Legislative Audit of NELHA Highlights Sunshine Law Concerns, Lack of Transparency

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The findings in legislative auditor Marion Higa’s report on the Natural Energy Laboratory of Hawai`i Authority (NELHA) should come as no surprise to anyone who has been keeping up with that agency through the pages of Environment Hawai`i.

The report, which was released to the public in late May, has little good to say about NELHA’s management since 1990. That was when the present administrative structure of NELHA was formed by the merger of the Hawai`i Ocean Science Technology (HOST) Park and the adjoining Natural Energy Laboratory of Hawai`i.

There’s the turnover in management: “Prior to the new administration, the authority had at least 21 heads in 37 years, the longest serving of whom served from 2005-2011,” the report states. (Although not mentioned by name, Ronald Baird, who was NELHA’s director for that six-year term, comes in for particularly scathing criticism from the auditor.)

Lack of transparency is another major issue that the auditor addresses. Although transparency and accountability have increased since Baird left and Greg Barbour took over last June, “there is still work to be done,” the report states.

Here are some of the report’s highlights. The full 51-page audit may be found on the legislative auditor’s website: http://www.state.hi.us/auditor/


NELHA’s Research Advisory Committee, authorized by statute, “is inappropriately operating as a ‘permitted interaction group’ in violation of the Sunshine Law,” the report states. A permitted interaction group, the audit states, “can be used for investigatory purposes and necessarily involves at least three board meetings and has a finite duration.” However, the RAC has virtually no public meetings, with its members commenting on proposals through email exchanges.

University of Hawai`i geochemist Don Thomas is the committee chairman, who customarily provides the RAC recommendations to the full NELHA board. He informed Higa’s staff that his committee, precisely “because of ‘Sunshine Law’ requirements,” did not recommend to the board that it accept or reject prospective tenants’ proposals. Rather, the RAC merely identified technical issues, possible financing challenges, or regulatory concerns” that the board could do with as it liked.

“This practice is of concern,” the audit states, “because the RAC chair appears to believe that the RAC is legitimately circumventing Sunshine requirements by behaving as a ‘permitted interaction group.’”

“There are several problems with this approach, and the Office of Information Practices concurs with our analysis,” the audit notes, and goes on to list at least four ways in which Sunshine Law compliance is required of the RAC. “The plethora of issues raised by the RAC’s scenario, combined with the apparent belief by its chair and the board that this behavior is legitimate, serve to highlight the board’s lack of understanding about the scope of the Sunshine Law and the board’s responsibilities under it,” the report states.

Sunshine Shortfalls

“Failure to understand basic Sunshine Law requirements hampers interested parties – such as tenants, private organizations (like Environment Hawai`i) and notably prospective tenants or other stakeholders – from discerning the board’s activities and methods,” the report states. Although NELHA has a policy to give an orientation to new board members, it has no formal training program – and in any case, “the orientation described in the policies and procedures manual does not include a review of [the] Sunshine Law,” the audit found.

Last November, an OIP attorney gave a 15-minute presentation on the law’s requirements to the board. “While we applaud this effort,” the report says, “we believe more comprehensive training is in order… The OIP provides Sunshine Law training upon request; its shortest training is approximately 45 minutes long, and its normal training is about two hours long.”

The audit makes special mention of two matters raised by Environment Hawai`i in the course of our coverage of NELHA: our concerns over the apparent lack of executive committee minutes, and the convening of a board meeting without public notice.

“In 2006,” the report states, “a private organization contacted OIP regarding access to executive session minutes from three years prior…. The authority subsequently re-created the previously missing minutes and provided limited access to them.”

“In 2007,” the report goes on to say, “the same private organization complained about not receiving notification of a board meeting despite being on the list of those to receive notice… The authority conceded this violation as well by voiding all action taken at the improperly noticed meeting and effectively re-doing all actions at a subsequent board meeting.” At the improperly convened meeting, the board approved issuing a lease to Megasoft and its fly-by-night owner, Venu Pasupuleti, for a wholly improbable computing facility; for details, see the May 2007 issue of Environment Hawai`i.

Altogether, the audit notes, “Seven complaints, several with multiple Sunshine issues, have been brought against the authority’s board since 2001. Of these, the board violated Sunshine in at least five instances.”

A Stalled Master Plan

The auditor questions many of the operational issues at NELHA, including a lack of uniform lease rent rates, lack of transparency in developing charges for seawater deliveries to tenants, and an absence of performance reporting. Its website (http://www.nelha.org) is “outdated and incomplete.”

Lease execution is “sloppy,” the auditor found; “Of 26 lease-type agreements reviewed, less than one-third were properly executed. The deputy attorney general usually did not date his signature. In one case, the agreement date was so illegible that it was unclear whether it was January or June, and the signatures were at least six months after the effective date and possibly 13 months after the agreement date. In another, the agreement date was blank and there were no dates on the signature page … Although such breaches do not invalidate the contracts, they do raise concerns about the authority’s and its deputy attorney general’s diligence generally in executing tenant leases.”

Fiscal information provided to the board is “unreliable,” the report states, with the management using a commercial program (QuickBooks) for in-house reporting that is not reconciled with the state’s program.

NELHA controls land that is leased from the state Department of Land and Natural Resources, which requires that the agency have a master plan. Up until last August, the official governing master plan was one crafted in 1976. As the auditor notes, the updated master plan was six years in the making. Environment Hawai`i reported on this stalled plan in March 2011, by which time the plan was complete but the contractor, Group 70, had yet to receive any payment for it.

“Reasons for the delay … are hazy,” the auditor found. According to one board member, “the consultant was given conflicting directions from the board and the then-executive director, who ignored board input and gave contrary advice to the contractor as to how to proceed.” A full draft plan was presented in 2009, but “NELHA staff refused to accept the final report until all numerical errors were corrected. According to both the consultant and current executive director, these errors were non-substantive … Delay in finalizing the master plan hampered the authority’s ability to move forward with its plans, ultimately affecting fulfillment of its mission and the mandate to become self-sustaining.”

‘Aggressive, Dismissive, Angry’

NELHA executive director Ron Baird was routinely given positive performance evaluations in annual reviews by the NELHA board. Yet friction between Baird and staff was often apparent to people attending board meetings. His dealings with Environment Hawai`i bordered on the hostile; he refused to take phone calls or questions and advised staff (we were told) against talking to us. Uniform Information Practices Act requests were dealt with via post. The Keahole Point Association, made up of NELHA tenants, had difficulty dealing with Baird as well.

The auditor captures some of the flavor of Baird’s tenure in the report. “Of the staff and tenants interviewed, many were concerned about the executive director’s communication style or tone, which was described as aggressive, dismissive, and angry. Respondents reported the executive director did not engage with tenants and preferred leaving it to the board. Some perceived the executive director to be unfair or partial.”

(Baird is now the government affairs officer for the Kona Civil Air Patrol. Last August, he was also named to a spot on the Kona Soil and Water Conservation District board, with a term ending June 2014.)

Since Baird’s departure, “the authority has made significant progress in a number of areas,” the report says.

Still, the report concludes with a series of recommendations that underscore how much work remains to be done to address the shortcomings it identifies. Many have to do with bringing the board into compliance with the Sunshine Law and other transparency issues. Other recommendations address such issues as staff training, development of key performance measures, and improved methods to derive seawater charges to tenants.

— Patricia Tummons

Volume 23, Number 1 July 2012

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