Auditor Issues Urgent Warning About Key Hawaiʻi Homeless Program

An audit underway of the state’s tiny home initiative for the homeless, mandated by lawmakers after a Civil Beat investigation uncovered significant flaws in the program’s accounting, has found deficiencies that warrant “immediate attention by those in governance.”

In a letter addressed to legislators and the state’s human services director Monday, Auditor Les Kondo explained why he was raising early alarm bells about the kauhale initiative and payments to HomeAid Hawai‘i that have cost taxpayers nearly $40 million so far, some of which he said was spent with little public oversight and weak internal controls.

“In our professional judgment, waiting until the issuance of a final audit report will likely result in continued exposure of public funds to unsupported or inappropriate costs,” Kondo wrote. “The current control environment does not provide reasonable assurance that improper billing will be detected or prevented.”

Last year, Civil Beat found a lack of documentation for more than $14 million worth of work. In some instances, there were only brief descriptions of services rendered and materials purchased, without supporting documents.

Some of the payments on contracts were doled out in large lump sums instead of the smaller installments required by the state’s contract with HomeAid.

The initiative is overseen by the State Office of Homelessness and Housing Solutions. Reached by phone Monday night and asked about the preliminary findings, Jun Yang, the director of that office, said he had not yet received Kondo’s letter.

In a written statement later in the evening, Yang said that the state takes oversight of public funds seriously and welcomes a fair and objective audit process.

“It is important to be clear, though, that this letter presents a one-sided glimpse which does not account for the full scope of documentation, the emergency context in which many of these decisions were made, or the extensive legal review and approvals that were part of the process.”

The no-bid contracts to HomeAid were issued under an emergency order from Green that suspended normal bidding requirements in order to expedite the development of housing initiatives and services to homeless people. That work, Yang wrote, is done in coordination with legal counsel.

Officials with the Department of Human Services, which also has oversight of payments related to the initiative, could not be reached. Gov. Josh Green’s office also could not be reached Monday night.

Deficiencies Noted In Fast-Moving Projects

The letter from Kondo Monday said his office had so far identified almost $1.7 million worth of invoices that weren’t consistent with state requirements.

That includes $770,000 paid to HomeAid and later credited back to the state, an indication that those invoices included improper costs, Kondo wrote.

And that also included more than $900,000 in payments that lacked substantiation, work that fell outside the scope of HomeAid’s contract, and costs related to travel and meal expenses that “appear inconsistent with State policies.”

The letter noted “significant deficiencies” in the homelessness office’s processes relating to contracting and invoice review. Those deficiencies included a limited understanding of best practices in contracting, an absence of defined management structures and a lack of enforcement of contract terms.

The letter also said there was no evidence of a meaningful review of invoices HomeAid submitted to the state before receiving payment.

Kondo urged lawmakers and state leaders to consider corrective actions, including an independent review of payments made to HomeAid, temporary conditions on reimbursements, and enhanced oversight and review procedures.

In a written statement to Civil Beat, HomeAid CEO Kimo Carvalho said the nonprofit is cooperating with the audit and takes the preliminary letter seriously. He believes the auditor’s concerns will be addressed as HomeAid provides more materials.

Carvalho wrote that HomeAid engaged independent auditors to reconcile its accounts and noted that adjustments are common in large and fast-moving emergency projects.

Kondo’s letter to lawmakers noted that his office is still conducting field work and is reviewing contracts, invoices and expenditures and assessing the state’s oversight of the kauhale contracts, pointing out that the findings may change.

Yang said the state will continue to provide the auditor’s office with information and documents upon request.

“We are confident that a complete and balanced review will reflect the full picture including the safeguards in place, the outcomes achieved and the lives impacted,” Yang wrote.

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This story was originally published by Honolulu Civil Beat and distributed through a partnership with The Associated Press.