Ka Wai Ola - Office of Hawaiian Affairs, Volume 13, Number 12, 1 December 1996 — OHA's Audit: Does the bottom line tally? [ARTICLE+ILLUSTRATION]

OHA's Audit: Does the bottom line tally?

^hen the Board of Trustees met several weeks ago in Kaunakakai to consider OHA's most recent audit, I I joined the minority voting against approval. To audit the period from July 1, 1994 to June 30, 1995, known as FY-95 completed in late 1996, we hired a reputable firm, ranking among the very best, and its audit conforms to "generally accepted auditing standards." Nonetheless, I was very disturbed to see reflected recommendations

from OHA's administration to omit certain information and incorporate other data on no basis but the administrations's self-ser\'ing say-so I also disagreed with the administration's answers to the auditors' draft recommendations, some of them identical to recommendations made by Marion Higa in the legislative audit of 1993 and by other auditors over the past five years. One example of what

annoyed me concerns OHA's trust assets, mostly managed in separate accounts by nine investment managers whose commissions varv. These fees for services do not appear in the managers' reports and are not routinely disclosed to the Trustees despite repeated requests. Like Marion Higa, the FY-95 auditors spotted this gap immediately. They recommended that this important sum be included in any reconciliation of total ineome and expenditures, and that the Trustees use managers' fees in calculating cost effectiveness and negotiating contracts, something we have always wanted to do. But, at the suggestion of the administration, in the final version of the FY-95 audit, this eolumn was left blank. I don't doubt that the audit conforms to "generally accepted auditing standards," but I am very uncomfortable with an audit that, at least for me, doesn't tally. I'm also disappointed that it doesn't hold some feet to the fire to get these fees out in the open. To counter criticism by the auditors, the administration armed itself with a 19-point letter signed by most of the Board confirming the representation that all was well at OHA. I won't explore every discrepancy here, but I don't understand how any trustee could have

certified, for example, that "there have been no actions taken by management whieh contravene the provi-

sions of Federal ... laws or '

regulations ... or of contracts and grants applicable to the Office." In five

pages of one draft, the auditors themselves pointed out numerous instances of noneomplianee during FY-95 with the require-

ments of the Native American Program OHA administers. Based on the Board's letter, these and many others areas for improvement do not appear in the final version of the audit. Perhaps the most eloquent feature of the FY-95 document is the table of contents. According to a footnote, a star (*) indicates a comment reported in a previous audit. The table of eontents is a constellation of starred items because neither the administration nor the majority Trustees have followed through and insisted the recommendations of previous auditors be imple-

mented. It's not too late to correct this and we should start with the most basic recommendations of the legislative audit of 1993. For years, our Board attorney has eompared us to legislators, and OHA continues to run like a mini-legislature that oversees layers of bureaucracy and tangles of red tape. But Marion Higa, like other auditors, maintains that we Trustees are in fact trustees. Ms. Higa recommends training in the legahties of loyalty and prudence. She wants us to conform OHA's by-laws to the Uniform Trustees' Powers Acts, Section 554- A of the Hawai'i Revised Statutes and to develop a code of conduct appropriate to the higher standards set for trustees as opposed to legislators. Understandably this might make some people nervous, but isn't it what out beneficiaries deserve? On a brighter note: the 1994 elections have brought to OHA the infusion of new blood with three new faces. I look forward to working productively with our new board members, and am optimistic about turning OHA around in 1997. Looking back at 1996, 1 have appreciated hearing from so many of you; please eonhnue to share your concerns - and have a Merry Christmas and a wonderful holiday season.

I am very uncomfortable with an , . i leīi' audit that, at least for me, doesn't tally

Trustee, At-Large