Dana Naone Hall 2087 Wells Street Wailuku, Hawaii 96793 Telephone: (808) 244-9017 Facsimile: (808

) 244-6775

February 24,2011

Via Email and U.S. Mail colettem@oha.org

Colette Machado, Chairperson and Board of Trustee Members Office of Hawaiian Affairs

711 Kapiolani Boulevard Honolulu, HI 96813

Re: Grant Agreement Between OHA and Kawaiaha'o Church Contract #1979

Dear Chairperson Machado and Members of the Board of Trustees:

This letter is a follow-up to my oral testimony offered during the Community Concerns portion of the Office of Hawaiian Affairs (OHA) Board of Trustees (BOT) meeting held on February 17, 2011, regarding OHA Contract #1979 - a grant agreement between OHA and Kawaiaha'o Church.

A number of beneficiaries, including myself, asked OHA to investigate whether the grantee Kawaiaha'o Church is in compliance with the terms and conditions of the grant referenced above or whether there is cause to terminate the grant agreement. Specific concerns about the use of ceded land revenue to support the multi-purpose facility project are detailed below.

StatutOry Framework

I. HRS Chapter 10

Section 10-17 (a)(6) HRS requires that grants provided by OHA "shall be used for activities that are consistent with the purpose of this chapter". Grant applicants must "comply with applicable federal, state, and county laws" and all "activities and improvements" funded "shall

comply with all applicable federal, state, and county statutes" (see §10- 17(b)(2) and (4)).

Receipt of a grant is contingent on an applicant's agreement to make available to OHA all of applicant's records "relating to the operation of the applicant's activity, business, or enterprise" in order to allow monitoring of "the applicant's compliance" with the purpose of Chapter 10 (see §10-17(c)(3)).

Another important provision contained in §10-17(c)(4) states that an applicant shall:

Establish, to the satisfaction of the office, that sufficient funds are available for the effective operation of the activity, business, or enterprise for the purpose for which the grant is awarded.

Furthermore, §10-18(d)(l) requires that every grant be "[mlonitored by the office to ensure compliance with this chapter and the purposes and intent of the grant."

II. HRS Chapter 42F

Because OHA distributes public (ceded) land trust funds for grants, it must do so in accordance with Section 42F-I03, entitled "Standards for the award of grants and subsidies", which begins with the statement that grants and subsidies "shall be awarded only

to ... organizations that

(2) Comply with all applicable federal and state laws prohibiting discrimination against any person on the basis of race, color, national origin, religion, creed, sex, age, sexual orientation, or disability:

(4) Allow the state agency to which funds for the grant or subsidy were appropriated for expenditure ... and the auditor full access to their records, reports, files, and other related documents and information for purposes of monitoring, measuring the effectiveness, and ensuring the proper expenditure of the grant or subsidy. (Emphasis added)

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OHA Contract #1979

III. Whereas Clauses

The first whereas clause recites the primary purpose of OHA "to better the conditions of native Hawaiians and Hawaiians". In the controversy involving the deliberate excavation of iwi kupuna at Kawaiaha'o to accommodate construction of a new building that is larger, by at least 10% than the foot print of the old buildings it is designed to replace, and attendant underground utilities installation, OHA is faced with having to weigh the interests of proponents of the church project against the express wishes of those who seek protection and preservation in place for ancestral burial sites. A cultural determination must be made as to which course of action would result in bettering the conditions of native Hawaiians and Hawaiians now and in the future.

The implications of OHA's determination are great.

The third whereas clause states that the multi-purpose facility is "designed to meet the needs of the Hawaiian community" by providing a facility which will "support education, culture, and social service programs "and the fourth clause notes that "this Capital Improvement Project ... will support the construction ofa facWty to be used primarily for non-sectarian purposes". (Emphasis added)

Kawaiaha'o Church has yet to demonstrate how the construction of the multi-purpose facility in the manner proposed will support Hawaiian culture. The disturbance of ancestral burial remains, whether Christian or not, is to be avoided and has long been acknowledged to cause extreme grief and distress to Hawaiian families. One way to illustrate this basic conflict is to substitute the name of a non-Hawaiian developer for the Church. In that instance would OHA have any doubt as to the culturally appropriate course of action? Kawaiaha'o Church should at least be held to the same standard as any other developer.

In fact, Kawaiaha'o Church's position on disinterring burials encountered during construction of the multi-purpose facility is at variance with its Proposal attached to Contract #1979 as Exhibit "A". Section II entitled "Problem/ Opportunity Statement" contains the following avowals in the fourth paragraph:

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... However, the need goes far beyond the renovation of existing facilities and the construction of a new building. Site preservation and the protection of valuable documents and archives and of the historic burial sites themselves are of primary importance, as well. (Emphasis added)

The language in the fourth whereas clause, which assures that OHA's funding for construction of a multi-purpose facility to be used for non-sectarian purposes, is consistent with HRS Chapter 42F.

The fifth whereas clause states that $ 1 Million is to be allocated over a three-year period ($500,000 in FY06, $250,000 in FY07 and $250,000 in FY08). There have been no amendments or extensions, in writing, to Contract # 1979 that I am aware of. Although most of the installments were paid, I have not seen any documents verifying payment of the sixth (final) installment of $25,000. There has been no actual construction of the multi-purpose facility itself. To date, only the demolition of Likeke Hall and the old administration building have occurred, along with the nearly completed installation of a sewer pipeline. This activity resulted in the identification of the human skeletal remains of 69 individuals. Many more burials are expected to be disturbed if this project moves forward.

In the sixth whereas clause, "the GRANTEE represents that it has the required qualifications to comply with the terms and conditions required under this Agreement .... " This recitation will be called into question through comments provided elsewhere in this letter.

IV. Section One - Scope of Activities and Conditions of Grant

A. Under this section the grantee is required to "perform all of the work specified and comply with" all provisions enumerated. Grantee agrees to construct a multi-purpose facility and is required to:

1. Conduct necessary cultural, archaeological or environmental assessments. Summaries of work are to include, but not be limited to, among other things, "initial surveys" due on or before July 31, 2006.

A final copy of "the cultural/ archaeological assessment" is also to be submitted.

No cultural impact assessment and no archaeological inventory survey were ever conducted for the multi-purpose facility. Nor was an environmental assessment ever done.

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2. Draft design schematics for the multi-purpose facility were due on or before July 31,2006. Comment: This deadline was not met.

3. A construction timetable and a revised budget of anticipated project costs were due on or before January 31, 2007. (Construction timetable updates are required with each progress report.)

4. The submittal of a copy of the executed contract with the General Contractor for off-site and on-site work was due on or before January 31,2007. Comment: Question whether this deadline was met.

5. Status updates on a Capital Campaign to raise funding necessary to complete construction was due with each progress report.

6. A status update on the permitting process was due with each progress report.

7. Construct a multi-purpose facility. Each progress report until project completion was required to contain details about site preparation, construction activity, and budget expenditures. Comment: This most important condition has not been met.

8. Site visits with an OHA representative to be coordinated at OHA's discretion, including access to "invoices, receipts, evaluation records and other documents as deemed necessary by OHA's representative" .

B. Assurance of Benefit to Hawaiians. This provision states that the multi-purpose facility will be used to provide services to Hawaiians, however, OHA must weigh the costs and impacts associated with the disinterment of iwi kupuna with the project's purported benefits.

C. Evaluation. Grantee is required to "maintain all relevant records, documents, and materials as deemed necessary by OHA to monitor and evaluate activities under this agreement" and "shall cooperate and participate in all monitoring and evaluation of activities under this agreement. "

D. No Comment.

E. Failure to Comply. "Failure to comply with any of the conditions of this Agreement shall result in" grantee's ineligibility for funding from OHA for a five-year period or "the termination of this Agreement, whichever occurs first." (Emphasis added)

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V. Section Two - Time of Performance

This section clearly states that the term of the grant "shall be from June 1, 2006 to and including December 31, 2008" unless the Agreement is sooner amended or terminated. As noted earlier, there has been no actual construction of the multi-purpose facility and I do not believe that there have been any amendments to this Agreement, in writing, approved by OHA.

In fact, on October 19, 2008, approximately two and a half months before the expiration of this grant, Kawaiaha'o Church held a special membership meeting to amend the congregation's original resolution adopted on June 1, 2003. The amendment included increasing the cost of the project from $10Million to $ 17.6Million and amending the church's contribution to the project from its Land Trust account from $5Million to $9.5Million. The notice for this special membership meeting stated that these changes were necessary "due to cost increases."

Approval of the October 19, 2008 resolution increased the Church's Capital Campaign fundraising obligation from $5Million to $8Million. It should be noted that the events described above all occurred approximately ten months before the filing of the lawsuits against Kawaiaha'o Church.

VI. Section Three - Award and Method of Payment

1. First payment of $500,000 made upon execution of the grant agreement.

2. Second installment of $125,000 made upon "satisfactory completion of Items 1-4" as outlined in Section One - Scope of Activities and Conditions of Grant and "satisfactory progress towards completion of Items 5-7" as outlined in Section One and upon receipt and approval of grantee's progress report, expenditure report and payment request due on or before January 31, 2007.

3. Third installment of $125,000 made upon "satisfactory progress towards completion of Item 5-7" as outlined in Section One and upon receipt and approval of grantee's progress report, expenditure report and payment request due on or before July 31,2007.

4. Fourth installment of $125,000 made upon "satisfactory progress towards completion of Item 5-7" as outlined in Section One and upon receipt and approval of grantee's progress report, expenditure report and payment request due on or before January 31,2008.

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5. Fifth installment of $100,000 made upon "satisfactory progress towards completion of Item 5-7" as outlined in Section One and upon receipt and approval of grantee's progress report, expenditure report and payment request due on or before July 31, 2008.

6. Sixth [final] installment of $25,000 made upon "satisfactory completion of activities identified in Items 5-8" as outlined in Section One, which are to be described in grantee's final report, final expenditure report and payment request and "shall be due no later than January 31, 2009".

Comments on the Expenditure Reports

I do not have grantee's final report, final expenditure report or payment request which would cover the period of July 1, 2008 through the end of the grant term on December 31,2008. Therefore, my comments on the expenditure reports pertain primarily to those periods preceding the last six months of the grant term.

For the period June 1, 2006 to December 31, 2006, the $500,000 initial payment of the grant was expended as follows:

$91,014.49 in payment of eleven invoices dated over

an eight month period for professional services to Ku'iwalu.

$313,742.00 in payment of two invoices for bookstore renovations to S & M Sakamoto, Inc. (The bookstore renovation is not a proper expenditure of the OHA grant funds since it was for renovation of an existing bookstore building into a wedding center and has

nothing to do with the multi-purpose facility construction.)

Kawaiaha'o Church noted at the bottom of the expenditure report "If specific invoices are required, we will provide them upon request." These invoices should have been included with the report. As a beneficiary concerned about the proper expenditure of public trust funds, I request that OHA obtain the specific invoices for all of the grant reporting periods.

For the period January 1,2007 to June 30, 2007, the $125,000 second installment of the grant was expended as follows:

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$29,025.82 in payment of seven invoices for professional services to Ku'iwalu.

$144,816.00 in payment of one invoice for bookstore renovations to S & M Sakamoto, Inc. (Again, application of

OHA grant monies to pay this invoice constitutes an improper expenditure since it is for a project other than the multi-purpose facility.)

For the period January 1, 2008 to June 30, 2008, allocation of funds from OHA's fourth increment funding of $125,000 was expended as follows:

$125,000 in payment of contract/invoice for sanctuary

windows and doors to Stan's Contracting. (This is another improper expenditure of the OHA grant, since it is for a project other that the multi-purpose facility. Furthermore, use of public trust funds for this project violates HRS Chapter 42F)

Section III. B. of Contract # 1979 states that

... invoices should be accompanied by an Expenditure Report certified by the GRANTEE to contain expenditures actually incurred for the performance of activities required under this Agreement.

In addition,

... OHA's preliminary determination of appropriateness and acceptability of the reported expenditures shall be subject to later verification and subsequent audit. (Emphasis added)

On behalf of OHA beneficiaries concerned about the apparent misuse of OHA grant monies, I request verification and audit of the appropriateness and acceptability of the reported expenditures questioned in this letter.

Section III. C. is a provision which details ways in which OHA may recoup misspent grant monies. Since the great bulk, if not all, of the grant has been paid to Kawaiaha'o, the following option is appropriate:

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.. .If, after payment of the last installment, investigation and examination reveal ... expenditures that are determined by OHA to be inappropriate and unacceptable, OHA may require that an equivalent amount of moneys be refunded by the GRANTEE notwithstanding OHA's preliminary determination of appropriateness and acceptability. An amount of moneys to be refunded ... may be offset against the amount of moneys withheld by OHA in determining the final payment to the GRANTEE in final settlement of this Agreement. (Emphasis added)

On behalf of myself and other OHA beneficiaries, I ask OHA to recoup grant monies paid for inappropriate expenditures

VII. Section Four - Coordination and Reports

This section makes it clear that the "Grantee shall submit

reports ... within the deadlines specified by OHA." (Emphasis added) Kawaiaha'o Church was required to submit its final reports for the period July 1, 2008 to December 31, 2008 no later than January 31,2009. I have a Request for Government Documents on me with OHA for the reports due on or by January 31, 2009. If OHA has located these reports, please provide me with copies.

The Grant further states that Kawaiaha'o Church is required to submit to OHA within 30 calendar days after the end of the agreement a final expenditure report and "a final report of services performed under this Agreement." Again, this report was due on or before January 31, 2009.

VIII. Section Five - Records Maintenance, Retention and Access

The grantee Kawaiaha'o Church is required "in accordance with generally acceptable accounting practices" to maintain all fiscal records and related documents that "relate to GRANTEE's performance of services under this Agreement." OHA and other entities shall have the right to conduct an audit or other examination "to assure the proper and effective expenditure of funds under this Agreement."

On behalf of OHA beneficiaries concerned about the improper use of grant funds, I urge OHA to conduct an audit.

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IX. Section Seventeen - Modification of Agreement

This section unequivocally provides that

Any modification, alteration, or change

to this Agreement, including modification of the services to be performed and/or extension of time of performance shaD be made only by written supplemental agreement executed by the parties of this Agreement. (Emphasis added)

I am unaware of any written supplemental agreement executed by the parties.

Conclusion

For all of the reasons stated above, and with the understanding that additional questions and concerns may be raised once further reports and documents are provided, I renew my request on behalf of myself and other beneficiaries that OHA enforce the provisions of Contract 1979.

Thank you for your prompt attention to these important matters. I would very much appreciate hearing from you no later than March 10, 2011.

Dana Naone Hall

c: OHA BOT attorney, Judge Robert Klein OHA staff

O'ahu Island Burial Council Descendants

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