The Department of Hawaiian Home Lands has one of the highest percentages of temporary positions within state government and is hampered by a fundamental conflict of interest, two factors that have contributed to the agency’s long history of inefficiency and poor accountability, according to Native Hawaiian beneficiaries and advocates.

The high number of so-called exempt positions — nearly two-thirds of its authorized jobs as of May — and the conflict arising from the agency’s position within the executive branch are among several factors that help explain why DHHL has been ineffective in correcting long-standing deficiencies, those advocating for change say.

Exempt positions, which are filled outside the state’s civil service system, can be subject to political patronage because of the hiring leeway managers have.

Attorney General David Louie and Gov. Neil Abercrombie, responding to Star-Advertiser questions through a spokeswoman, denied that an inherent conflict exists, saying DHHL’s status as an executive branch agency does not hamper its ability to act in the best interests of beneficiaries.

While the conflict notion is subject to dispute, no one disagrees that a lack of funding is one of the biggest factors impairing DHHL’s ability to meet its primary obligation.

Judges, auditors, beneficiaries, state officials and others over the years have agreed that a lack of money has been a major reason DHHL has fallen far short of its trust duty to get Native Hawaiian beneficiaries onto homestead lots in a timely fashion.

But the agency also has had a poor track record of fixing problems that do not require huge financial outlays, such as establishing written rules and policies, according to various audits and other independent evaluations.

Some change advocates say DHHL’s structure within state government and the resulting conflict is at the root of the problem.

"There needs to be a major overhaul," said DHHL Commissioner Renwick "Uncle Joe" Tassill, who raised the issue at a recent meeting of beneficiaries at the state Capitol.

As a condition of statehood in 1959, the state agreed to assume responsibility for a 203,000-acre land trust established by the federal government to get Native Hawaiian beneficiaries — those with at least 50 percent blood quantum — onto homestead lots. DHHL was created to manage the trust under the Hawaiian Homes Commission Act.

By law, the state, DHHL and the nine commissioners who oversee the agency have a fiduciary duty to run the trust solely in the best interests of beneficiaries.

But as an executive branch agency, DHHL operates as a state entity, subject to what is in the best interests of the state under the law. Its director, who also heads the commission, and the eight other members are appointed by the governor and confirmed by the Legislature, adding politics to the mix.

The problem, according to those advocating for change, is that what is best for beneficiaries doesn’t often match and frequently conflicts with what is best for the state or governor.

"The trust has been subjugated to a state agency whose leadership is beholden to a political hierarchy that has resulted in the mission of the HHCA being underserved," Big Island police officer Ian Lee Loy, whose tenure as commissioner ended last month, said in an email to the Star-Advertiser.

Lee Loy, who like Tassill supports restructuring the framework for administering the trust, said the commission is unduly influenced by the state and is ineffective in fulfilling its trust responsibility.

Louie, in a statement to the Star-Advertiser, said the notion of a conflict incorrectly implies that because DHHL is a state agency, it would disregard its obligations under the law. He said the agency is subject to the supervision of the governor to ensure its administration is consistent with the HHCA.

"To the extent that you are asking about competing interests between DHHL and other principal departments with respect to state laws other than HHCA, the governor gathers the appropriate information, consults with the affected departments and, after balancing the needs of the competing interests, makes a decision," Louie said.

The tension created by the two-headed nature of the department is nothing new.

Here is how a 1991 report to the U.S. Commission on Civil Rights portrayed the problem:

"The placement of the trust obligation in a relatively small state agency largely subordinate to other greater public interests results in a conflict of interest," an advisory committee to the commission wrote. "From the inception of the program, the ability of larger economic and political interests to prevail over Native Hawaiian trust entitlements have worked to render the program ineffectual."

DHHL disputed that finding.

State Sen. Clayton Hee, vice chairman of a new Senate committee on Hawaiian affairs, says the 1991 assessment still is on the mark.

"I don’t think that has changed and in fact the dysfunction only has become more apparent," Hee said.

The high percentage of exempt positions has contributed to DHHL’s accountability and efficiency woes, Tassill and others say.

Exempt positions are not subject to the merit-based civil service system, and those holding the DHHL jobs can have contracts no longer than two years, according to state law. But because employees can be reappointed, some have been on exempt status for many years.

According to Department of Human Resources Development data, about 64 percent of DHHL’s 193 full-time positions were exempt as of May. With the exception of the offices of the governor and lieutenant governor, DHHL’s percentage was the highest of any state agency under the Human Resources department’s jurisdiction, which does not include the Department of Education and the Judiciary.

The large numbers mean DHHL’s director can be subjected to pressure from the governor’s office to fill spots with political supporters, especially after a new governor takes office, the change advocates say.

That can lead to more turnover, less continuity and people wary about job security, particularly given that DHHL has had four different directors in the past five years, the advocates say.

"It’s systematic inefficiency," said one former DHHL worker who asked not to be named because of concerns about repercussions. "People don’t have comfort. Nobody knows what the next step will be. They’re walking on eggshells."

Tassill, who was appointed to the commission by Abercrombie in 2011, agreed that efficiency takes a big hit.

"Half of these guys don’t even know what the hell they’re there for," he said.

Asked why DHHL has such a high percentage of exempt positions, spokesman Punialoha Chee said those workers assist the department in carrying out the purposes of the Hawaiian Homes Commission Act. He said the exempt positions, including 14 managerial ones, allow the department to be more responsive to needs as they arise.

The law allows the agency to establish exempt positions for critical services on an as-needed basis.

Chee also said continuity has not been a problem, even when administrations change.

Alapaki Nahale-a, an Abercrombie appointee who served as DHHL director and chairman from January 2011 to May 2012, was frustrated by the conflicting nature of the two positions and political pressure from the Abercrombie administration to hire supporters, according to those familiar with his reasons for resigning.

Nahale-a last week declined comment to the Star-Advertiser. In public comments about his resignation last year, he said the job had been "taxing on a number of levels" but gave no indication of any specific frustrations. He had been commuting to his DHHL job on Oahu from the Big Island, where he lives.

"While I am proud of all that we’ve accomplished so far, the decision for me to move on is what I believe is best for my family, which is my No. 1 priority," Nahale-a said at the time.

Louise Kim McCoy, an Abercrombie spokeswoman, denied that Nahale-a was pressured to hire Abercrombie supporters.

"No one from the governor’s office at any time applied pressure or interfered in the hiring of employees at the DHHL," McCoy said in a statement.

Chee, the DHHL spokes­man, said his department works within the parameters of multiple laws to serve beneficiaries, and some of those parameters can present challenges. The lack of resources also compounds the challenges, Chee said.

"There are some things we definitely can do better, and we’re committed to doing better," he added.

Kali Watson, who served as DHHL director and chairman in the ’90s during Gov. Ben Cayetano’s tenure, said the two-headed nature of the job created major conflicts that sometimes got him into trouble with his boss.

He recalled hiring non-union contractors who paid prevailing wages to build homes that cost beneficiaries as much as $20,000 less than had the same units been built by union contractors. Watson said he went that route because of his fiduciary duty to beneficiaries, but Cayetano wanted DHHL to deal with union contractors.

"Without a doubt, that got me into political hot water," he said.

Cayetano told the Star-Advertiser his recollection was that nonunion contractors didn’t pay prevailing wages and benefits as required by federal law. He said he doesn’t remember Watson or anyone else telling him that the contractors could build homes for $20,000 less while still complying with federal law.

Cayetano agreed, though, that the chairman position has an inherent conflict because of the fiduciary duties to beneficiaries and the state. "But that is the state of the law, and until it is changed, governors and legislators … have to abide by it," he wrote in an email.

The issue was significant enough that a federal-state task force in 1983 recommended the state consider alternatives to administering the trust, such as a semi­autonomous government corporation.

Eight years later, the civil rights panel predicted more failures for DHHL until its basic structure was changed.

"The advisory committee believes that it is unlikely that the Hawaiian homes program will ever succeed unless the trust functions can be managed in a more independent, aggressive and creative manner, with increased accountability to the beneficiaries," it concluded.

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