WAITING OVER A YEAR: Where is OHA' s Internal Audit?
by OHA Trustee Rowena Akana, Ka Wai Ola, April, 2018
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:
a. Sufficiency of contract/grant oversight provided appropriately by the assigned contract manager/ monitor;
b. Deliverables were met by the contractor/ grant recipient;
c. Conflict of interest with LLC managers and directors; and
d. No fraudulent or wasteful disbursements were made.
(2) All other disbursements of funds, excluding payroll:
a. Conflict of interest with LLC managers and directors;
b. Compliance with internal policies and procedures; and
c. No fraudulent or wasteful disbursements were made.
(3) Quarterly reports to the BOT:
a. 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 Po no 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 approve 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.