Scathing report on Natural Energy Laboratory of Hawaii Authority

By CHELSEA JENSEN

Stephens Media

The Natural Energy Laboratory of Hawaii Authority is on the hot seat following an auditor’s report released Wednesday that outlined years of poor management and lack of transparency.

“Our findings reflect an agency which, after nearly 40 years, has yet to achieve its potential as an ocean-related research, education and commercial center. In the absence of clearly reported progress and while continuing to struggle with the basics of open government, it is no wonder the authority has had difficulty convincing legislators, taxpayers and potential tenants of its worth and successes,” wrote Hawaii State Auditor Marion Higa. “However, despite the myriad issues it faces, we found that the authority is making progress under new management.”

That progress, which has mainly taken place since Greg Barbour took over the helm as executive director last year, includes addressing marketing and promotion of the site, improving tenant relations and pursuing alternative revenue streams, as well as reaching self-sufficiency on the operating level, according to the audit.

“Since taking up duties in mid-2011, the new executive director has made noticeable progress in a number of areas. The results of these efforts mostly remain to be seen, but the executive director’s plans and intentions have been made public via informational reports to the board at its public meetings. We will hold the authority accountable for implementing these plans,” reads the audit.

The facility since 2010 has operated without any state funding. It relies on land leases, seawater distribution fees and federal funds for its operating budget. The land leases make up about 40 percent of its income while another 36 percent is provided by seawater pumping fees.

However, while NELHA is operationally self-sufficient, Higa noted the agency will remain dependent on state capital improvement project funds “for the foreseeable future.”

The 50-page audit, which covers the period from 1990 to mid-2011, criticized for the most part the agency’s administrative functions and not fiscal mismanagement.

Among Higa’s recommendation’s to NELHA were to ensure new board members, as well as staff, receive orientation and training, especially in areas regarding Hawaii’s Sunshine and Ethics laws; facilitate transparency, including creating a more structured land lease rate structure and updated website; complete business and financial plans; finalize administrative rules; update the policies and procedures manual, which dates to 1995; adopt more meaningful performance indicators; and follow through with plans for an economic impact analysis.

In response to the audit, NELHA Board of Director’s Chairman John DeLong in a May 23 letter to Higa acknowledged “problems in the past” and the authority still has “much work to do to achieve our mission and objectives.”

A master plan, which hadn’t been updated for decades, was completed in August 2011. A financial plan is under way.

“I can assure you that NELHA will increase its efforts to achieve our mission and objectives. We have already made much progress in taking action on some of the recommendations contained in your report,” the letter reads before noting the board has completed training regarding Sunshine Laws, approved a new strategic plan, completed an economic impact analysis and began efforts to review leasing policies and website updates. Under way, according to DeLong’s letter, are plans to adopt new administrative rules.

Barbour said NELHA appreciates the “fresh approach” taken by the auditor in not just identifying issues but also providing a list of recommendations for making changes and improvements.

“We felt they really listened to what we had to say and they provided very good recommendations and comments on how to make our agency better,” he said.

The Natural Energy Laboratory of Hawaii Authority, located at Keahole Point, manages the facility on 870 acres of leased state land. The facility is home to 41 tenants consisting of 29 precommercial research and commercial tenants, four Gateway Center tenants, and eight research, educational and community service tenants, according to the audit.

The facility was established in 1974 with public and private grants in response to the 1973-74 oil embargo and concerns about Hawaii’s fossil fuel dependence. By 1984, it became apparent seawater could be used for research and other profitable ventures prompting the state to pass laws allowing NELHA to host commercial entities on state property as well as develop the Hawaii Ocean Science and Technology Park.

Natural Energy Laboratory Hawaii and the park officially merged in 1990 forming NELHA.

To view the audit in its entirety, visit state.hi.us/auditor/ and select reports.