Financial Audit & Management Review Discussion of BOT Ac.on Item #17-03 Office of Hawaiian Affairs February 2, 2017 Prepared by Trustee Keli‘i Akina
1. Intent of Ac9on Item Ac.on Item #17-03 2
The proposed ac9on item DOES NOT call for the following: • The collec.on of evidence for use as evidence in court. • The targe.ng of any Trustee or Execu.ve for fraud or other financial claims. Ac.on Item #17-03 3
The proposed ac9on item DOES call for the following: • Iden.fica.on of areas of waste, abuse and fraud in procurement • Enhanced assurances that financial decisions are in full compliance with applicable laws and internal policies • Recommenda.ons on policies to strengthen the Board’s fiduciary oversight Ac.on Item #17-03 4
2. Current Audit Requirements Ac.on Item #17-03 5
There are currently three different audit requirements Audit Scope of the audit Auditor Financial Statement Limited to presenta.on of CPA Firm Audit (Annual) financial statements Limited to presenta.on of financial statements & Federal Funds Audit CPA Firm (Annual) compliance with grant requirements Limited to the assessment of the efficiency and Office of the State State Audit (4-years) effec.veness of certain Auditor programs. Ac.on Item #17-03 6
Why Do We Need A Financial Audit & Management Review? • Exis.ng audits (FY 2005-2015) suggest issues that need to be researched 1. Federal Funds Audits Pa_ern of significant internal control deficiencies § Procurement viola.ons § 2. State Audits Non compliances with state repor.ng requirements § Lack of grant oversight and accountability § Need for improved strategic planning process § Ac.on Item #17-03 7
3. Specific Areas of Concern Ac.on Item #17-03 8
Management: • OHA’s net assets declined by $46.8 million in the last two fiscal years • Fewer resources are allocated towards beneficiary programs Beneficiary Programs as % of Total Expenses 80% 70% 60% 50% 40% 30% 20% 10% 0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Ac.on Item #17-03 9
Procurement: • Financial consul.ng/fiscal sustainability planning contract • Kaka‘ako Makai development contract • Both contracts raise significant concerns with respect to: • Compliance with procurement law and policies • Contract management & administra.on • Cost management Ac.on Item #17-03 10
Fiduciary Oversight: • Trust funds are increasingly diverted to OHA’s subsidiary LLCs without proper accountability and oversight OHA Grants to Hi'ilei Aloha LLC (Millions of $) $2.85 $2.65 $2.07 $1.48 $1.46 $1.47 $1.25 $0.10 2007 2008 2009 2010 2011 2012 2013 2014 Ac.on Item #17-03 11
4. Conclusion Ac.on Item #17-03 12
Goals: 1. Improve and strengthen rela.onship between Trustees and the Administra.on through improved governance policies 2. Improve OHA’s reputa.on by providing a higher level of assurance to the public 3. Restore beneficiary confidence in the Board’s transparency & management Ac.on Item #17-03 13
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