Hawaiian Affairs investigation finds $7.8M in possible fraud

HONOLULU — A financial review of the Office of Hawaiian Affairs has found $7.8 million worth of potentially fraudulent, wasteful and abusive transactions, officials said.

The independent audit by national accounting firm CliftonLarsonAllen covers the period from 2012 to 2016, The Honolulu Star-Advertiser reported Monday.

The agency’s Board of Trustees voted to have the agency’s administration review and analyze the report and prepare a plan for implementation by Jan. 22.

The public agency is tasked with improving the well-being of Native Hawaiian citizens through community advocacy and assistance, including home and business loans and scholarships.

The review documented shoddy record keeping, inadequate oversight, unlawful procedures, missing documents, conflicts of interest, and contractors failing to perform work, officials said.

The review of 185 contracts and disbursements found 85% suggested conflicts with statutory requirements or internal policies while 17% were flagged for potential fraud, waste and abuse.

The audit contract awarded more than two years ago called for an examination of the agency and its limited-liability companies. The audit was meant to identify areas in the agency’s procurement process at risk of fraud, waste and abuse, officials said.

The audit firm was not tasked with determining whether any transactions were in fact fraudulent, abusive and wasteful. Instead, it was only to point out whether they might be, officials said.

The report of more than 1,000 pages concludes with 109 recommendations for improving financial procedures and guarding against abuse. The recommendations include more employee training, a special audit committee and a hotline for reporting fraud and abuse.

Chairwoman Colette Machado and Kauai trustee Dan Ahuna said in a joint statement that the report confirms the agency “is moving in the right direction” because the board has already started implementing a number of recommendations.

They said “more needs to be done to regain the trust of our beneficiaries and the general public.”

Trustee Kelii Akina, who pushed for the $500,000 audit, called the findings troubling. “The results, in some instances, are more serious than I imagined,” Akina said.