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Wednesday, December 4, 2019
OHA Admits LLC Audit "observed indicators of potential fraud"
By News Release @ 11:05 PM :: 1461 Views :: Ethics, OHA

OHA & LLCs Contract and Disbursement Review

News Release from OHA, December 4, 2019

In 2018, the Office of Hawaiian Affairs contracted CliftonLarsonAllen (CLA) to provide a review of OHA and its LLCs’ grants and procedures for Fiscal Years (FY) 2012, 2013, 2014, 2015 & 2016. For OHA, CLA selected 80 contracts and 50 other disbursements of funds for testing and review. For the LLCs, CLA selected 30 contracts and 25 other disbursements of funds for testing and review. The following report and attachments are CLA’s review.

OHA & LLCs Contract and Disbursement Review

  *   *   *   *   *

OHA statement on OHA & LLCs’ Contract & Disbursement Review Report

Statement of OHA Chair Colette Machado and Trustee Dan Ahuna, Chair of the OHA Board Committee on Resource Management, On the OHA & LLCS Contract and Disbursement Review Report

News Release from OHA December 4, 2019

Four decades ago, the Office of Hawaiian Affairs (OHA) was created to improve the lives of Native Hawaiians, who were struggling with the generational trauma resulting from the unresolved historical injustices committed against them as well as with the state’s failure to fulfill its obligations to Hawaiʻi’s indigenous people since statehood.

This report represents our understanding that the best way to fulfill such a sweeping mandate is through an unwavering commitment to continued improvement. In September 2018, our OHA Board took the very unusual step of engaging a top ten national accounting firm – CliffordLarsonAllen LLP (CLA) – to conduct a detailed review of a sample of our contracts and disbursements for five fiscal years. We were not required by anyone to do this. Despite undergoing regular state audits and receiving clean annual independent financial audits for eight consecutive years, our Board chose to do this on its own, something few other state or private entities would do.

The recommendations of this report confirm that OHA is moving in the right direction. In fact, a number of the recommendations of this report are similar to those of recent state audits. As a result, some of recommendations have already been implemented or are in the process of being implemented. For example, OHA has implemented a comprehensive grants management system, including policies and procedures for Board approval and grant monitoring. In addition, OHA is already in the process of filling a key position as an initial building block for an internal audit function.

CLA’s procedures were designed to detect and identify indicators of potential fraud, waste and abuse. As a result, CLA did not use random sampling methodology to make its selection of contracts and disbursements to test. Instead, CLA used its professional judgement to select a sample of contracts and disbursements that were more likely to result in observations of indicators of possible fraud, waste and abuse and other instances of non-compliance. As the sample was judgmentally selected, it is inappropriate to extrapolate sample results across all OHA contracts and disbursements during the review period.  

(Translation: Stop looking because you will find more.)

It is also important to note that, as the report looked at a five-year period (2012-2016) that began seven years ago, implementation of several significant grant and procurement reforms are not reflected in the observations; and staff with detailed knowledge about certain contracts or disbursements are no longer employed with OHA and therefore were unable to provide key information.

While this report observed indicators of potential fraud, waste or abuse, it did not identify actual instances of fraud, waste or abuse. If during the performance of CLA’s services other matters had come to its attention suggesting possible financial improprieties and/or irregularities, CLA would have communicated such matters to OHA’s Board Committee on Resource Management. No such matters were ever communicated by CLA to OHA.

We understand that more needs to be done to regain the trust of our beneficiaries and the general public. Therefore, the OHA Board Committee on Resource Management approved a motion today directing our administration, under the new leadership of Chief Executive Officer Sylvia Hussey, to analyze the recommendations of this study and return to the Committee in January with an implementation plan for the recommendations. We are confident that Dr. Hussey, with her accounting background and professional experience with large trusts, along with our competent and dedicated staff, will successfully guide the agency through this project and make the necessary policy and procedural changes to enhance our fiscal management and transparency.

The OHA Board remains committed to continuous improvement. We are in a critical period of transition intended to set the agency on a firm course for the future, with a new CEO, a new 15-year Strategic Plan, and the implementation of these financial management upgrades. We look forward to sharing our progress with our community and general public soon.

We also want to extend a warm mahalo to our staff, whose hard work made this enormous undertaking possible. OHA staff timely submitted approximately 870 file packets, often containing more than 100 pages each, to CLA. They are the unsung heroes of this project.

The OHA & LLCS Contract and Disbursement Review Report can be viewed at LINK.

Related: Red Flags: An Analysis of the Independent Audit of OHA and its LLCs

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