Department of Land and Natural Resources officials say audit veered from original scope

Officials with the state Department of Land and Natural Resources were prepared to talk about contracts related to leased state lands but soon realized that state Auditor Les Kondo intended to go beyond what they thought the Legislature wanted from Kondo’s 2019 audit, DLNR officials Tuesday told a special House Investigative Committee that’s investigating Kondo and his office.

Russell Tsuji of DLNR’s Land Division said he reviewed the original bill directing an audit of DLNR’s management of state lands before the audit began — and again before his testimony Tuesday before the committee.

“It did talk about contracts and procurement, so I thought that was the focus of at least the bill, but also I understood Mr. Kondo believed that he had the authority to expand the scope and he decided to take the audit in that direction of RPs (revocable permits) and some leases,” Tsuji said. “So I don’t believe they asked to see many of our contract files during that time period, perhaps a few.”

Suzanne Case, chairwoman of the state Board of Land and Natural Resources, which oversees DLNR, added, “I think the bill also had language about ‘performance audit,’ and it was my impression that he (Kondo) interpreted that performance audit language as kind of a wide-open authority to look at whatever he wanted.”

Committee Chairwoman and House Majority Leader Della Au Bellati (D, Moiliili- Makiki-Tantalus) appeared intrigued by Kondo’s focus of the audit.

And she said her committee is curious that the audit appears lacking in details about DLNR’s use of third-party contracts and appraisals.

“The fact that this is omitted is also of concern to me,” she said.

“I have great interest in understanding what the scope was (of the audit),” Bellati said. “That’s interesting.”

Bellati told DLNR officials that she wanted all recorded interviews that Kondo’s staff conducted with them, along with any audit-related staff emails.

Pressed later in Tuesday’s three-hour hearing about what he thought the scope of the audit would be about, Tsuji said that in one of the initial meetings with Kondo and his staff, “I got the sense at one of those meetings that the scope was something that was surprising to me because he (Kondo) was giving me the impression that he was going beyond what I thought the audit was supposed to be about, which was basically contracts, procurement kind of situation at the Special Land Development Fund as to contracts and procuring of contracts.”

Tsuji said he expected the auditors “to evaluate and ask for the files for those contracts, and I realized that they were not. … They were focused on RPs. … I asked about that, and I think, if I recall correctly, Mr. Kondo’s comment was something to the effect of, ‘Well, that’s within my authority and it’s my decision, and I’ll do whatever I want in the audit.’”

Case began the committee hearing by saying she thought it was unusual that DLNR was not offered the opportunity to review the recommendations in the audit and offer responses.

“We did not see the recommendations until the audit was finalized, so we weren’t able to comment on those,” she said. “It was a very odd procedure, but we subsequently responded in writing to the findings in 2019, and then the auditor did request a status update in 2020 and we responded timely to that. And then the auditor did request another update in 2021, July 1. And we responded to that at the end of July.”

Like the DLNR officials, Kondo was subpoenaed to appear before the House Investigative Committee and testified under oath Monday.

He is scheduled to appear again Monday about his office’s audit this year of the Agribusiness Development Corp.

Both audits concluded that DLNR and the Agribusiness Develop Corp. suffered from poor planning and policies that affected their ability to properly manage state lands.

Bellati’s committee is reviewing — and seeking — thousands of documents related to both audits and told the Honolulu Star-Advertiser that hearings will stretch into October with witnesses who also will be subpoenaed to testify under oath.