A spokesman for Mayor Mitch Roth said the mayor and the county’s Office of Housing and Community Development are working to correct deficiencies pointed out in an audit of its affordable housing credits program.
Cyrus Johnasen said Roth and OHCD Director Susan Kunz “have gone over the audit in detail and have already put actions into place” to improve accountability in the program.
The county’s affordable housing policy — outlined in Chapter 11 of the Hawaii County Code — mandates the inclusion of affordable housing in certain developments. Developers who agree to build new affordable housing units in excess of any requirements imposed under county law may earn affordable housing credits. The credits can be transferred to other developers, who can use them to satisfy existing or future affordable housing requirements.
The report made public Feb. 1 by County Auditor Tyler Benner was at the behest of North Kona Councilman Holeka Inaba, the council’s vice chairman. The audit followed a guilty plea in federal court to honest services wire fraud by former OHCD employee Scott Rudo, who admitted to taking about $1.8 million in bribes.
Three others — Hilo attorneys Paul Sulla Jr. and Gary Zamber plus Big Island businessman Rajesh Budhabhatti — were indicted in July by a federal grand jury. The feds allege the trio received affordable housing credits and land conveyances worth at least $10.98 million with no intention of developing affordable housing. All three have pleaded not guilty to multiple charges punishable by up to 20 years in prison.
The county hired a California consulting firm, Keyser Marston Associates, to review Chapter 11 last year. According to the newsletter Environment Hawaii — which first reported discrepancies in OHCD’s housing credits program — the firm was to be paid $102,000, and it was to present its report to the county in October 2022.
“They have completed the housing market assessment, developer interviews, pro forma analysis evaluating the feasibility of market-rate development, including development costs and investment, and the draft report,” Johnasen said of Keyser Marston. “We decided to ‘pause’ until the audit was completed to ensure results would be considered by the consultant, and now have reconvened to complete the work.”
In addition to bringing the consultant aboard, according to Johnasen, steps the county have taken or are taking include:
• A plan to complete administrative rules once appropriate revisions to Chapter 11 have been made through work with the County Council;
• Established policies and procedures with industry best practices to ensure consistency throughout the department;
• Outline ongoing internal monitoring and program oversight in conjunction with the County Auditor’s office;
• Consider software options to support managing provisions of Chapter 11;
• Established policies and procedures to ensure that just one staffer isn’t overseeing key elements of the process;
• and started to incorporate training components to weekly division staff meetings.
“We’re working diligently to address these issues and retain public trust, and it’s important for the community to know that there have been improvements and will continue to be improvements,” Johnasen said. “We have unwavering trust in the leadership at OHCD and the workers in that office, and will continue to make strides to be better in every way.”
According to Benner, the recently completed county audit was “our first engagement with the department.”
“OHCD is the recipient of grant funds and as a result receives periodic audits for elements of programs associated with those rewards,” Benner said. “… They were conducted by outside auditors and would have focused on compliance with grant provisions.”
Asked about a follow-up audit, Benner replied it’s “our standard practice to allow the audited entity to improve over a two-year time frame and to return to conduct a follow-up on the third year.”
“We do plan to return and conduct that follow-up,” he said. “Audits are conducted on risk-based priority. We have added the audit findings to our remediation tracker and invite OHCD to contact us if they believe they have resolved a recommendation sooner than expected.”
The remediation tracker can be found on the County Auditor’s webpage.
Benner, who indicated he will have a debriefing session with the council on March 7, encouraged “an environment where improper activities are reported.”
”The Office of the County Auditor maintains whistle-blower hot lines,” he said. “Tips of improper activity can be reported online or by phone. We invite either employees or the public to visit our complaints page to determine if they are observing an activity that can be substantiated and is in our jurisdiction to investigate.”
The Tribune-Herald also reached out to Kunz, who didn’t reply in time for this story.
Email John Burnett at jburnett@hawaiitribune-herald.com.
