Ka Wai Ola - Office of Hawaiian Affairs, Volume 25, Number 10, 1 October 2008 — The OHA Budget [ARTICLE+ILLUSTRATION]

The OHA Budget

This document is intended to provide readers with background and other information that will aid in the review ofthe OHA budget. As a quasi-public institution, the Office of Hawaiian Affairs (OHA) prepares its budget in accordance with Hawai'i Revised Statutes Section 10-14.5. Pursuant to the statute, OHA is required to provide opportunities for beneficiaries in every county to participate in the preparation of eaeh hiennial budget. To comply with the requirement, OHA has posted a suimnarized version of its proposed budget on the OHA web site for public conunent and input. As a state agency, OHA is required to prepare a biennium budget. The

hiennium budget is prepared every two years, for the ensuing two years. The current proposed hiennium budget covers the periods from July 1, 2009, through June 30, 2010 (FY 10) and July 1, 2010, through June 30, 2011 (FY 11). What is a Budget? A budget is a hnaneial operating plan that allocates limited revenues among competing expenditure requirements for a given time period. As a state agency, OHA ean not spend more than is budgeted. What are OHA's Sources of Revenues The sources of revenues available for spending include the following: • General Fund appropriations from the State of Hawai'i • A portion of revenues generated from Ceded Lands received

annually from various State Agencies conducting business on Ceded Lands • A portion of the Native Hawaiian Trust Fund (NHTF), whieh includes revenues received primarily from past-due settlements received in the past and dividends and interest earnings thereon • Federal Funds • Other miscellaneous program ineome How mueh ean OHA spend? The amount of monies that ean be budgeted and spent eaeh fiscal year is based on the Spending Limit, whieh is determined by the OHA Spending Policy. For budgetary purposes, monies are considered spent when actual disbursement or encumbrance of funds is made. An encumbrance represents a formal coimnitment (usually evidenced by a contract or purchase order) to acquire goods or services not yet received. At the end of eaeh fiscal year, any monies that have not been spent (disbursed or encumbered) lapse, either back to the general fund or the NHTF, and are no longer available for spending. Trustees are not allowed to spend funds beyond the Spending Policy ealculated amount. General fund appropriations are detennined by the Legislature during eaeh hiennium and have approximated $3 million annually. Current payments of ceded land revenues received from the State of Hawai'i have been set at $15.1 million, until further legislative action. The amount of monies to be withdrawn annually from the NHTF is limited by the Native Hawaiian Trust Fund Spending Policy, as amended. Generally, the spending policy limits the annual withdrawal to no more than 5 percent of the average fair market value of investments, as defined. The annual withdrawals for the ensuing hiennium approximate $20 million and $19 million for FY10 and FY1 1, respectively. Budget Components While the total budget is limited by the spending limit, the budget

is further segmented and broken down by cost centers, whieh are defined as a units or organizations for whieh costs are accumulated or computed. For OHA, cost eenters have been defined primarily as Hale or departments. Eaeh Hale or cost center is provided with its own budget that is further broken down into various cost components. For presentation purposes, the various Hale have been suimnarized into major divisions including Board of Trustees, Support Services and Beneficiary Advocacy and Empowennent. Eaeh of the divisional budgets is then broken into the following components: Payroll and Personnel Expenses Personnel Budget includes the budgeted costs for both salary and fringe benefits. Fringes are set by the State of Hawai'i and typically include benefits such as a comprehensive heahh care insurance, life insurance, retirement programs, sick leave, vacation leave and paid holidays. The fringe rates are detennined by the State of Hawai'i and assessed as a percentage of salary costs. Operating Expenses Equipment Budget includes tangible property (excluding land and buildings) with a useful life greater than one year. Primarily includes costs for items such as computers and printers and other office equipment, as well as the related repairs and maintenance for those items. Supply Budget includes the cost of office and other supplies, promotional items and postage and freight. Grants and Contracts Budget includes the cost of grants and sponsorships, and services on a fee contracts, including legal services. Travel Budget includes the costs of all travel incurred for both in-state and out-of-state trips. Other Budget includes all costs not reported in other budgets. Significant items included in the Other Budget include facility and overhead costs such as rent, utilities and insurance. Other costs include printing and advertising, training and development costs, dues and

subscriptions and other expenses. Definitions "Agency" means any executive department, independent eommission, board, agency, authority, bureau, office or other establishment of the state govermnent (except the Legislature and the judiciary), or any quasi-public institution whieh is supported in whole or in part by state funds. (Source: HRS Section 37-62) "Ceded Land Revenues" refers to Public Land Trust Revenues. "Cost Center" is a unit or organization for whieh costs are aeeumulated or computed. In the State this may take several forms: (1) a significant activity within a department for whieh administrative control is desirable and/or necessary; (2) a designated area within a department with costs that have significance in terms of financing and budgeting of the department; (3) an area or activity under a single supervisor with costs that ean be controlled by direct budgeting to such supervisor. "Encumbrances" represent formal commitments (usually eontracts orpurchase orders) to acquire goods or services not yet received. Pursuant to the Spending Policy, amounts that are encumbered are considered spent, although the cash has not yet been disbursed. "Fringe benefit" is an indirect, non-cash benefit provided to employees by employers in addition to regular wage or salary compensation, such as heahh insurance, life insurance, profitsharing, and the like. "Native Hawaiian Tmst Fund" is defined as all Public Land Trust revenue emanating from 5(f) funds that is subject to OHA's Native Hawaiian Trust Fund Investment Pohcy. "Public Land Trust Revenue" is mo nies emanating from 5(f) funds that the "State of Hawaii remits to the Office of Hawaiian Affairs. It is also conmionly referred to as Ceded Land Revenues. "Spending Limit" is the maximmii amount of monies OHA ean legally spend for a given budget year. "Spent" is when actual disbmsement or encumbrances of funds is made. (Source: OHA Spending PoIicy ) S

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