TAXWatch: Pulling Teeth at OHA

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Imagine that you wake up one day to an awful toothache, and you march into your dentist’s office.  

But then your dentist says, “Well, you tell me your tooth hurts, but can you prove that you have a cavity?” 

“Um … no,” you reply.

“Well, then, get out!  You’ve just wasted my time.  I’ll be sure to send today’s bill to you personally, not your dental insurer, for this outrage.”

Similar logic (if you could even call it logic) is being used at our Office of Hawaiian Affairs (OHA), and that argument has become an issue in the upcoming election for OHA Trustees.

In September 2018, the OHA Board of Trustees, at the urging of At-Large Trustee Keli’i Akina, engaged a national accounting firm to conduct a contract and disbursement review, looking for indicators of fraud, waste, and abuse.  The accounting firm’s report was issued on December 4, 2019, at a cost of $500,000.

The report and a summary of the report put together by Trustee Akina’s staff highlighted a number of “red flags,” or potential problems.  Here are some examples.

Various places in the report, including at pages 70-72, discuss a $2.6 million grant made to Akamai Foundation to conduct a Native Hawaiian self-governance election, including independently monitoring the election and funding self-governance activities after the election was concluded.  The money was supposed to be paid out in five tranches.  But Akamai Foundation asked that all funds be paid out at once, before the nonprofit incurred a large portion of the costs, and OHA did so (in violation of its internal policies).  The election was cancelled, leaving the auditors wondering whether some of the funds disbursed were really needed or actually spent for the requested purposes.  

Page 121 of the report discusses a contract with Mid-Continent Research for Education and Learning.  OHA paid $349,527 for consulting services.  Neither the procurement documents nor any deliverables could be found.  But of course the money went out the door.  

On the day the report was issued, a statement of OHA’s Chair of the Board Colette Machado and Chair of the Committee on Resource Management Dan Ahuna said, “While this report observed indicators of potential fraud, waste or abuse, it did not identify actual instances of fraud, waste or abuse.”

Thus, on a recent PBS Insights candidates’ forum, Keoni Souza, who is running for OHA Trustee-At-Large against Akina, said, “Do I think there was a waste of $500,000?  Absolutely.”  OHA Chair Machado then doubled down by saying, “Keli’i, you tried to find the smoking gun.  And there was none.  It’s on you now.”

Has your tooth stopped hurting yet?

Just to be clear:  CliftonLarsenAllen, the accounting firm issuing the report, is not the police, is not the FBI, is not law enforcement.  An accounting firm can’t arrest people, throw them in jail, or otherwise find that they have committed illegal activity.  We have previously urged OHA to turn the report over to law enforcement.  Apparently, that hasn’t happened because, well, there is no smoking gun so why trouble law enforcement?

Ouch!  Give us the Novocain!

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Tom Yamachika is the President of the Tax Foundation of Hawaii, a private, nonprofit educational organization dedicated to informing the taxpaying public about the finances of our state and local governments in Hawaii. Tom is also a tax attorney in solo practice and has been since early 2013. Prior to 2013, he was with the accounting firm Accuity LLP, which was formed in 2006 from the Honolulu office of Coopers & Lybrand (which later became PricewaterhouseCoopers). Before that, he served as an Administrative Rules Specialist in the State of Hawaii Department of Taxation from 1994 to 1996, where he drafted rules, interpretive releases, and legislation on several different state taxes. Prior to that, he practiced litigation and tax law with Cades Schutte Fleming & Wright in Honolulu.