Ka Wai Ola - Office of Hawaiian Affairs, Volume 37, Number 1, 1 January 2020 — OHA to implement recommendations from independent review [ARTICLE]

OHA to implement recommendations from independent review

By Office of Hawaiian Affairs Staff OHA is moving forward with developing an implementation plan for the 80 recommendations from the hnal report conducted by an independent accounting hrm that reviewed a sample of OHA and OHA LLC contracts and disbursements from a period of hve hscal years, from 2012 to 2016. In September 2018, the Board engaged a top ten nahonal accounting hrm - CliffordLarsonAllen LLP (CLA) - to conduct a review of the agency and related LLCs, approving $500,000 in trust funds to analyze contracts and disbursements from that hveyear period. On December 5, the OHA Board of Trustees received CLA's more than l,000-page hnal report and directed staff to review the hnal report and return to the Board on January 22, 2020, with an implementation plan for the recommendations.

Four decades ago, the Office of Hawaiian Affairs (OHA) was created to improve the lives of Native Hawaiians, who were struggling with the generational trauma resulting from the unresolved historical injustices committed against them as well as with the state's failure to fulfill its obligations to Hawai'i's indigenous people since statehood. This report represents our understanding that the best way to fulfill such a sweeping mandate is through an unwavering commitment to continued improvement. In September 2018, our OHA Board took the very unusual step of engaging a top ten national accounting firm - CliffordLarsonAllen LLP (CLA) - to conduct a detailed review of a sample of our contracts and disbursements for five fiscal years. We were not required by anyone to do this. Despite undergoing regular state audits and receiving elean annual independent hnaneial audits for eight consecutive years, our Board chose to do this on its own, something few other state or private entities would do. The recommendations of this report

confirm that OHA is moving in the right direction. In fact, a number of the recommendations of this report are similar to those of recent state audits. As a result, some of recommendations have already been implemented or are in the process of being implemented. For example, OHA has implemented a comprehensive grants management system, including policies and procedures for Board approval and grant monitoring. In addition, OHA is already in the process of filling a key position as an initial building hloek for an internal audit function. CLA's procedures were designed to detect and identify indicators of potential fraud, waste and abuse. As a result, CLA did not use random sampling methodology to make its selection of contracts and disbursements to test. Instead, CLA used its professional judgement to select a sample of contracts and disbursements that were more likely to result in observations of indicators of possible

fraud, waste and abuse and other instances of non-eomplianee. As the sample was judgmentally selected, it is inappropriate to extrapolate sample results across all OHA contracts and disbursements during the review period. It is also important to note that, as the report looked at a five-year period (2012-2016) that began seven years ago, implementation of several significant grant and procurement reforms are not reflected in the observations; and staff with detailed knowledge about certain contracts or disbursements are no longer employed with OHA and therefore were unahle to provide key information. While this report observed indicators of potential fraud, waste or abuse, it did not identify actual instances of fraud, waste or abuse. If during the performance of

CLA' s services other matters had eome to its attention suggesting possible hnaneial improprieties and/or irregularities, CLA would have communicated such matters to OHA's Board Committee on Resource Management. No such matters were ever communicated by CLA to OHA. We understand that more needs to be done to regain the trust of our beneficiaries and the general puhlie. Therefore, the OHA Board Committee on Resource Management approved a motion today directing our administration, under the new leadership of Chief Executive Officer Sylvia Hussey, to analyze the recommendations of this study and return to the Committee in January with an implementation plan for the recommendations. We are confident that Dr. Hussey, with her accounting background and professional experience with large trusts, along with our competent and dedicated staff, will successfully guide the agency through this project and make the nee- ' r o i j —

essary policy and procedural changes to enhanee our fiscal management and transparency. The OHA Board remains committed to continuous improvement. We are in a critical period of transition intended to set the agency on a firm course for the future, with a new CEO, a new 15-year Strategic Plan, and the implementation of these hnaneial management upgrades. We look forward to sharing our progress with our community and general puhlie soon. We also want to extend a warm mahalo to our staff, whose hard work made this enormous undertaking possible. OHA staff timely submitted approximately 870 file packets, often containing more than 100 pages eaeh, to CLA. They are the unsung heroes of this project. The OHA & LLCS Contract and Disbursement Review Report ean be viewed at https://www.oha.org/oha-llcs-contract-and-disbursement-review/. ■

Full Statement of OHA Chair Colette Maehado and Trustee Dan Ahuna, Chair of the OHA Board Committee on Resouree Management, On the OHA & LLCS Contraet and Disbursement Review Report