The Office of Hawaiian Affairs has acquired major pieces of real estate without analyzing whether it makes financial sense or hiring enough staff to manage the properties, a state audit concludes.
The report also criticized the agency for not adequately monitoring the millions of dollars it distributes in grants that are supposed to benefit Native Hawaiians.
OHA has been building up its real estate portfolio in recent years and now owns more than 28,000 acres valued at $228 million, making it the 13th-largest landowner in the state, the audit found.
"OHA’s land management infrastructure is inadequate, unable to support the office’s growing portfolio nor any future land involvements," acting State Auditor Jan Yamane wrote in the report released Wednesday.
"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 real estate acquisitions are based on a strong financial foundation."
OHA responded that its mission includes stewardship of land and cultural resources, not simply making money.
"Given the importance of the aina to our culture and the Native Hawaiian people, there are times when OHA will acquire land where the primary purpose is preservation of our aina and rights," board Chairwoman Colette Machado wrote in response to the audit. "Therefore the goal of financial return and financial sustainability on these lands must be balanced without compromise to this primary purpose."
OHA ventured into real estate in a big way beginning with the acquisition of 1,800-acre Waimea Valley on Oahu’s North Shore in 2006 for $3.9 million, in hopes of protecting its cultural and natural resources. The following year, it acquired 25,800 acres of rain forest land at Wao Kele o Puna on Hawaii island from The Trust for Public Land.
Its most valuable holdings by far are 30 acres of land in Kakaako, worth $200 million, received last year from the state as a settlement of claims to revenue from ceded lands dating back to 1978.
OHA also recently bought the Gentry Pacific Design Center, on North Nimitz Highway, for $21 million, and acquired 511 acres of agricultural land in central Oahu for $3 million, including the culturally significant royal birthing site Kukaniloko.
"Lacking trustee leadership, OHA opportunistically acquired land without accounting for stewardship costs and otherwise adhering to best practices," the audit contended. "This non-strategic approach has resulted in an unbalanced real estate portfolio that generates insufficient income to offset OHA’s overall property costs."
The board of trustees responded that it started with preservation properties, but has been adding commercial, income-generating properties to balance its portfolio. Machado said the board prudently held off on hiring land management staff until it knew which properties would be received from the state.
"Once the Kakaako Makai land settlement was approved by the state, the trustees quickly approved additional positions to manage its land holdings," she said.
The agency recently hired a commercial property manager and plans to add a property management specialist, the audit said. A consultant in 2008 recommended hiring up to 50 staff for its land and property division but trustees balked at the idea.
The auditor expressed frustration that staff could not locate key land-related documents and had not produced an annual report summing up real estate activity and finances. An OHA administrator told the auditors that there had been high turnover and a shortage of staff in the land program.
The auditor also questioned the participation of one trustee in the decision to purchase the Gentry Center, saying it ran afoul of an OHA policy against perceived conflicts of interest, a charge hotly denied by the board of trustees. The Ethics Commission looked into the matter and determined that the vote did not violate the state ethics code.
OHA, a semiautonomous state agency, is responsible for improving the conditions of all Native Hawaiians. In the 2012 fiscal year, it awarded more than $14 million in grants and sponsorships, mostly for education and housing programs.
The auditor faulted the agency for what it called "inadequate and inconsistent grant monitoring that fails to ensure that grants are achieving their intended results."
Although grant documentation usually showed the number of participants and number of workshops conducted, for example, it seldom evaluated outcomes. And site visits were completed in 2012 for only three of the 30 grants reviewed by the auditor.
OHA said it concurred with some of the auditor’s concerns and had already begun making changes to improve its grants program over the past year, developing accountability measures.
