non Native Hawaiian expert--judgment better than your judgment?

Crabbe:  Trustees

Waihee:  Or the Trustees judgment?

Crabbe:  (Nods in agreement.)  And I think to even put it into further context, 6% which is the General Funds, approximate is about $3 to $4 million.  Its only 6% of our total budget.  The remaining 94% is all from the native Hawaiian trust fund.     

Waihee:   One of the reasons why we have the Office of Hawaiian Affairs is that the regular civil servant types weren’t doing a good job to start with.  

Crabbe: Right 

Waihee:  Now.  There has been people saying – one of the items real quick – was the idea that maybe you didn’t listen to your staff.  Now I know when I was Governor, if I listen to my staff all the time they wouldn’t need me as Governor.   

Crabbe: Right 

Waihee: So is it unusual for the CEO to say, ‘No.  I think in this case the beneficiary may be right and you guys may be just a bunch of auditors.’ 

Crabbe: You’re correct.  We go through a vetting process.  We have a delegation of authority.   Delegation of authority from the Board to me and even from me down to directors, managers and so forth.

Waihee:  But you’re still the responsible person.

Crabbe:  The buck stops here.  I’m the one fully responsible for all of the ….

Waihee:  I have someone telling me times up….  Aloha….

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