BY MALIA ZIMMERMAN – HONOLULU — The state auditor is looking into Hawaii’s 13th largest landowner, the state Office of Hawaiian Affairs.
The land management infrastructure of the agency charged with serving native Hawaiians is “inadequate, unable to support the office’s growing portfolio nor any future land involvements,”acting State Auditor Jan Yamane said in a 64-page report to the Legislature.
The report, issued Wednesday, also said the “acquisition and management of real estate holdings are “inadequately planned.”
The auditor said the 28,206 acres that OHA owns or leases was “impressive,” but added: “Without the policies, procedures, and staff to help guide and support the increased real estate activity, OHA’s Board of Trustees cannot ensure that its acquisitions are based on a strong financial foundation.”
OHA’s real estate portfolio — including OHA’s most prolific year in 2012, when it acquired properties worth $224.4 million — is “unbalanced, with revenues generated from commercial properties unable to offset expenses from legacy and programmatic land holdings.”
In 2008, OHA trustees disregarded a consultant’s proposal to expand its Land and Property Management division as well as proposals for a real estate business plan and investment policy. Rather, two years later it simply adopted a one-page real estate investment policy.
Hawaii, granted statehood in March 1959, was the recipient of 1.8 million acres originally ceded to the federal government. The state must hold land, sales and income proceeds in public trust, according to the original agreement.
The Office of Hawaiian Affairs, established during the state’s constitutional convention in 1978, said the agency must work to improve the lives of all native Hawaiians, which includes “any descendant of at least one-half part of the races inhabiting the Hawaiian islands prior to 1778” and “any descendent of the aboriginal peoples inhabiting the Hawaiian islands in 1778.”
Proceeds from land can be used to fund public schools or other educational institutions, develop farm and home ownership, make public improvements and for the provision of lands for public use.
The auditor said better monitoring of grants, including more than $14 million in fiscal 2012, would help OHA fulfill its duties.
“OHA’s grant administration has been remiss in developing procedures and guidelines that are in accordance with all applicable statutes and board of trustees policies,” the auditor said. “This has led to inadequate and inconsistent grant monitoring that fails to ensure that grants are achieving their intended results.”
The auditor inspected 30 grants, noting “incomplete documentation of monitoring activities, which made it difficult to determine whether such activities were performed and reviewed by management or to determine their nature and extent.”
Even more alarming, 10 of the 30 files “contained no evidence that grant monitors fulfilled responsibilities to address inadequate progress by grantees and non-compliance with reporting requirements.”
OHA could not provide records for the $228,000 grant issued to the state Department of Land and Natural Resources in fiscal 2012, the report said.
The Legislature can use the audit to determine whether it should continue to allocate money to the agency or whether to investigate it further.