Audit: DLNR mismanaged state land

LIHUE — A division of the state Department of Land and Natural Resources responsible for millions of acres of state-owned property is being run without coherent policies or guidelines by a staff that is incompetent to the point that it misunderstands its own funding, according to a report released Thursday by the Hawaii State Auditor.

Over the course of 18 months, auditors combed through two years of contracts, leases, permits, financial records, annual reports, public-meeting minutes and other relevant documents, ultimately concluding that the DLNR’s Land Division is, simply put, “not fulfilling its mission.”

In a sprawling 53-page report to the governor and state Legislature, state auditors concluded that the Land Division “lacks clear and consistent policies and procedures necessary to guide day-to-day operations,” has no strategic, long-term plan to manage its obligations or goals, and has an understanding of its own revenue source that is, “frankly, very wrong.”

“In short,” auditors wrote, “the Land Division is ill-prepared for the current and future demands of public land management, unable to resolve its present challenges, and not planning for opportunities in the future.”

The state auditor’s report is the second one this year to focus on the DLNR. A January audit revealed numerous concerns with how DLNR officials managed a multimillion-dollar state fund, including poor oversight, budget shortfalls, inappropriate spending and lapsed funding.

And the state auditor is not the only government agency looking into the inner workings of the DLNR. Two state Ethics Commission reports in recent months revealed rampant corruption among DLNR employees in a Kauai division office.

The findings of the audit published Thursday reveal multiple instances of seemingly systemic problems related to resource mismanagement. Several specific instances were cited in the report, quoting multiple state Board of Land and Natural Resources board members who displayed a clear misunderstanding of their responsibilities.

Even Land Division Administrator Russell Tsuji was described as holding views about his job that sharply contrasted with those of the auditors. The report cited one example of a missed opportunity from 2014, when one of the land division’s larger leases expired, opening up the possibility for generating additional revenue.

The DLNR staff “did not prepare for this eventuality, and when the lease expiration dates were imminent, the Land Division did not have the staff, expertise and resources to do anything other than continue business as usual.”

Auditors said Tsuji “does not see the necessity of such planning, explaining that the division’s focus and direction often change ‘on a dime,’ especially during changes in administration.”

The DLNR disagreed.

“On the contrary,” they wrote. “We believe a long-range, strategic plan is precisely what provides an agency with the direction and guidance that are needed during transitions of leadership.”

Without long-term strategy or a basic understanding of the Land Division’s purpose, auditors found that DLNR leadership potentially cost the state tens of millions of dollars in unearned revenue, and maneuvered the division into a financially unenviable position for decades to come.

The Land Division is funded entirely by revenue generated from leases and land permits it issues to 1,600 DLNR-managed properties, but the auditors found that “strategically growing this income has not been a priority — or even a possibility — since the land division’s lack of planning has left its staff without the expertise, resources or options to actively and effectively manage its land portfolio.”

Auditors came across one instance in which the Land Division lost an estimated $16 million in annual revenue opportunities on a 10-year agreement on just 16 leases simply by extending short-term leases rather than issuing new ones at a higher rate.

When asked why the DLNR would lease state land for rates that are well below market value, one land board member — a former legislator who represented the Hilo district — told auditors that he was to blame “for having a soft heart,” explaining that some of the lessees are former political supporters and close friends.

In another example, auditors explain that the division recently entered into an agreement that will likely prevent it from collecting fair-market value on its single greatest income-generating property for decades to come by fixing rent prices through the year 2057, despite lease provisions requiring rent to be reassessed every 10 years.

When it comes to permits, “the land division is leaving even more of the state’s money on the table,” according to the report, which said an independent contractor reviewed a third of the division’s permits and discovered the total was $838,000 below fair market value.

“Since only a third of the land division’s revocable permits were appraised, an estimate of total lost revenue to the state is likely substantially higher,” the report added.

“In other words, the division is almost certainly costing the state well over a million dollars a year, in large part because the clear majority of those permits, which are meant to be issued on a temporary, month-to-month basis, are decades old and rent adjustments have been few and far between,” according to the auditors.

In addition to costing the state a fortune in unearned revenue, DLNR officials did not accurately account for the Land Division’s revenues, expenditures, transfers or available cash balances and underreported the balance of the division’s fund to the state Legislature by more than $1.5 million.

A financial audit of the DLNR as a whole in 2018 turned up a slew of other accounting discrepancies.

In response to a draft of the June audit, BLNR Chair Suzanne Case sent a six-page memo contesting many of the auditors’ findings. In the memo, Case objected to auditors’ opinions and characterizations regarding the Land Division’s strategic planning strategies, fiduciary responsibilities, implementation of policies and procedures, and efforts at financial transparency.

“The draft audit report includes useful recommendations in some instances,” Case wrote, before adding that the report “reaches a number of subjective conclusions based on the auditor’s interpretation of the public trust.”

In a rebuttal to Case’s memo included in the report, auditors wrote: “Instead of discussing the report during the exit conference, DLNR waited for its written response to raise questions about our audit findings. However, the department’s position is primarily unsupported, composed of cursory statements, most of which are inconsistent, contradictory, or misleading; some are simply wrong.”

•••

Caleb Loehrer, staff writer, can be reached at 245-0441 or cloehrer@thegardenisland.com.

7 Comments
  1. Remember When June 28, 2019 4:55 am Reply

    Remember when DLNR had their female officer stalk me at the hunters education class and sat by me at the tree and try to subtly question me? I pulled out my voice recorder and she left swiftly thereafter.

    You all was identified back then. DLNR public corruption was exposed prior to the audit and this article.

    Remember when.

    How about all of the “mainland guys” -D coming around and questioning the powers?

    I didn’t good work didn’t I?


  2. Rampant Corruption June 28, 2019 4:59 am Reply

    “Two state Ethics Commission reports in recent months revealed rampant corruption among DLNR employees in a Kauai division office.”

    You already know who’s involved. Kauai has exceeded it’s reputation as the Wild Wild West.


  3. LMat June 28, 2019 8:43 am Reply

    Soooooo, what is the county going to do about it…?


    1. numilalocal June 28, 2019 4:55 pm Reply

      The county’s not going to do anything about it. DLNR is a state agency.


  4. Debra Kekaualua June 28, 2019 8:53 am Reply

    So, TOP to bottom, including but not limited to guilty “stolen mailbox”, judiciaropolitico occupying military that continues to the heightened levels of corruption fraud collusion which includes Every county/state department directors, judges, lawyers, P.A. The entire operation “americanization” is frought with the super evil that has dismissed the line drawn in the cocopalms sand! WE are here, we never left, but we are held hostage by the regime that THINKS they are in charge and the intent to dismiss everything hawaiian including kanaka maoli. mAhalo investigators auditos. You uncovered only the tip of the iceberg, try check on our KPD officers and a recent test taking discovery that tell more deeply, what has been the agenda for six decades that ive been “paying attention”. Even our new mayor and his hui need to step down for continuing the RUSE! not america and not american!


  5. harryoyama June 28, 2019 7:14 pm Reply

    How can the State say that millions of acres of “state” lands are mismanaged by DLNR, when it still belongs to the Hawaiians, land stolen by the illegal overthrow of the Hawaiian nation?

    In any case the director of DLNR is appointed by the governor and approved by the state legislators, who are often “given” these land leases for pennies on the dollar and “massaged” by former “scratch my back” fellow legislators on the DLNR, who makes sure their buddies have below market value rates so they pay way less.

    Sounds like the method used in the corrupt DOE administration, where top executives approve sweet heart deals for former DOE executives who retire, then come back the next day as contractors getting special treatment and of course more $$$ secured for a very long time beyond the expired leases. Both DOE and DLNR are corrupt to the core and need to be investigated by the FBI not the State, which is ripe with friends and relatives of these corrupt DLNR as indicated by the Kauai division of the DLNR, of which the DLNR director who is Japanese and the retired former State legislators are also of the same Japanese descendants of the Japanese workers during the sugar plantation days.

    All these “scratch my back” that infest the DLNR, DOE and other State agencies that are infested with this race and it is noted by its 17% total Hawaii population status, yet they represent over 67% of all State agencies. So it is true that Hawaii’s government has been “massaged” by racist activity favoring this particular race to benefit itself at the expense of the general public it was designed to serve. Time for the Federal law enforcement like the FBI to investigate and jail these crooks like in the recent Kealoha case.


  6. rk669 June 30, 2019 4:29 am Reply

    Thank you AG Chin ,also Judge Watson.


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