Senate Standing Committee on Health and Human Services

The Committee on Health and Human Services, 1 p.m. calendar for notice of informational briefing is gonna be called to order. Purpose of this informational briefing is to review the administration and financial oversight of the governor's Kauhale initiative. Specifically examining the findings and recommendations detailed in the State Auditor's Report No. 26-11, audit of the Statewide Office on Homelessness and Housing Solutions' administration of the Kauhale initiative.

Agenda will focus on the execution of the emergency procurement and management powers, the reliance on nonprofit development partners, identification of unauthorized, unsupported, or questionable expenditures, including, but not limited to, the $13,700,000 identified by the State Auditor as questionable.

A discussion will address administrative internal controls, project planning protocols, predevelopment processes, performance outcomes, any evaluations and necessary corrective measures to ensure fiscal and program accountability while maintaining support for deep affordable housing and homelessness solutions.

So I just wanna make clear that we understand that the Kauhale as well as the Statewide Office on Homelessness and Housing Solutions have been very good about reducing the number of homelessness. It isn't to attack that. Daisy, you wanna come on up? But it is to determine the accountability of monies that were spent for the Kauhale initiative.

And we believe it is the Legislature's constitutional duty to provide the checks and balances for the administration and not just to rubber-stamp what it is that they provide.

Present with me are my committee members, Senator Samantha DeCorte. And also present is Representative Daisy Hartzop. And who will be coming in will also be WAM Vice Chair, Senator Sharon Moriwaki. And potentially she's coming up. Okay.

House Human Services potential Chair, Trish La Chica. Okay. And with that, Les Kondo, identify yourself and please proceed.

Thank you. I'm Les Kondo. I'm the state auditor. Thanks for having me today. I wanna begin by making clear...

Could you put the microphone closer to you? And I'm sorry. I'm gonna interrupt. So we're gonna have the presentations first in the order of Les Kondo, the auditor, making his presentation. Then we will have the Statewide Office on Homelessness and Housing Solutions, June Yang with interim director Joe Campos thereafter. And thereafter... You're right here, Trish. And thereafter, it will be Ernest Carvalho of HomeAid. And then there at Kimo Carvalho.

Kimo Carvalho. I'm sorry. Kimo Carvalho. Sorry. Kimo Carvalho and, yes, of HomeAid. And, and thereafter, we will have questions and answers. So, legislators, if you could hold your questions until after the presentations because your questions may be answered by the succeeding presenter.

Okay? And then we will have the questions and answers. So... Okay. So we have Trish La Chica here who is... You wanna identify yourself?

Aloha. Good afternoon, everybody. Trish La Chica, District 37, Central Oahu.

Okay. Thank you very much. Okay. Aye... Sorry to interrupt you.

Please proceed, Les Kondo. Yeah.

I'm Les Kondo. I'm the auditor. Thanks for having us today. I wanna begin to... By making clear what our audit was about and what it was not about.

We did not audit whether Kauhale should have been built. We did not audit whether the initiative helped people who are experiencing homelessness. Our audit addressed a different question. Did the state protect public money while it was building Kauhale? And, we found that it did not.

The Governor's emergency proclamations gave the state flexibility to move quickly to address homelessness. They suspended certain laws, including the state procurement code. But the proclamations did not suspend accountability. They did not relieve the state of the responsibility to protect public money. And that's what we found a fundamental error, a fundamental failure.

The state was responsible for reviewing HomeAID's payment requests, determining whether the expenses were appropriate, and ensuring that public money was spent in accordance with the contracts. But that's not what happened. HomeAID submitted payment requests. The state paid them. Some of the requests did not have supporting documentation.

Others included expenses, many expenses that should have raised obvious questions about why the state was paying for them. The state approved those too. In fact, during the period that we reviewed, the state did not reject a single HomeAid payment request. Not one. And the consequences, they were significant.

$13,700,000. We identified more than $13,700,000 in costs that were unauthorized, unsupported, or otherwise questionable. Now that doesn't mean every dollar was necessarily an improper expense. It means the State paid those costs without adequately determining whether they were authorized, supported, or appropriate charges under the contracts. $13,700,000 is likely not the full extent of the problem. We didn't examine every payment or every underlying transaction.

We didn't have access to HomeAid's contracts with its subcontractors, its vendors, its consultants. More than $13,700,000. That's what we identified from the transactions we reviewed. Some of the expenses, some of the questionable expenses, involve hundreds of thousands of dollars. Others were relatively small.

But many should have prompted someone to stop and ask a simple question. Why is the State paying for this? Today, I wanna show you some of the contracts, some of the budgets, some of the invoices, and some of the receipts that we reviewed. I think you'll see a pattern. Expenses that should have raised questions, documents that should have prompted further review, and payment requests that the state approved anyway.

Before we get to the expenses, there's something important you need to understand about the contracts. The state generally uses fixed price contracts for public works projects. Under those contracts, the state agrees to pay a specified amount for completed work. The contractor bears the risk that its cost will exceed that amount. These contracts are different.

The state used cost reimbursement contracts for Kauhale projects. That means the state was reimbursing HomeAid for actual costs it incurred, subject to contract terms and limits. That distinction is really important. Under a cost reimbursement contract, it's not enough that someone spent money. The State needed to determine whether an expense was for contracted work, whether it was reasonable, whether it was supported by documentation, and whether it complied with the approved budget.

Those determinations were supposed to be made before the State approved payment. Let me show you what the contracts required. This is a picture of... From the compensation provision of HomeAid's predevelopment and planning agreement. The first highlighted provision establishes that HomeAid would be reimbursed for costs and expenses incurred in performing the services under the agreement.

The second requires payment in accordance with the approved budget. Any changes to the budget require the state's written approval. That's important. The total contract amount was not simply a pool of money that HomeAid was entitled to spend. The approved budget established what the State had agreed to pay for.

Here's the budget from the predevelopment agreement. It identifies specific categories and amounts, personnel, professional services, telecommunications and other expenses. And there's something important that I wanna point out about the budget. If you look on the lower right hand corner of the budget, you'll see a signature block. The budget was prepared by HomeAid's executive director Kimo Carvalho.

It wasn't a budget the state imposed on HomeAid. HomeAid prepared the budget. I noticed that some categories had no money in them. Lease and rental of motor vehicle, staff training, subsistence and per diem. HomeAid could not simply move money around or add new categories without the state's written approval.

Excuse me. Do you mind if I just ask when you're referring to your report, the page number?

I'm not referring to the page number. I'm sorry if you... Okay.

Is, is... Excuse me. Is the PowerPoint up on the website? Yes. So if you look into the Senate portal under informational briefing, there should be the PowerPoint. There's also a link on the hearing notice.

Okay. So that that way... So that way you can follow along because we have asked, Les Kondo to summarize his findings because this is super long for him to do a PowerPoint on. Okay. So thank you.

So the budget established the money and the categories that were appropriate for HomeAid to submit payment requests for and what the state was obligated to pay. HomeAid couldn't simply move money around and add new categories without the State's written approval. And the State was responsible for making sure that didn't happen.

But checking the budget was only part of the State's responsibility. It also needed to determine whether the particular expense was necessary, reasonable and properly charged to the contract.

A receipt proves that someone paid money. It doesn't prove the state owed the money. The DAGS Public Works Administrator told us, he told us that his office used cost reimbursement contracts very rarely because of the substantial oversight they require. And his office is staffed with engineers, architects, and construction professionals. The state office on homelessness...

The statewide office on homelessness didn't have that expertise. But many of the expenses the State reimbursed didn't require construction expertise. They required someone to read an invoice, look at what was purchased and ask why. Why is the state paying for this? Let me show you what I mean.

The state entered into an $8,500,000 predevelopment agreement with HomeAid to identify potential Kauhale sites, prepare engineering studies and site plans, develop construction budgets, and produce construction ready plans and documents. Those were the services the state was paying HomeAid to perform.

But when the state selected HomeAid, the organization had very limited capacity. HomeAid's former executive director told us that when she left the organization at the end of 2022, there was only one employee, her. And its offices consisted of a desk in Castle & Cooke's office.

Within months, the state entered into the $8,500,000 agreement. Under the agreement, the state began paying for computers, office equipment, software, employees, office space, and other expenses associated with operating and expanding HomeAid. The state wasn't simply paying HomeAid to perform the work. It was also paying to build the organization that was supposed to perform that work. Let's start with computers and office equipment.

The State reimbursed HomeAid for laptops, monitors, keyboards, wireless mice, docking stations, printers, cables, and other electronic equipment. Some of those purchases were made directly from retailers like Best Buy or Amazon or Costco. These are some of the examples of what the state paid for. A 49-inch curved gaming monitor, a couple laptop computers, headsets, docking stations.

Computers and other equipment, they may be necessary to perform professional services, but the State needed to determine why these purchases were necessary for the contracted work and properly chargeable to the State.

And some of these purchases raised additional questions. HomeAid also purchased computer equipment through a company called MOB TechNet Solutions. This is one of their purchase records. MOB Tech appears to have purchased some of the... That equipment for HomeAid from CDW, a computer equipment retailer.

Other purchases included more monitors, docking stations, printers, Microsoft Surface Hub, which is, in essence, a digital whiteboard, a smart camera, more cables, laptop chargers, surge protectors, and other equipment. MOB Tech is located in Vancouver, Washington. And there's something important about the company. MOB Tech was owned by the brother of HomeAid's CEO's husband. HomeAid submitted more than $70,000 in charges associated with MOB Tech.

A family relation doesn't necessarily mean the transaction was improper, but it should have raised questions. HomeAid was already buying computers and other equipment directly from Best Buy and Costco and Amazon?

Why was HomeAid purchasing equipment through a company owned by the CEO's relative when it was already purchasing equipment directly from retailers? And what did the State do to determine the prices were reasonable? There are questions that should have been asked before the State approved payment, but there was another issue.

Sorry. Where did the equipment go? Let's look at the shipping invoices. The shipping address is on these orders. Vancouver, Washington.

The purchases included laptop computers and docking stations. These were purchases charged to a state-funded contract for work being performed in Hawaii. Yet the equipment was shipped to Washington State. Was it subsequently shipped to Hawaii? We found no documentation in the Statewide Office on Homelessness' files establishing that the equipment was subsequently received by HomeAid or used for the contracted purposes.

And Vancouver wasn't the only unusual shipping destination. Other equipment was shipped directly to an address in Mililani that appears to be the HomeAid CEO's residence, including four zero framed home office monitors. A laptop and docking station were shipped to Ocean View Accounting and Bookkeeping, a HomeAid contractor in Pittsburgh, Pennsylvania. Other equipment like a monitor and iPhone case purchased through Amazon were also shipped directly to Pittsburgh.

There may have been legitimate explanations for these, for these deliveries, but the state needed to verify that the equipment was received, accounted for, and used for contracted work.

Where was the documentation establishing that HomeAid received the equipment, who was using it, and whether it was being used for the state's project? The shipping addresses were right there on the purchase records. These were purchases made with public money and the state approved payments without adequately resolving these questions. And the computer purchases were just the beginning. The state also paid for HomeAid's ordinary office expenses.

Letterhead, logoed envelopes, business cards, pens, printer paper, shredder, and things that look like... More like household supplies, a stainless steel sponge holder, a mop, a paper towel holder, dish rack, door stops, Lysol disinfecting wipes, napkins, plates, plastic utensils, chopsticks, trash bags, coffee, creamer, seltzer, juice, and even beer.

We also pay for IT services to set up and maintain HomeAid computer systems and cybersecurity, even dark web monitoring. What's, what's about... What's that about?

Dark web monitoring. Look at the other services on the invoice. Antivirus malware protection, cybersecurity training, help desk support, firewall monitoring. The state also paid for HomeAid software subscriptions, including Adobe and DocuSign licenses, Microsoft 365 and Azure accounts, as well as accounting software, customer management systems, and password management applications. One software purchase particularly caught our attention.

The State paid more than $6,600 for a premium subscription to Kindsight. Software used to identify and research potential donors. In other words, software to help an organization fundraise. Why did... Was the state paying for software to help HomeAid raise money under a contract for predevelopment and planning?

We've seen how the state paid for computers, office equipment, IT services, and business applications, but HomeAid also needed people to perform the work. And as I mentioned before, HomeAid reportedly had only one employee at the end of 2022. The state knew HomeAid would rely on outside professionals to perform the contracted work. This is a provision from the predevelopment agreement. It specifically identifies engineering, architectural, and professional services.

Look at the highlighted language. The state expressly recognized that HomeAid would need to subcontract with third-party professionals and contractors to carry out the work required under the contract. And that was reflected in the contract's agree... In the contract's budget. The budget included more than $4,500,000 for subcontractors.

Those funds were intended to pay outside professionals for engineering, planning, architectural, and other services. But look at the other highlighted provision. The budget also included more than $1,600,000 for HomeAid's own personnel. That's $1,600,000 for salaries, payroll taxes, and fringe benefits. Months earlier, HomeAid reportedly had one employee.

Yet the state approved a budget with more than $1,600,000 for HomeAid's personnel in addition to the one... To the $4,500,000 for, for subcontractors. There's nothing inherently wrong about paying employees to manage and coordinate work of outside professionals. But HomeAid hired a contractor, construction management and development or CMND, to provide construction management services. So HomeAid had outside professionals performing much of the specialized work.

It also had a construction management contractor, and it had a separate $1,600,000 budget for its own employees. What exactly were HomeAid employees expected to do? How were their responsibilities different from the outside contractors? And perhaps more importantly, what did the state do to determine whether the personnel costs it was paying were necessary and reasonable? And there's another part of the story.

HomeAid needed to hire employees. And the state paid tens of thousands of dollars associated with recruiting them. That includes advertising job openings through Indeed.com and nearly $46,000 paid to a recruiting firm to help HomeAid find three employees, a project manager, an executive assistant, and a project administrator. The state also reimbursed HomeAid for temporary staffing. So the state contracted HomeAid to perform predevelopment and planning services.

It budgeted millions for HomeAid's subcontractors and employees, and then it reimbursed HomeAid for expenses associated with recruiting employees needed to staff its organization. Yet, we found no documentation showing the state adequately considered whether these recurring... These recruiting expenses were necessary, reasonable and properly chargeable to the agreement.

And this wasn't simply a budget issue. Through the end of 2025, HomeAid had requested nearly $970,000 in personnel reimbursements under this agreement.

And the state paid those requests. Under the agreement, HomeAid was required to provide an itemized or time sheet supporting the claims that it claimed... Supporting the amounts that it claimed. This is what HomeAid actually submitted. Employee names, positions, percentages of time supposedly dedicated to state work.

Where are the actual hours? Where is the description of the services performed? How could the State determine whether those employees actually performed work... Performed the work for which HomeAid was seeking reimbursement? The State was already paying outside professionals to perform much of the specialized work.

It was also paying for construction management services. And it was paying HomeAid's own employees, but the state needed documentation to establish what services those employees actually performed and whether the charges were appropriate.

Instead, the state paid nearly $970,000 in personnel reimbursements without obtaining documentation of the work performed as required in the contract. We've shown... We've seen how the state paid for HomeAid computers, IT systems, software, and employees, but the state also paid for HomeAid's office space.

More than $130,000 in office leases on Oahu and Maui, along with parking, utilities, common area maintenance fees, and nearly $79,000 for something else, an ocean view condominium in Wailuku. Who was staying there? Why did the state need to pay for the accommodations? And what did the state do to determine whether the expense was necessary and reasonable under the predevelopment agreement?

The state also reimbursed substantial insurance costs. Through September 2025, about two years after the contract's effective date, the state had reimbursed HomeAid almost $463,000 for insurance, including directors and officers liability coverage, cyber insurance, management liability coverage, and business risk insurance.

$463,000. Some insurance was required under the agreement, commercial general liability and professional liability insurance. But these other coverages raised questions about whether the State was paying to protect HomeAid's organization generally rather than the work performed under the contract. But the State wasn't just paying for HomeAid's office and accommodations. Sorry.

The State also reimbursed legal and accounting fees, including almost $100,000 for HomeAid's 2024... 2024 financial audit alone. These were substantial organizational expenses. The state needed to establish why they were appropriate charges under the predevelopment agreement. But HomeAid wasn't simply using state money to purchase equipment and services it needed to operate its business.

It was also paying outside consultants to help run the organization. The state reimbursed HomeAid over $243,000 for services provided by SDC Strategies, a company that provides strategic and organizational planning, capacity building, providing hands-on support, and facilitating meetings.

Here's an example of the types of administrative support the state paid for. The activities listed on SDC Strategies' invoice include organizing an employee's desk, picking up a gift and other administrative tasks. Similar administrative tasks appear on other SDC invoices reimbursed by the State.

But SDC wasn't alone. What did blended services mean? Several consultants submitted invoices, recurring monthly invoices, describing their work simply as blended services or monthly fees. Here's some examples. Hano Marketing received more than $150,000. Its recurring monthly invoices described its services as blended services.

Its principal was also a HomeAid employee. Ocean View Accounting and Bookkeeping submitted recurring invoices describing its services, blended services, accounting. Ocean View's accounting also worked for HomeAid. Rorinda Linsky's invoice was not much better. It said monthly fee.

She also became a home... HomeAid employee. Jeff Hately, a California-based CPA charged $7,500 a month and his voice... And his invoices described the services as consulting. These invoices which totaled more than $200,000 did not adequately establish the services the state was paying for.

How could the state determine whether the services were necessary, whether they duplicated work performed by HomeAid employees, or whether the charges were reimbursable, yet the state approved the payment requests anyway? And why mainland accountants? Jeff Hateley is not a licensed CPA in the state of Hawaii. HomeAid paid for Hateley and her Shalinda Cox and the accountant with HomeAid... I'm sorry, the accountant with Ocean View to travel to Hawaii.

Airfare, hotel, meals, grand tram... Ground transportation multiple times, including to attend HomeAid's orientation. And there was another consultant whose charges raised a different issue, Carrie Capoy. The state reimbursed over $406,000 of her charges. She appears to have two contracts with monthly recurring fees.

One for $26,000 and a second for $12,500. Almost $40,000 in monthly recurring fees. Her website describes her services as strategic management... Strategic planning and management. Unlike the other invoices, Capoeira describes the services that she performed in the month. Here's some examples.

Note the services that she performed. Communication, fundraising and donor support, strategic development, government affairs, setting up meetings, advocacy meetings, securing advocacy meetings in DC, organizing and facilitating legislative, legislative visits, managing media and communications and messaging, event coordination and planning.

Here's the issue. The state's predevelopment agreement was for identifying Kauhale sites, conducting studies, preparing plans, and developing construction documents. It did not originally include public relations or media relations services.

Yet, HomeAid's submitted the invoices for those services and the state paid them. Then in December 2025, last December, the state amended the predevelopment agreement to add communications and public relations service. December 2025, after the State had already reimbursed HomeAid for substantial public relations expenses, over $400,000

So why was the State paying for services that were not included in the agreement at the time the expenses were incurred? The fact that the agreement was subsequently amended doesn't establish that the earlier payments were authorized when they were made.

The state needed to establish that the services were authorized under the agreement before approving payment, not after the money was spent.

And there's still more. And these aren't isolated examples. The state paid $17,500 for HomeAid to be a presenting sponsor of the Hawaii Chamber of Commerce's Hawaii on the Hill Policy Summit in Washington, DC. It paid for HomeAid's promotional brochures, signs for donor presentations, hats, T-shirts. It also paid almost $15,000 in advertising in two local publications, Hawaii biz...

Pacific Business News, and here's another spread in Hawaii Business Magazine. And there are other expenses that were harder to understand. There are invoices for video production, more than $87,000, including filming multiple days of HomeAid's corporate retreat. The state even paid to register domain names. The state reimbursed, reimbursed HomeAid for a parking ticket.

Hats, shirts, jeans from Nordstrom Rack for a HomeAid staffer, steel-toed boots, shoes, a truck bed cover, a two week car rental for a HomeAid CEO while his personal car was being repaired, and even filing fees at DCCA to establish HomeAid's two liability... Limited liability companies. And there were also numerous food and beverage expenses. These expenses ranged from relatively small purchases to expenditures of thousands of dollars.

But regardless of the amount, the State had the same responsibility: determine whether the expense was authorized, necessary, reasonable, and properly chargeable to the contract.

There are substantial travel conference related expenses as well as car rentals that the state reimbursed. State reimbursed HomeAid for many, many hotel still stays, rental cars, Uber rides, airport parking, meals, and expenses associated with attending conferences.

Those included the CEO's trip to Washington, DC for the Hawaii on the Hill event, to HomeAid America's conference in Utah, the Urban Land Institute conference in Las Vegas, and the National Alliance to End Homelessness Conference, also in Washington, DC.

It also paid for travel associated with HomeAid's own internal training and orientation activities, including airfare, hotels, meals, and ground transportation for HomeAid consultants brought to Hawaii from the Mainland. But there's something else about these expenses I wanna show you.

Remember the budget I showed earlier? Let's go back to it because now you're seeing some of the expenses the state paid. Look at the three categories. Lease and rental of motor vehicle, zero. Staff training, zero.

Subsistence and per diem, $0. The budget did not contain any money for these expenses. In other words, HomeAid agreed that it could not directly bill these type of costs absent a budget revision by the state, approved by the state. But HomeAid billed the state for them anyway. How?

HomeAid charged the expenses to other budget categories, squeezing the square peg into the round hole. Rental car was charged under transportation. Notice what else is charged under transportation. Hanblue for photo ops... Photo props.

iStock for stock images of Hawaiian Islands. There's another. Rental cars, but also signs today for board vision road map book, booklets. Hotel accommodations were charged under lease and rental of space, airport parking too, and certain conference related expenses, including Hawaii on the Hill, were charged to publication and printing. These were not budget categories that ordinarily describe those expenses.

The agreement required the state's written approval for changes to the budget. So where was the written approval to charge these expenses to other categories? And why did the state do... And what did the state do to determine whether the charges were appropriate? The approved budget was supposed to control what the state paid for.

It wasn't simply a list of categories HomeAid could use to get reimbursed. Yet the state approved these expenses without adequately enforcing those budget controls. And this wasn't the only way HomeAid charged expenses without following the approved budgets. Let me show you what happened with the contingency funds under the development agreement. Most of HomeAid's contracts included contingency.

In total, nearly $2,500,000. Contingency is a reserve for unexpected project costs. For example, additional excavation costs because of an unforeseen underground obstruction. Contingency is not a slush fund. Under these contracts, HomeAid needed the state's written approval to revise the budget and transfer contingency funds to the appropriate expense category. But that did not happen.

HomeAid charged expenses directly against contingency without require... Without obtaining the required written budget approvals. In several contracts that were closed before the end of our audit period, the contingency balance were reduced to zero. Look at some of the expenses HomeAid charged directly against contingency in Kipa Ola. Starbucks, airport parking, even airline tickets.

What unforeseen conditions justified those charges? And where was the state's written approval to use contingency funds for them? The state paid these expenses without enforcing the budget controls required by its own contracts. But the problems weren't limited to the state... To the expenses the state reimbursed.

There are also questions about whether the state adequately accounted for resources that were supposed to benefit the Kauhale projects. Let me give you an example. A $49,000 in-kind donation associated with IHS, the Institute for Human Services. IHS had been contracted by HomeAid to provide FF and E, furniture, fixtures, and equipment at Alana'olapono, which is the Iva Lake Kauhale. This is IHS's billing to HomeAid, which was submitted to the state for reimbursement.

This is the value of the FF and E the project received, $218,906. But IHS received an in-kind donation of $49,360. Almost $50,000. So, the amount that IHS incurred and wanted reimbursed is $169,514.45, $170,000 However, HomeAid requested and the state paid the gross amount, $218,906. So, what happened to the $49,000 contribution? The state paid the full amount, $218,906, including the value of the in-kind contribution. That raises the obvious question.

If the donation was intended to offset project costs, why did the state pay for the amount as well? And who ultimately received the benefit of the contribution? Let me show you another example of the state's failure to protect public money. This involves the tiny homes contract. The state entered in agreement with HomeAid to acquire 273 tiny homes for the Kauhale initiative.

It required HomeAid to design, build, transport, and deliver 273 homes to locations specified by the state. And I quote that, to locations specified by the state. Like the other agreements we discussed, this was a cost reimbursement contract. The State was supposed to reimburse HomeAid for costs incurred under the agreement. Not simply pay HomeAid the entire contract amount.

But that's what happened. The state paid HomeAid the full contract amount, $5,860,000 in October 2024. Yet at the time, at least 128 of the tiny homes were still in Korea. Yet the contract required HomeAid to deliver to the location specified by the state. According to the homelessness coordinator, he accepted delivery in Korea.

Then who is responsible for this cost of storage, insurance, ocean freight, tariffs, and import fees, and the remaining transportation costs from the harbor to the location specified by the state. And there's another part of this story. This is HomeAid's closeout construction report for the tiny homes contract, final. First, it reflects that HomeAid was the general contractor and its staff served as a project manager. But there's a second page.

The reported expenditures that raised a big question. According to HomeAid's cloud... Closeout construction report final, its expenditures were less than the contract ceiling by more than $726,000. The State had already paid the entire contract amount. But HomeAid's own final closeout report showed expenditures more than $726,000 below the contract amount. The State had already paid the bill in full.

What did the state do to reconcile the difference? So why did the state pay the full contract amount, the full contract ceiling? Let me show you another example. This is the approved budget that is part of the state's contract with HomeAid for the first phase of Ka Malu Ko'olau, which is the Ko'olau Kauhale. The contract was for $1,600,000.

Notice that it includes a budget for project management of $150,000, but it does not include any overhead. Well, look at what HomeAid included in its final payment request. Project management and development. That's a category that's not in the approved budget. HomeAid also added an indirect...

10% indirect line. There is no indirect costs in the approved budget. In total, sorry, together that's more than $500,000, $508,000 in charges for categories that were not in the approved budget, yet the State approved the payment. And those charges exhausted the remaining contract balance to the penny. But there's another problem.

This is the invoice submitted to support the charges. Look at the description. Government services. That's it. Nearly $462,000 described simply as government services.

What services? Performed by whom? How did the State determine that those charges were appropriate? These are basic questions that should have been answered before the payment. This is not an isolated example.

In the final payment request for Ho'okahili'o, which is the Middle Street Kauhale, HomeAid again added project management and development and indirect costs that were not included in the approved budget. Those charges totaled more than $313,000. And once again, those charges exhausted the remaining contract balance to the penny.

And I wanna briefly address some of the statements that I've heard from the governor and from the HomeAid CEO. The governor has characterized our findings as old news and stated that the problems have been corrected.

The state has recovered over $400,000 in costs, a lot less than $13,700,000, and that our recommendations have been accepted.

HomeAid CEO has repeatedly referenced or referred to a reconciliation clause in the contract and to amounts that HomeAid has credited or reimbursed to the state. I wanna tell you what both of these folks are saying. What they're telling you, what they're telling us. They're telling us the same thing. Keep driving.

Nothing to see here. Keep driving. Nothing to see here. The documents tell a really different story. I think there's a lot to see.

In fact, much, much more than what I showed you today. Moreover, recovery... Recovering some of the money does not establish that the remaining questionable costs were appropriate. We identified more than $13,700,000 in unauthorized, unsupported, or otherwise questionable costs. Second, there is no contractual provision establishing a general reconciliation process that relieve the state of its responsibility to a route...

To review and approve costs before payment. There is no reconciliation clause in any of the contracts. In fact, the contracts require HomeAid to certify that the expenses it submitted were incurred in performing the contracted services. And in most, but not all, of the payment requests, HomeAid certified the expenses had not previously been reimbursed. Yet, HomeAid subsequently did credit the State for certain costs.

And this is what the credits look like. Here's an example. Reconcile to remove expenses on prior invoice. Another example, remove previously invoiced double billed on prior... I'm sorry.

I can't read it because I see the stuff in front of me. But the credit raises a different question. Why were the expenses included in the payment requests in the first place? And why didn't the state identify the problems before approving payment? The issue is not simply whether HomeAid eventually returns the money.

The issue is whether the state had adequate controls to protect public money before it was paid. Our audit found that it did not. I also have little confidence that things are fixed as the governor believes. SOHHS is a policy office. The Statewide Office on Homelessness is a policy office.

It does not have construction or public works expertise ordinarily needed to administer these con... These types of contracts. It admits as much. And that experience matters. For example, how does the state determine whether the amount charged to excavate a trench is reasonable?

Whether the quantities of piping and other materials billed were actually installed? Whether the labor rates and fringe benefits were appropriate? Or whether additional charge... Additional charges reflected genuinely unforeseen conditions rather than work already included in the contract? Those are questions that require construction knowledge and expertise.

But many of the expenses I've shown you today require no such expertise. They required someone to examine an invoice, compare it with the contract, and approved budget, and ask what the state should be paying. And ask whether the state should be paying it. And that's the... That's even...

And even that basic level of scrutiny was missing. The coordinator told us that he'd implemented a policy in the summer of 2025 requiring supporting documentation for payment requests and that he would personally review those requests before payment.

But many of the expenses I've shown you today, they were paid after the policy was implemented. They were invoiced and paid in October, November, and December 2025. And requiring receipts is not the same as determining whether expense is authorized, necessary, reasonable and properly chargeable to the contract.

As I said before, a receipt shows that an expense was incurred. It doesn't mean the state must pay it. And that is the fundamental weakness our audit identified. So I wanna close here. I wanna return to where I began.

Our audit was not about whether Kauhale should have been built or whether they have helped people experiencing homeless... Homelessness. Those are separate questions. Our audit was about the state's responsibility to protect public money. The state had a responsibility to determine whether expenses were authorized, supported, and appropriate before paying them.

It failed to do so. And unless the state addresses the fundamental weaknesses in how it administers and oversees these contracts, public monies will remain at risk. Emergency auth, auth... Emergency authorization or authority allowed the state to move faster, but it did not res... It did not relieve the state of the responsibility to be accountable for how public money is spent.

Okay. Thank you very much. And stick around for questions later on. So I, I want to also point out that, Vice Chair Senator Sayama is on Zoom. Okay.

And I, I, I may have misstated Representative Hartsfield's name. Could you identify yourself, Representative?

Sure. Aloha, everybody. I'm Daisy Hartsfield, State House Representative of District 36.

Mahalo. Okay. Thank you very much. Okay. Next, we have Jun Yang and Joe Campos. We're gonna need another Chair up here. Yeah. So it's up to you, so it's up to you folks who wants to present what and identify yourselves. Okay?

Okay.

You have your laptop?

We have your... You guys are just gonna trust. Yeah.

Okay. And I believe we have your PowerPoint up. Yes. Okay. So you folks can, so the public can watch along.

Good afternoon, Chair, Vice Chair, committee members, House Representatives, Chair. Joseph Campos, director, Department of Human Services since May 2026.

Jun Yang, homeless coordinator, state by the office on homelessness and housing solutions.

Okay. Please proceed.

Yeah. And I'll allow Jun to proceed providing the presentation and explaining the situation. I'm here because ACK 309 from 2025 as the coordinator of the SOHHS reporting directly to the director of human services.

Which is you interim since May 2026? Yes.

Permanent. Okay. And then to be confirmed later.

Thank you for the opportunity, Chair and and, members today. The office for the statewide office on homelessness and housing solution was established in its current form in 2022 through act two fifty two as an attached agency to Department of Human Services. Prior to this time, the office was a temporary special project. From 2011 to now, the only constant is the position of the homeless coordinator as the Chair of the Hawaii Interagency Council on Homelessness.

The office has grown along with the growing efforts to make significant impacts on the issue of homelessness.

Drawing from traditional Hawaiian village style living, kohale, our community, is centered on shared responsibility in Kuleana and a sense of belonging among neighbors. The initiative begins with investment in public and private resources to build safe, welcoming places for people coming off of unsheltered living and out of emergency care. We have been able to use underutilized public land using innovative prefabricated structures, also working with our homeless service providers across the state.

We have been able to stand up projects quickly to serve populations, including survivors of domestic violence, those transitioning out of the legal system while being homeless, Kupuna, those needing behavioral health support, mental health support, our youth and young adults. Innovation is a big part of the approach of our office through this initiative.

The partnership with the city and county of Honolulu established the B+HARI Brain Health Kauhale, helping to create a healing place where native Hawaiian ideals direct the operations of the program. The B+HARI project is one that is in partnership with Harvard and the Institute for Human Services.

Exciting how Hawaii can be a first in the nation to couple Brain health care with native Hawaiian cultural understanding to build stronger programs to support our community, especially those that do not have the financial resources that programs like these would require in other places. Since 2023, we have created 26 places for individuals to heal quickly. This includes pilot projects such as our proof of concept in the Department of Health parking lot along Punchbowl and Miller Street across from the Queens Medical Center.

Palama Ola was a 10 unit medical respite project that served individuals to heal who would otherwise be forced to attempt to heal in unsafe, unstable, and unsheltered environments, leading many to enter emergency departments in a never ending cycle of partial care cancer patients with those suffering with extreme infections, those needing more than a week of in bed care by medical professionals.

We closed Palama Ola, stood up under the leadership of former homeless coordinator James Kashiba, and transferred the units from the Department of Health parking lot to Middle Street to begin the work that created the first phase of. We have three Kauhale projects on Hawaii Island, three on Maui, one on Kauai, and many more on Oahu. In the near future, we're looking to build another two projects on Hawaii Island and have already identified the sites and informed the legislature in the last two sessions about these plans.

Why is the Kauhale initiative different from any other initiative that we have worked on?

Our Kauhale initiative is different from the work in the past. This is in no slight of any way to the previous efforts and previous administrations. The Kauhale work has coupled rapid assessment of land with innovative building, looking at opportune partnerships to quickly create programs to serve families. In the time that we've been working, we've been able to build and create 950 beds to serve the target populations.

A number of these projects have transitioned or closed over these four years, including the pilot project at Palama Ola, on Maui, the Punawai medical respite, the Le'ahi be...

Behavioral health, and the Hilo overnight cop program. Some of the projects named here are still operating, such as the overnight COP program and the Le'ahi behavioral health program. These have been taken over by the counties. Why is this different? We're not building shelters.

We're building communities that reconnect people to networks of healing, healing body and spirit. This includes healing family relationships, learning again what it means to be a good family member, a good friend, a good neighbor. In our Kauhale, we are building opportunities to grow. Folks are getting better and good paying work. An example of this is the Kipa Ola Kauhale on Maui.

This site partnered with the Building Industry Association to host and train a number of our residents, and they all participated together. At the end of the training, four of the cohort were given full time positions, giving livable wages for the first time in a long time. Imagine people accessing our call holiday programs, rebuilding their foundations, saving money, and moving into market units, hopping and skipping over the wait list of affordable rentals directly into market units.

They move from taxpayer taxpayer assisted programs to participating in the tax base. We have created nine fifty units.

We have served over 3,140 individuals in these programs. We find programs on each of our major islands. Now, the statistics that we see here, we see a dramatic change from 2024 to 2026. There's a very sharp turn. The orange and green lines make sharp turns both in directions that we have not seen in many years.

Our unsheltered numbers have fallen sharply to numbers near 2018, when, in 2018, we saw major developments in permanent supportive housing across the state. Now, today, we see more people sheltered and less people on the street. Every initiative, every action is a part of this effort. But the most dramatic change to the homeless response system is the addition of nearly 1,000 new beds and units. I speak of how this system has been holding on as best as it can until now.

Now, with the Kauhale initiative, the system may be able to make bigger steps in response since we created housing places for people to enter into to begin the pathway to healing. I speak about the work of our office, what we've been doing. In reality, it's a network of hardworking homeless service providers across our island chain that work tirelessly to help individuals move from unsheltered to sheltered to permanently housed. All of our Kauhale have homeless service providers operating the facilities.

Hawaii Health and Harm Reduction, the Institute for Human Services, Hope Services, Project Vision Hawaii, US Vets Catholic Charities, the YWCA on Kauai and on Oahu, Mental Health Kukua, Halakipa, Alternative Structures Incorporated, Kealoha West Oahu, The Salvation Army.

Without them, how would we see the dramatic reduction in unsheltered homelessness in our state? And with them, the operating funds have come from the wisdom of our legislature who passed budgets that allow for the development and the operation of these programs to bring hope, health, and housing to the people. So I wanna say thank you. Now regarding the audit. Yes.

Yes. Thank you for that introduction. And

thank you, Senator, for coming in. The audit, we feel that it misses the point. Act three zero nine in 2025 directed to perform an audit and deliver it to the legislature for the twenty twenty six legislature session. The letter to initiate the audit was dated in late August. And in our initial interview, the auditor and team informed that they would be looking at the work of the office but seemed keenly focused only on the development work of the initiative.

The timing for me is questionable. They asked for information, then did not meet with the office before the April letter to the legislature. This is an action that I have not seen anywhere. It's not a finding. It's not a final report.

It did not ask for action. It was a shot at the office without initially asking if the questions were warranted. It seems, Don at the time, was trying to influence the legislative budget process in April. As an independent auditing entity, this is, quite frankly, a political action that seems to be outside of its mandate. But we have worked through this process and waited for the final report to the legislature delivered 10 men's...

Ten months behind the delivery date set by the legislature with a focus solely on development and not on development and operations. The audit included commentary on a project not within its scope and one that we did not have anything to do with in this office. It seems it was framed that it was to frame the office and the developer in a light that was not in any way accurate and was purely biased for the sake of tabloid excitement and not dispassionate analysis.

It felt editorial, actually, not professional. Finally, the audit failed to mention if and how the projects that the auditors focused on were actually operating to deliver the services that they were created to do.

I have to let you know all the projects are, and the auditor did visit many of them and saw people being served there. My presentation today is a humble effort to correct the record. The office has been working over these four years under multiple leader... Leaders with the sole focus of delivering to the community effective programs and projects that will improve the lives of individuals and families within our community that are experiencing homelessness.

Today, I will attempt to show that the work that has been accomplished had been effectively been shown to make a difference in the lives of members of our community.

Okay.

So you know what? You got fifteen minutes left for your presentation. I really want you to focus on the audit. And that's the reason why I preface this with... We...

Senator. We we admit that you folks have reduced homelessness.

I'm just about

to Good. Okay. But we really need you to focus on the

The auditor had about forty five minutes. So Well, because I'll run real quickly through these slides. Thank you very much, Senator.

Thank you.

I appreciate it.

Otherwise, we're gonna accept what he says as gospel.

Well, I'm I'm just about to get into the audit right now.

Response. Thank you

very much. The initiative and projects they've been working on have made an impact on efforts across the state, and we agree that the oversight of the project is an important part of the management of the contracts k. To ensure that we are delivering the service and development in a timely and effective manner. Absolutely. Through the process, we found invoices that may have not been in line.

When we encountered these chain charges, old or new, we informed the contractor that we have and as we have done in other contracts, including including our service contracts. These items were brought up in discussions with the contractor and were addressed quickly. The audit remains focused on two main contracts, the predevelopment and the Alana Ola Pono contracts. The issues that were raised are not insignificant. No.

But we have resolved them already. For one, the Alana Ola Pono Kauhale in aye vote Le has been delivering services to individuals since we opened in the site in 2024. I would be concerned if these sites were never delivered and opened, but that has never been the case. Each of our private... Projects have opened.

Each of our Kauhale are sheltering and housing individuals. I'm the first to admit that the change in who is driving this office also... Also staff changes have created some gaps in management. But from the moment I joined the team, I have worked to improve the processes while continuing to work on delivering solutions and projects to our communities across the state. We work to manage the service contracts, development design plans, and development contracts appropriately.

In my time since just before the beginning of March twenty twenty five, I've worked to incorporate the right staff into positions that we have, assessing the needs of the positions, creating procedures and practices that match the needs of the jobs we have. I've righted and hired individuals that have experience that are necessary for the work placed before them, and we are requesting more positions to help the office meet the need. The cedar church case study. As an example, I've included the cedar church project.

This was highlighted in the audit report as well in in a recent news article.

There seems to be a misunderstanding of the reason for my action towards a church whose only desire it was to serve homeless individuals in the Kalihi Area. Some background, the state does not own the land. It is a private property. There is no formal executed contract or description of how operations would work on the site. First of all, I have no ill will towards the church.

Some of you may know that I actually used to be the lead organizer for Faith Action for Community Equity that worked together with Jewish synagogues, Buddhist temples, Christian churches, and Unite Here Local five. Actually, I have a long history working with churches since I myself am a child of a retired pastor and now who is a missionary. My concern was with the legal agreements between the nonprofit and the state. There was work done by other groups to help the church and to power the units.

Once I joined the office, I could not find a legal agreement that would delineate how the Calhale would operate within a church property that is holding weekly Sunday services or daily early morning prayers at 6am, weekly Wednesday night services, safety of the participants became a major concern for me, not by those at the church, but by open facilities for people in the community since there is no way to clo...

Close the facilities in a way that would also make it usable for church operations. This picture for the This picture for the drawings, as my staff reviewed that information that we have had and visited the site, they observed some things that may be... That may become safety issues later on. I felt the need to act quickly, and I've included some documentation in the presentation to show how the work was presented to HECO.

The image on the left was a scat the schematic drawing submitted by the people working on that project.

These are not my our contractors. HECO was not able to approve these plants. The image on the right shows the electrical plants that were usually submitted to HECO as an example of the work by the office's contractor for approval of the site... Of other sites. Those on the right were approved and installed at another location.

This final one for the the case study is... This is a background letter for taking action for... In the manner that I did. I take responsibility for the speed and manner of action, but I felt it was necessary to find a resolution with the church since there was looming liability issues. I'm glad to hear that individuals are being served in the facility, and they're able to figure a way to move forward.

I did not find a way. I could not see a way that we could have a path forward with the necessary safety requirements that would be needed for safe participation by individuals in a program that the state would sponsor.

This is one example of the actions that my office is working to do to correct the things that need correction, to improve the things that need improvement, to employ best judgment and practice while delivering on the promise that the administration has made, which is to serve the people in our community who are experiencing homelessness to serve them and deliver units and supportive programs to bring healing to the whole person. The predevelopment contract. The office created this, this agreement.

The state needed to quickly assess properties for development scope and feasibility. This process and contract was drafted by a prior coordinator and executed during his tenure. More than 50 sites have been assessed all around the state. Actually, it's more than 60 sites. State parcels, local government parcels, even private parcels.

Assessments include preliminary engineering reports, geotechnical surveys, site surveys, topographical surveys, and basic conceptual and site layouts. Along with these studies, preliminary budgets and other plans were generated as projects progressed, community outreach, utility utilization, pre engineering feasibility studies, and basic schedules were produced. In my time in this office, I have reviewed the invoices, and I found the vast majority of costs to fall in line with the work required as as well as falling within the budget.

Where there were any discrepancies, we have required the contractor to refund to the state amounts in contradiction. We have reviewed the contracts and the invoices.

Review regarding the $7,700,000 $2,500,000 was an invoice that included costs for the preparation of the site for development, Erosion control, dust fencing, ingress egress installation, geotechnical barriers installation, deposits for handling, dumping waste materials, and base material, environmental monitoring services, site deposits for excavation and demolition of groundwork. Remaining invoices for Alana Olupouno were reviewed and the charges were consistent with the work delivered. This is a site that houses 45 tiny housing units and has served hundreds of individuals into permanent housing. Kamala...

Kamalu Kou Lau Phase one, and phase one, charges for about a million dollars as stated in the audit.

Actually, it's $901,000 and some change for project management. These are allowable costs to the project. We found no issue with the charges. If the invoices were only charged in a Linear manner, meaning January 1, invoice charge, December 31, invoice charge, in a Linear manner, then I can understand confusion about how this was was brought to the state. But the projects included charges from early...

Earlier and later in the project's life. We will ensure and review each concern once again, but in these two instances, we do not concur with the auditor. Concern about $100,000 $110,000 for zero funded categories. All of these items have already been reimbursed to the state even before the audit report was delivered to us. Dollars 4,100,000 in contingency.

This is prior to me joining the office, yet $992,000 in the tiny housing contract. We have to remember that this was a tiny housing stick build contract that included in its an an addendum, a move to 128 Korean units built for the Maui, location. $476,000, Alana'olapono. We know that this site needed more time, and so extended time for generator fuel pumping and HECO connection were all incorporated as well. A $123,000 for Hokai Leo.

This also has extended generator and fuel cost pumping and also other design work for changes to the site. There's some unknown figures of expenditures above the approved category, But when we look at all of these, no cost over the contracted budgeted amounts. The unsupported $1,000,000 in predevelopment. All invoices have been reviewed so far. Personnel costs are allowable costs.

Reports for survey and work delivered have been submitted to the office. Over 50, 60 sites have been surveyed and studied for appropriateness. We will, again, review all of our invoices. At this time, we do not see, we do not concur with the auditor. $2,300,000 in questionable the $5,000,000 categories.

2.3 to predevelopment for site assessments. Question about rentals compared to hotel costs at the time. We have to remember that this was during the wildfire response. Hotel room vacancies were at at the extreme low because we were housing survivors of the wildfire. Units per night were over $1,000.

Any invoices that were incorrectly built in this category have already been refunded to the state... In the state in discussions over this summer. The corrective action, my letter to Homemade. As shown in this slide, the Office initiated action before the audit report was delivered, and it even mentions in the final... It is even mentioned in the final report to the auditor.

In total, dollars 13,700,000 is a figure that was created, I feel, shock value to... During political moments. I value the auditor's work and appreciate his staff's time. Perhaps by December 2025, the only information that he had only allowed him to come to this conclusion. When we approached Homemade, we had questions about the number of charges that may not be appropriate for the contracts that we manage.

We had other con... Questions about categories that were invoiced when they were submitted in. These are conversations that I have had with other contractors as well, not just homemade. The total or miscategorized in charges that were not appropriate to our contracts added up to about $1,500,000 of which over $500,000 were refunded to the state through my offices, and those that were miscategorized were corrected. These refunded items are the items that we have been highlighting in the final that have been highlighted in the final report.

In each of our contracts, we have provisions that state... That protect the state and allow the office to claw back any charges we feel are out of scope. This is something I have done in my other employment in the past as well. In my discussions with Homi, these charges were not done with malice or in... Ill ill intent.

They informed me that these were not charges miscategorized... I I apologize. They informed me that these were charges miscategorized by the software or staff that were not familiar with working with the state. They have remedied their in house process. My office will continue to monitor closely all charges from all of our contractors.

At the end of the day, what we want to leave you with are state leaders. The Kauhale initiative was created in a way to deliver projects rapidly because we have crisis situations. For further, we are not utilizing the predevelopment, contract style any longer. They will all be site specific and inform the legislature through its progress, as we have done in the past two sessions. In my preparation for today, I was let down an led down an interesting statistical path as my conclusion.

Civil Beat article caught my eye from January 20... January to November 2025. Last year, already a hundred and sixty seven people had died on the streets. From 2014 to 2025, one thousand four hundred and sixty six people had died. I found the definition of crisis and emergency based on mortality rates, and I understand that the crude mortality rate and the crude death rate are not exactly the same, but I wanted to get an approximate baseline.

On Oahu where this information is only found, we have a normal crude death rate of five forty one individuals per 100,000 people. For our unsheltered, that number is six thousand five hundred unsheltered per 100,000 in an average year. That is 12 times the normal rate. Please understand that this is not a scientific statistic finding, but a general calculation that I performed based on the information that I found.

Even if the death rate was four times, it would still be considered a crisis, but we're talking about 12 times the rate.

The use of the emergency proclamation to quickly house our most vulnerable who have extreme health issues. Instead of allowing people to suffer and die on our streets, in our streams, in our mountainsides, in the ravines or valleys, we're utilizing the Kauhale initiative to quickly serve and save our vulnerable residents while saving taxpayer money.

How is it saving taxpayer money? Just in our medical respite service, a two week emergency or hospital stay costs an average of 42,200. Our services at Aula Medical Respite costs only 3,200. For that same two weeks, that's a 92% savings.

Health care costs for someone on the streets average about $8,000 per month, but when housed drops to by 76% to less than $2,000 Our cost to develop these Kalahali average about $100,000 per unit, while a unit in affordable development has risen to over $750,000 I believe the manner in which we are approaching the issue of homelessness isn't the right approach.

It is. I would very much understand the I do very much understand the concerns brought up by the audit report. I find them important to keep in mind and also to work on and monitor. These are my concerns as well. We will work to deliver in a way that is transparent and benefits the target population on behalf of the taxpayer.

Thank you very much.

Okay. Thank you very much. Okay. Joe Campos, do you have anything else to add?

At this time, no.

Okay. I'm just gonna, make a statement, okay, before I go on to Kimo Carvallo. Because it seems to me I have predated most of these legislators here, regarding the homeless initiatives. Because it seems to me, when looking at your slides, that there is a blending. And I don't like using the word blending because it was used for something else later on.

Of Ohana zones versus Kauhale. Because Ohana zones monies were created for, like, the Waikiki Vistas, a number of these. Kauhale monies were supposed to be for the creation of these tiny homes. And that is the reason why the audit was correct in that it focused on the building of the tiny homes and not the management because that is a separate contract. That is a separate budget.

Ohana Zone's money is a separate budget. And it seems to me when you gave us this slide presentation, When you start calling everything Kauhale, even when it was created with Ohana zones monies, which are supposed to be transitional, emergency uses that originally was not given to a contractor, but was actually given to, like, Catholic charities, partners in care type people, you know, and the counties for these emergency transitional homes, you're starting to count them as part of the Kahale initiative.

And maybe I'll give you guys an opportunity later on to correct your slides. And because I have next to me WAM vice Chair. She knows also that there are separate budget slots for Kauhale wildfire, Maui wildfire monies, which you have included in as part of your answers, as well as Ohana zones monies.

We are not asking the audit does not go into Ohana zones. It goes into the Kauhale initiative, which was not defined anywhere, but was determined by the governor. But regardless, I said I was just going to make a statement because I know Daisy Hartsfield used to work for Department of Human Services.

I don't know if she was aware of the Ohana zones issue before, but, and and I don't know whether or not, Senator Court or Representative and potential Chair La Chica is aware of these different buckets of monies. Okay?

Because she's getting a crash course, and that's why she's here. Okay. I said that we're going to have questions later on, because we're going to have a lot of questions later. And, Kemo, come on up.

Good afternoon.

Yeah, I know. Okay. Good. Please identify yourself.

Aloha. Good afternoon. Aloha. My name is Kimo Carvalho. I am the executive director of Homemade Hawaii.

Thank you, Chair. Thank you, members of the legislature, for allowing me the opportunity to address the Kauhale initiative and the audit report. So HomeMade Hawaii, just for some quick background, we are a nonprofit developer and operator focused exclusively on developing deeply affordable housing solutions for people who are in a housing crisis, including our homeless. Senator, I focused my PowerPoint today on the three main topics that you asked me. So, mainly, I'm gonna be addressing the auditor's claim of the 13,700,000

I appreciate that, team.

Yeah. Of course. Addressing the auditor's claims involving the workflow and approval processes and then providing you with the insight to what our investment resulted in. So let's just jump right into it, and this is not working, of course. So do do...

Okay. So the question everyone is asking is where is the 13,700,000 flagged in this audit? And the answer for you is that it's in the physical Kalahali villages that currently exist where more than 500 people have been served over the last three years. The state office of homeless and housing solutions currently has 37 contracts. And of those, nine are with Homemade Hawaii, totaling 39,900,000.

And that's all this audit focused on. My goal today is to assure our public lawmakers and our taxpayers that all of nine of our contracts for Kahili that have been audited is accounted for. Based on our analysis of the $13,700,000 we can absolutely account for every known transaction identified. Of the 13.7, we have supporting records and evidence to show that the state approved those transactions and that they were justified. We also show about 488,000 that was credited to the state over the last three years.

More than 300,000 of that was one single subcontractor who is on a monthly retainer that didn't deliver the results. And so despite it being justified contractor, I did make the executive decision to credit the state in good faith. For lack of deliverables, the auditor sort of mentioned who that was. I I won't. But finally, of the 13,700,000, the auditor did not specify 2,900,000 of that, and it's simply flagged with no rationale or reference that we can actually point to.

Irregardless of the unspecified amount, what I can say is that HomeAid Hawaii can account for all nine of its contracts totaling 39,900,000, inclusive of the auditors' claims. Not only do we have supporting evidence to defend this, we have completed multiple independent audits by a Hawaii licensed CPA firm that has also confirmed and verified there is no misuse and there is no fraud of public funds.

And finally, I wanna point out that buried in the back of this audit on page 50, the auditor provides a disclaimer that does state after all these claims that despite misuse, these transactions may ultimately be proven reimbursable, and it was. And this is what makes the audit inaccurate. We have a matrix that dissects the entire audit into individual claims, about a 135 in total.

And for each one, we can defend with supporting evidence that much of this audit is either outdated, incomplete, inaccurate, misleading, and even falsified. And this slide provides just some of those examples of what that looks like. And if there is any interest in this after this public hearing, I'd be happy to share with you our matrix, and that was conducted in collaboration with the state office of homeless and housing solutions in order to verify these facts.

The auditor himself also stated that and recognized that much of what he was auditing were actually live contracts. The audit was looking at a point in time between 2024 and 2025 that involved multiple active Kalahali and wildfire development and operating contracts.

The nonprofit development model, we aim to achieve deep affordability, and that is a very dynamic iterative process. So for each project, we deploy what's called a design assist methodology. For comparison, you know, traditional developments require stamp architecture and engineering drawings to be permitted before contractors begin their work in the field. We actually reverse that process. Instead, we empower the contractors to execute with consultation of our planning teams.

We document decisions real time, and then we provide as built drawings for closeout and documentation. That nontraditional process reduces time by more than a year, and it costs millions less in cost making deeply affordable housing possible under emergency proclamations. We're able to deploy safe site development with controls in place. The challenge we had and what the auditor chose to elevate is that the surge in projects and transactions with multiple Kahali and wire...

Wildfire sites, It really did require us to beef up a lot of our operations, to handle a surge in transactions.

And during this time, we also operated under three different homeless coordinators, and I I wanna thank, you know, director Yang and director Campos because they did, in fact, stabilize this office, because, you know, right now, we actually do have very clear guidance, and communication and collaboration between us and the office is important.

My last and main point here is that it would have been difficult for anyone to review active projects under construction irregardless of this situation, which is why I believe the auditor also added this disclaimer as well. Following our 2024, challenges and before the audit started, Homemade Hawaii had already taken internally sorry. We had already taken action internally to ensure that the state was provided with the best professional services to manage our portion of the Kahali initiative effectively. We brought accounting and leadership in house.

Our board investigated me following a claim of fraud, which they found no evidence of. And we strengthened our processes, our controls, our reporting, our templates, and we rebuilt an operation that was meant to be of service to the state office of homeless and housing solutions. Following the corrective action plan, we used opportunity to then refine other requested processes and systems with which director Yang listed a couple of those, but we relabeled budget categories for him to align with their budget templates.

We formally listed who the point of contact was because we needed to align with roles and responsibilities. We identified documentation that needed to be updated.

So a lot of things that got refreshed in order to really fine tune loose ends. But mainly, the corrective action plan allowed us, both of us, to tie up loose ends and actually were operating much stronger and better today. A lot of attention has been put on the predevelopment contract. What I wanna share here is that not only were their financial controls, but also process work for... Workflow approvals and controls in place.

We ensured that the emergency proclamation didn't just throw the playbook out of the... Playbook out. Rather, we established a new process that demonstrates how to accelerate housing production within three to six months. And just to put this in comparison, this usually takes about twelve to eighteen months and costs millions more. And so there is a process in place.

And in every step, if I were to break this down, in detail, it involves quite a lot of approvals that we documented. So we developed this process in 2023 to ensure that there was proper oversight when we started working with the... This office under multiple coordinators. The auditor mentioned that there is no language in our contracts for controls and safeguards.

This is an extraction out of a couple contracts, and it's used in multiple contracts that ensures that the state of Hawaii has reconciliation clauses and allows us to protect taxpayer dollars along the process.

So I just wanna make sure that you guys are aware that there are controls and safeguards contractually in the state's favor as we develop, Calahari sites under, quick, deployment. So what does this all mean, and what did the state actually get out of their investment in homemade Hawaii and the Kahole initiative? We've built eight villages consisting of 330 homes, 72 communal facilities. We've assessed over 70. I know June said 60.

It's actually 70 state lands that have another seven of those sites planned that consists of about 400 beds that can be deployed quickly for governor Greene's goals of the Calahly initiative. In addition to what we delivered by developing a nonprofit development model to execute a public private partnership between our builder industry and the state of Hawaii, we actually reduced the cost of construction by nearly $38,000,000. We converted underutilized government lands, which I call remnant parcels, into thriving villages.

We reduced the cost of construction through our builder network, our volunteers, the use of emergency proclamations, value engineering costs, and we bring in philanthropic contributions, which I know the audit said it did not. It did.

Had Governor Green and his team not made this policy decision, the state of Hawaii today would have about 100 less beds. The average cost per unit would have been adjusted from 120,000 per unit to about 340,000 per unit, and we've not seen the same reduction in unsheltered homelessness that we saw this year. And for context, as June sort of alluded to the Louili, HHFDC project in Kapolei, they're averaging about 744,000 per unit, including predevelopment and construction.

And what the cost differential basically reflects is that the policy innovation can reduce time and cost of construction substantially to actually achieving deep affordability. And here on the left kinda gives a little bit of the market comps in comparison to affordable multifamily and luxury rentals, which really shows that the state of Hawaii is getting a really good deal out of this.

So the reason this all matters, for the past several decades, policy has been to subsidize affordable housing with use of federal tax credits and state subsidies such as the state rental housing revolving fund, which I wanna emphasize is needed. There is a role for that level of housing in this community.

But for those who are 30% area median income and below, basically are working poor and those who are homeless, we need to then subsidize their rents with voucher programs, which really becomes a very costly operation for the state of Hawaii. And so for the first time in decades, Governor Green's administration has figured out how to build more housing with a lot less subsidy. And what that results in is more housing units for our low...

Lowest income residents, building a new, rung of the housing ladder that's been missing for decades, penciling projects to ensure people have the rents that they can actually afford, and reducing our homeless population benefiting from new bed inventory. And most importantly, this new model of our community first villages is showing that living in community first villages versus living in isolation can actually improve a person's social determinants of health. It's reducing a lot of system costs, including our health care system.

And so just quickly in closing, I wanna emphasize that money is not wasted. Controls are in place.

Accountability is strong. We are making an impact on our home. I love this home. This is my home, and I will do anything for it. More importantly, we're saving lives, and we welcome the opportunity to share how policy can further support deeply affordable housing development so that Kahle is not just for our homeless, but for all our people across the state of Hawaii. Mahalo.

Okay. Thank you very much. Okay. Questions. Let's go let's go with Senate first. Oh, by the way, we also have vice Chair representative Olds also online. So first up, Senate. Any Senate questions? Because I have a whole bunch.

Which one which one wants to go first? Okay. We'll have Senator Moriwaki have questions now of anyone.

Oh, this one. Sure. Yes. Okay.

Okay. Or or we can have Sayama. Are you in, Sayama?

Yes. I'm here.

Do you have any questions?

Yes, Chair. If I might start with OHHS, Jun.

Okay. So Jun Yang and Campos, why don't you come on up and Kimuk have a seat for a while until... K. We're we're gonna allow you one question, and then we're gonna go round robin here. K?

Senate first and then, house.

K. Jun Yang, Statewide Office on Homelessness and Housing Services.

Okay. Senator Sayama, please proceed.

Thank you, Chair. I'd like to clarify the structural administrative management regarding HHS's oversight.

You need to change again. You need to talk directly into your mic. We cannot hear you.

Alright. I'll try this again. OHHS, can you describe the process of for paying full needs, expenses, and subsequent approval or rejection of the reimbursement?

I think I I got part of it, but I think it's the the process on how we approve and reject any kind of charges?

That's correct.

Okay. As invoices are are coming in, the... My staff will review each of the charges, that are, with receipts. And then they will forward them on to me if they are approved. If there's any questions, they will reject it and have a discussion with the contractor directly.

If not, if I do... If it comes up to me and I have a chance to look in and look through all of those invoices, some are gonna be ones that I wanna be keeping an eye on. There may be an opportunity for me then to have a conversation with both my staff and with the contractor if there are any charges that are questionable. At that point, I will not sign off on the on the, the invoice to be moving forward for payment.

Okay. Do you have one follow-up question, Jackson, before we move on? . Do you have any follow-up? Because I mean Yeah.

Just just one just one follow-up just one follow-up on a very specific one at that. How would you justify the expense that HomeAid has incurred regarding their KindSite purchase, regarding the fundraising?

I think I remember that one, and I'll have to go back into my specific... The... I have a spreadsheet of all the the questionable or miscategorized contract charges. And I think I did catch that one already. And so that's one that I, have already asked for reimbursement on.

And there are a couple of others. One... You know, the the ones that were highlighted in the, the report itself, Urban Land Institute, NEH, travel to Utah, these type of things, have already been discussed and have already been brought back to this brought back to this stage.

500,000.

That's correct.

Okay. K. Are you done with your follow-up? Because then we have a whole bunch of questions over here. Yes.

Senator... Chair. Please go ahead.

Okay. Thank you. K. Senator DeCorte and Senator Moriwaki.

Thank you, Chair. Thank you very much. On page 11 of the auditor's report, it does state regarding the proper use of public funds. So although the emergency proclamation does suspend the Hawaii procurement code, however, it does not remove the obligation to properly use public funds. So in a case like this, a performance bond and payment bonds would be a little bit more appropriate to use.

However, in the auditor's report, it says here that, and I quote in the report, despite the importance of these protections, our current coordinator, which is you, did not have any understanding of the best practices for bonds on public works contracts. He had previously heard of performance bond was... But was not familiar with their definition and was likewise not familiar with payment bonds.

So my concern and my question is, are you the right person qualified to be reviewing these contracts if you're not looking in the best interest of how to use public funds and the funding mechanism in taking this?

A number of things that we are also working on. We have, we're in the process of hiring on or contracting with, general contractors or project managers to be able to understand, on on the the best, for the best position for the state to oversee some of the developments that we have. My position here was created not for just development. This office was created initially as a planning and a Chair for the Hawaii Interagency Council.

But as the the the demands of the office grew, both in in initiatives and in policy, my office has now taken on a whole new role. I believe that I still have the, the ability to look over contracts working with our attorneys and working with, the the appropriate staff within the state, who I hire or who I contract with.

So I'm gonna go back to my question, Chair. So the question again was, if you did not... Were not familiar with payment bonds, do you believe that you're qualified for this position to handle multimillion dollar contracts, being funded by the state? And again, the question is is are you qualified to handle these kinds of contracts if you don't even know what a performance bond is?

So I I do. I have looked into it after... Especially after the auditor. But at the end of the day, the the requirements for the the position are to make sure that not only our contracts, but our state policies are moving forward in the right direction.

Well, according to the HRS, the requirement is to ensure that, we as a state are, taking responsibility for proper use of public funds.

That's right.

This would have been another way that you could have kept the HomeAid accountable. But because of your inexperience, I'm afraid that you weren't able to safeguard state funding because of that.

This contract is, as as stated prior to in my presentation, is a contract that was, established in 2023, 2024. I was not a part of this office in that.

\. Okay.

Okay. If I may?

Yes. And then we gotta go on to the next one.

We can move on to the next question.

And and you'll have an opportunity later on after everyone else has come. K. Finish her question.

Yeah. Joseph Campos, Director, Department of Human Services.

And you were in DHS as first deputy at the time of the at the time of this

As deputy director. Yes. Yeah. So one of the things with performance bonds, we understand what those, do. It's just a disagreement in the necessity of it.

You know, for me, I would much rather see $1,000,000 that might go to pay a bond. Go to house individuals that are experiencing homelessness. You know, if you're talking about a $10,000,000 build, you know, maybe it's gonna be $304,100,000. That money can be better spent elsewhere, especially when we have all the protections of the office of the Attorney General, the contract, and the language of the contract.

So you're justifying why we don't have a performance fund? K. Senator Moriwaki.

Yeah. Aye... I'd like to go back to... Again, I'm building a Senator DeCortes' question. The capability of the office.

Does DHS or OHHS, have you ever had instruction contracts that you oversaw? That you have contracts?

Have I... Have our... Has my office ever had it prior to

What date?

Prior to '23 when you when you started. It's called Holly Project.

Not not... He wasn't in. So you gotta ask questions

Okay. So... Yeah.

Yes. He was in.

Have you have have you ever had con... Construction contracts in your department other than... Okay. Not not not probably HPHA. Just...

No. But, you know, we do have HPHA assets.

So my question, Joe, is if you didn't and you had this responsibility for construction, why didn't you ask consultation from your sister agencies... For other agencies, like the comptroller or SPO, the state procurement office? Why why didn't you go elsewhere if you didn't have the expertise when you took this responsibility on?

Okay. Yeah. So, first of all, we did, you know, HPHA is an attached agency, you know, so there were conversations constantly with the Executive Director Hakim Ouansafi . In addition, unfortunately, at that time, it was not a direct report to the director of the Department of Human Services. It was only in 2025.

But but I'm just asking, where was the consultation? Where did you say, hey. We don't know how to do this. Can you come in and help? Comptroller, SPO, help us because what do we need to set it up so that we can do this?

Because your office and OHHS was never established. Its mission is really coordination of the state, county, and community agencies to make sure that we have a good assessment of where the homeless are, where we place the homeless, and that's where we build the housing, not to do construction contracts.

Right.

So so my question is, how did you not go for for somebody who had expertise and just did it on your own?

Yeah. So at that time, I did not know the process that the coordinator, Koshiba, was pursuing. But I can let you know that, yes, I don't have any experience being a developer or a contractor, but we built a city in Lahaina, right, with consultation with the other groups. So we do have we do have the experience now. In addition, DHS does have someone that we've hired on who is a project manager engineer to be able to assist the office SOHHS in their processes.

Let me let me just put another question because because I go back to what is what is the role of this agency? Because if it is services and and the Auditor never got to the services, we need to look at how all the contracts are managed because it's a small office, and you've got all of these millions of dollars coming through the office. And and how are you doing if... Is this serve... And we're not against the whole hallways.

We're not against having the homeless sheltered. It's really how do you manage all this money so that we get the best benefit for the state, and it didn't seem to happen.

Right. Okay. So... Yeah. So let me... Because I think I have the... Overall, because I used to be House, Human Services and Homelessness Chair in the House before I became a Senate Health and Human Services to do this. Why Home Aid? Home Aid, initially, at the time when I was house Chair, it was basically what, auditor Condo had stated, was basically like a one person Nani Maderos. And she did great.

She was she was introduced to me by then Lieutenant Governor Green as this wonderful person who will build Kahales, and he... And she did. That was a bet. And I don't see that as being charged to the state. It's not in any of this.

And later on, Palami Palamalui, the one here at Queens Jacob. Right.

Palamaola.

Palamaola. So many acronyms. The one over here. 12 units, one person. Why did we... And I ... So I understood. Okay. Conceptually, because of these experiences with the governor, the great in Kailua, the great over here in Queens, but now we created this behemoth. We are paying...

Why is it we did not do a performance type contract? When whenever a regular homeowner, citizen, hires a contractor, we go with performance contracts. Right? We say, we wanna... We want...

This is the house. Tell me how much it's gonna cost. When it reaches certain stages, we will pay you based upon performance when they reach certain amounts. This was a cost reimbursement. We have paid for the LLC of homemade when we didn't need to do that back when they did the vet homes and back with...

Before they did Queens. We have paid for all the office equipment, all the office supplies, all of the training. We have basically paid for a contract... Created a contractor to compete with other private contractors when... If we have just followed procurement, we wouldn't have had to pay for all of this.

We would have had a regular contract bid on by regular contractors, and we would have had performance and not this cost reimbursement where we have to figure out whether or not we have to... Whether or not it's okay to pay for intimacy kits, Whether or not it's okay to pay for travel. Whether or not it's okay to pay for cons... Oh, God. The public relations?

I mean, why do we even need to publicize a homeless initiative? And the question really is... And no one is saying fraud because the auditor said that isn't within his ballot. And basically, I understand Kimo. I mean, he has been given a blank check, so why not take advantage of it?

So I don't see him as, I'm not going to say that he defiled it because he was told everything he's expended is going to be paid for. The question is with you, Gavi, still. Why is it that you folks went beyond... Did not do a regular procurement of performance contacts, which everybody normally does for construction, and did this type of cost reimbursement. Because bottom line is, who owns HomeAid?

Does the state own HomeAid when we pay for their LLC, when we pay for their employees, when we pay for the office supplies, when we pay for the capital, when we pay for their furnishings? Do... Does the State own HomeAid?

And if we do, why did we create homemade to compete with general contractors? Because we've had, we asked these general contractors to volunteer their time earlier. You know this. Okay? When we did this, when I did a breakdown, and you guys keep bringing this up.

Well, it only costs 131,000 per unit. But in reality, it ballooned. It started off with Palama Ola at 12 units, dollars 67,000 at $6,000 per unit. Went up to Cedar Church. I know you're gumbling about Cedar Church, but that was cheap.

716,000 for 20 units, 36,000. Went up six times. And then we come up with 5,400,000 for 20 units at a cost of 270,000. It is exponentially costing the state a lot of money. From free to 270,000 per unit.

And we and we provided the land for tiny homes. That's as much as when we can go to Amazon and get $20,000 for... You haven't gotta pay for shipping. $270,000 per year. So bottom, I mean, the question is, why was it...

If we're gonna go again... If we're gonna go around procurement, why was it cost reimbursement type of contract? Because there's no fraud. Kimo did exactly... Showed you his bills versus performance contract like every other contract we have?

You wanna answer first? Okay, Jared. Thank you for the question. You know, the selection of homemade, I cannot answer that. You know, that was

You were the the... You were deputy director at the time.

I was deputy director at the time. But

This. You are accountable. You admit to being accountable. That's the reason why you're here.

True. Yes.

Okay. So the buck stops with you.

And that is true.

Okay. So you need to be able to answer. Why homemade? Why is it cost

So I can only I can only share with you when I became familiar with homemade, you know, they had already done Pula Mahola. I saw that their reimbursements were within line. Their costs, if I'm not mistaken, was like 2% admin costs compared to private companies, which are at minimum 10%. Okay? So that was one of the reasons why I believe they continued to go with homemade.

Okay. Was this before we bought all of the office supplies and the training and paid for employee salaries. You're saying when we paid for all of that, it was only 10% versus a 100%. Sounds like it's a 100%.

Well, I don't think it's a 100%.

Okay.

Okay. But... So anyway, I'm just sharing with you my experience. Okay? The work that they've done was sufficient and on time, And I believe that's why they were continued, you know, to be tapped to do this work.

Okay. No. And and like I said, they did great in Kailua. They did great here in Palamaola, but that was before it became this behemoth

Right. But I think.

before you guys provided them a blank check. Before then, you did provide them a blank check. So

Well, I also think the work that they have done in the additional eight developments has also been, you Know K. Great, as you said.

I don't know if it's good.

Okay. But... No. I... And I've seen the progression from the tiny stick builds to now these units, the spouse units.

And when you see the effect it has on those experiencing homelessness, And I hate to say this, but it's priceless.

Okay. But don't you think that using local contractors will have the same effect on the homeless as you have by creating a brand new corporation who is an unlicensed contractor. They don't have a general contracting license. And there is a question as to whether them hiring unlicensed. Whereas we...

DCCA, we penalize contractors for doing unlicensed work. But we ourselves have created a huge multimillion dollar unlicensed contractor under the guise of emergency proclamation.

I would call them a developer that then subcontracts with licensed contractors.

Okay. And so you dispute what, Les Condo has pointed out that a number of their subcontractors are in fact unlicensed. Yeah. Did you go check on that, by the way? Being that the buck stops with you.

Did you check as to when not any of those subcontractors are in fact licensed? Like the... Oh, God. I'm getting...

The electrical plumbing. Yeah.

Yes. All of those.

Yeah. On page 20, I'm just tagging off a Chair. On page 20, it does actually state that contractor licensing requirements were still in place. However, there has been a lack of required licenses. Therefore, Homemade had paid out 324,600 on four different projects.

So that poses us a serious threat. It poses... It it poses a violation to the law. It poses a safety risk to the people that are living there that we are not even pursuing the license requirements for these people that are working on the projects. So that thing is Shabai.

If we cannot make sure that the license requirements are in place, then... And, you know, I I I wanna really respond to your statement saying that the project and the efforts are priceless. It's not priceless. It's costing millions of dollars, and somebody has to pay for that, and it's gonna be the taxpayers. So there is nothing that is so priceless that there shouldn't be checks and balances.

And when you violate the law by hiring unlicensed workers, then it's just a slap in the face to taxpayers. So I just wanted to mention that because that was a note that I was wanting to bring up, and that's from Kamalu ko'olau phase two. So on page 20.

So Senator, you know, first of all, priceless is a turn of phrase. Right? It shows the impact that it has on people's lives. I am not saying that it's can be any price that a blank check wants to be cashed. Right?

So please recognize that that was a turn of phrase that I used.

Well, I just wanna say for the... For for context and for semantics, it's inappropriate to say that.

Fine. And I'll take that, and I apologize then for using it as I did say, you know, I hate to use the term, you know, recognizing that as well.

Thank you.

But it is a project that impacts people's lives that you cannot totally comprehend.

So, George, I just wanted to just clarify because the emergency proclamation is really to build emergency housing at the time. But when when you have all these other expenses that wasn't to do with the housing, that's a real problem because it's outside the scope of the contract. And and when you use unlicensed, it's very dangerous. For example, duh, hairdressing handyman for electrical work. Unlicensed.

Right? So things like that that cannot... You cannot, as a state agency, under under... To really be able to say we're doing the right thing for the people. It it could be cheaper, but cheaper is not better if if, you know, somebody gets hurt and then Agree.

Fire.

And I would like that question to be maybe referred to homemade because, you know, is it that their subcontractors are then hiring these people, you know, within the licensure of the subcontractor? That I don't know.

But the...

But we will find that out.

Do you folks, though, when you're saying we we looked at all of the the receipts that came in and they came in for requests, Did you not look a little bit deeper than just, oh, it was a budget for x dollars and x dollars came in? So check. You've gotta look at what is it for. And I think that's where the the problem really was, is that you were just letting things go like a blank check, but it shouldn't have been. It should have been.

Is this a licensed contractor to do plumbing or to do electric work? And is it part of that school?

Yep. And So what I what I can share what's missing.

Yep. So what I can share is that since I became director of DHS on 05/20/2026, we do utilize strict scrutiny of any bills that come in. We look at if it's a, you know, personnel costs. We wanna see how many hours it's, you know, being allotted for that. What is being done?

You know, is it be done? Is it being done for the purposes of the scope of the contract? You know? And unfortunately, prior to that, it was very clear to me that the coordinator reported only to the director. So when I became director, I made sure that we implemented very specific strict scrutiny of any invoices that come into the office.

I know that June prior had already started that process. Okay. So, unfortunately, the mechanisms that were in place

prior one more question, Joyce, because it... Because there's all of this backlog because I think the auditor had mentioned that, you know, it was just giving the top or, you know, a a sample of all of the receipts that came in. Did you, in April, when the auditors, you know, warned us, hey. We better look at this. And that's when we got really excited looking at this.

Is did you go back and look at all the other receipts and say, hey. Let's look at it. Maybe it's not just 400,000. Maybe it's a 13,000,000. But where where where were those expenditures?

And if this is a a licensed contractor, hey. Nix that. That's not supposed to be here. And start looking at how we

Yep.

Hoop some of that because it's really the state's money. It's all of our money. And we need to have that money spent wisely and correctly and safely. So Right. Okay.

Did you look at any of that? And and what did you do in all of those individual receipts?

Okay. So, you know, first of all, I appreciate the facts of the audit. In my opinion, I do not appreciate the subjective language in which the facts are presented. Okay?

But but But let's get.

When we just look at these facts.

Yeah. So looking at the facts, right, there was that April, I believe, April 20 letter to the legislature. You know, when I became director in May, that's when I worked specifically with June to go back and look at things. I know that June had already June had already been looking at it, so I'll let him

look at all of the other receipts that were not in the auditor's report so that we can see, yes, we did the whole assessment, and this is what it is. Because I think those monies that were used that were unauthorized or paying people who are unauthorized should not be paid by the state.

Yeah. So I will let June answer that part.

Thank you, Senator, for the question. Yes. We did review all of those, invoices going all the way back. We'll do, another thorough review again. But at this point, the review of all of the invoices for these contracts, we...

We've looked at every single line item. We've asked for the money back for things that should not be paid. And for the things that were in a category that they shouldn't be but are possible to be paid, we ask for those to be recategorized into... For review.

Okay. Because there's no travel and there's no per diem.

Yes. We've we've oh. So I'm... I've already I've already responded Mini. Yep.

I've already responded to to those PR.

No PR.

Yes. Alright.

No flashy video. And no Okay. Wait a second. The house. Okay.

Chair... Potential Chair, Dautrica. Please proceed.

Aloha. Thank you everyone again for being here. And thank you for sharing with us. I think that we are in agreement that, you know, that there is evidence that we are housing people. I would like to see further evidence of other measures since 2023 that, you know, whether or not these people, have not returned to homelessness, whether they moved on from my understanding, right?

The model is meant to be transitional. It's not meant to be a permanent replacement for permanent housing. It's not a rental where permanent person is intended to live there forever. My question is on the, Couple of projects where there were, specifically changes in deliverables, yet the contract ceiling didn't change. I believe it was Alana Ola and Kipi Ola, in the auditor's report where they were contracted to produce, for Cupola 128 units, and they produce 64 units.

And then for Alana Ola, they produce 45 out of the 75 units that were in their contract. My question was why the original ceiling had not had remained unchanged. And whether the state required at that point of review to provide justification as to why the... Those funds were allowed to remain with that... Through the...

With the project.

Okay. I I can answer some of these questions from my from, working together and and finding out a little bit more. For Kipu Ola, the project, was initially slated as a 128 unit, tiny home village, development. Through develop- for- through discussions with the Senator of the area, we were, told to then go ahead and reduce the size to half of that, to 64.

So we reduced the size to 64, but as we were as as, the auditor had mentioned, we do find things under the ground, and there were boulders that were were very, very large that ended up costing quite a bit of money.

That change order discussion did happen with our office, and so, there was no increase to the ceiling, but we ended up utilizing the full amount. 64 units at at, I'm still trying to remember the number. I think it was, like, 5.9 or $77,200,000 for the for the site. We have now delivered, a a site that is functioning extremely well. For, Alana Olapono, this is a site that is on the rail corridor.

And initially, when we had designed the site, the discussions were including spaces that were behind the current Ala no, Ala medical respite and along the fire lane that is near the affordable housing senior affordable housing buildings. But we were told through the heart alignment that the fire lane, they needed more space than they were going than we, than the state and the contractor initially designed. So, So, we went from 75 down to 45.

The space behind was not usable because that was going to be space for infrastructure digging for the mayor right housing development, across the street. Through the process, this is a site that is, is known for...

Is hazardous materials, and so there were costs that were quite high.

So for those amounts in which, you know, there were there were, you know, those gaps in the funding. Right? Because they were unable to meet, what was required of their contract. Are you saying then that the state was able to, you know, made a determination after the fact to take a look at potential new charges, like, you know, new spending, and made that determination after the contract had already been agreed upon versus create...

Having, like, a review process that would have, you know, the, you know, the developer to be able to, defend, you know, justify the the the, why those amounts were necessary to remain in the contract.

At least that's what it seems to me. And is that still the... What's in place right now, or has there been a change in how you're proceeding with, like, future projects or how you're administering current oversight on these, like, projects when contract... Where change orders occur?

So in these cases, the the conversations were had with the office. They may or may not be documented well. It is discussions that, were not specifically in my time, but through the discussions to try to patch up and understand what happened during that time. Some of these decisions and change orders were already, in conversation with the office itself.

This is something that, you know, the budget, what's required, deliverables, all of those are required and responsible discussion is being had to ensure that we have appropriate delivery of services to the site.

But we will we will be strengthening this this contract process in in the development as well, front end, making sure that we have, the right plans and and place... And things in place to protect the state. That is, high on on on our responsibility and accountability for this office, and we'll... We keep to that.

Contract first before payment.

Oh, absolutely.

Okay. K. Next.

Sure.

Representative Hartsfield.

Thank you. First of all, thank you for being here today. I'm gonna just focus on some fiscal management related questions for either of you to answer. So I do want to say I appreciate that both of you, came in. So there are some things that have occurred that were out of your control.

But since you've been in your positions, Kondo, you stated that now you review, every invoice that comes in and that you have reviewed every invoice that was audited, as well. Correct?

Yes.

And have you noticed an improvement in terms of details of invoices that are currently being submitted?

So so, if I if I may, I apologize to to cut you off. The, the staff prior to me coming in, I sometimes have a question on how much training that they went through, Because looking over some of the invoices, I was surprised at how far and how fast they went ahead. When I came on, there were changes in my office that had to be made. And with those that were still remaining or those that were hired on.

They have the understanding and also the experience and expertise to understand what to look at in invoice, what is appropriate and what is not.

For those that have stayed on with my office, they have been trained. We've created procedures in place, and, I continually, have meetings with my staff to make sure that these invoices, as they come in, these are the minimum standards that I do have. And then anything that comes in specifically with our projects, I am looking at to make sure that these fall in line with with what we would call acceptable uses.

Okay. Thank you. And then you also mentioned that, your office has asked for money back from homemade. Correct? Can you share with us how much monies have been requested to be returned?

So, in one of our, more recent invoices, a total of 517,000 plus was, was returned back to the state, through, through discussion. And so, we're continually... These are all, a part of, ongoing finalization of of, you know, final contract, payouts or, in the middle of contract, you know, invoice payments.

Okay. So that leads to my next question. You referenced six contracts that were audited. Homi mentioned nine, so I'm not sure which contracts you guys are talking about. But in terms of the six that you refer to, when does those contracts end?

Because if there is still money owed to the state, I wanna make sure that the state gets those monies back.

Absolutely. We have an opportunity to go back and to look at them. So, the once since the audit has been now with us for about a month and in preparation for the info informational briefing, after this, we'll be going back to all of our contracts with homemade and to to look and and scrutinize if there's anything else that needs to be looked at. Everything so far, you know, if there's an issue, we will have a a direct con... Conversation with them.

To this point, they have not, done anything fraudulent in that way. There have been some mistakes, but we have already made those corrections.

Okay. Respectfully, are there any contracts ending on 06/30/2027?

At this moment, I can't I can't. The contract... The predevelopment contract ends at the end of this year, this calendar year. So there's just a few thousand.

K.

For homemade, there might be one.

Oh, okay. Thank you.

Representative Olds, any questions?

No questions.

Okay. So second round. Vice Chair Sayama, you have any questions?

Yes. I'd like to go back to the chair's original question regarding why HomeAid. Like, I I understand that we built up HomeAids capacity to be able to execute on the contract. But when they started and given that they had some experience to fall back to, why was the state paying to create an organization when we could have contracted with other existing vendors or general contractors who are already capable. So I...

I'm just questioning that decision making process. And if you could maybe provide some clarity to that, I'd really appreciate it.

Okay. Vice Chair, again, thank you for your comment or your question. You know, unfortunately, I'm in the same position as I was earlier when I responded to the Chair. You know, I was introduced to homemade, as they were completing. I do not know the selection process of homemade. I just know that the work that they did and have been doing.

What... Was there any record of

Wait a second. Let let Chair Sayama finish your... His question.

Just just to And

and any any follow-up questions? Senator Sayama?

Okay. So since you... Seems like no one can answer that question.

Well well Let's go back. Hold on. Hold on. Okay?

Yeah. Go ahead.

Okay. You know what? To follow-up on on yours, and then we'll go back to you. Go ahead, Senator Moriwaki.

So so so you weren't there at at all, but there should have been records of at least some kind of vetting of having this one organization and no other. Can you look through your records? Because there should be something. You know, we're a state agency. We have all kinds of paper all over the place.

Right? There must be something.

And HomeAid did not get this cost reimbursement type of contract and grew that big until after Pūlama Ola. Because Pūlama Ola that was only a $6,000 per unit. So since you came in after and accountability ends with you, why is it that we did not have performance type contracts instead of this cost reimbursement contracts moving forward?

And why is it that we built up HomeAid from this one employee, non in the Darrows, efficiently run system into what it is now where everything, including their training and their consultants and their PR and their... You know, and their recruitment is all paid for by the state.

Why is it since you admitted as direct... As deputy director, you came in at that time?

Yeah. So

So why did you do that?

So to clarify my comment or my response was that I was introduced to homemade while they were finishing up. I did not have direct involvement in the selection of them nor in their future work. Okay. So I just wanna make that clear. But I would like to turn to Jun.

Maybe he can provide some insight as to, you know, why they were continued to be used.

Thank you. When we look at... Especially at 2023, 2022, who is available to do this type of work?

A lot of contractors. Yeah.

We're not talking about she knows. Contractors. There are not very many contractors or developers. Actually, very few, if any, that wanna do any homeless work.

Catholic charities.

They they... Actually, we've asked Catholic charities as

an aid We're arguing. We're arguing. But we'll see.

It's really

We're assuming... Okay. So We dispute that premise, but we'll go ahead.

Okay. So

Because also, let me just make make a mention. The fact is in 2022, Home Aid with one employee bringing a revenue of 235,000. In 2023, they were bringing a revenue of $2,200,000. And in 2024, they were bringing a revenue of $143,000,000 in which 90% of that was coming from state contracts. So if you're asking that there was nobody else out there, I I I beg to really differ on that.

So I think the question is if you can just answer who selected homemade? Who made the call? Who signed off? Who said these are the guys that are gonna do the job?

Continue to do the job.

But so that that I will address because the increase to the $143,000,000

is not under the 2023.

I had a direct involvement in that decision.

So you hired homemade?

So what happened was that was in response to Lahaina wildfires. Okay? We were looking for possible developers, you know, because I... You know, when governor said, hey. You know, does anybody have any idea what to do for FEMA ineligible?

You know, I may have... I made the statement, whether it was a great statement or not. You know? It was to... I...

You know, this is what I would do. Gov said, okay. Do it. Okay. I'm a political scientist by trade.

Right? And so then because I had known of homemade with the Pulama Ola, because we had this predevelopment contract in talking with the attorney general's office, you know, I said, is this something that we can utilize to be able to do, Kalaiola, the build in Lahaina? At that point, you know, they said, yes, you can utilize that to have them start looking at property or land.

You know, trying to figure out a place for Kalaiola was a nightmare, you know, because of various competing interests with county, private, you know, community organizations. We settled on the property above Lealii.

So that 140,000,000, I think you said.

Well, let me just mention that the Lahaina project is a totally different project. I know. That's a $154,000,000 project. Yeah. I'm talking about the Kauhale.

So if we could just take it back to the Kauhale.

But that's why I want to address that increase in the revenue stream for homemade, I believe, is because of Kalaiola, that build in Lahaina. Okay. So to look at it as being all of a sudden they were doing Kauhale at, you know, $2,000,000, and then all of a sudden they had a 140,000,000. I just want to clarify that in my opinion, that is specifically that increase is because of Calleola. And it wasn't that they were paid 140,000,000.

Right. That all went out to the contractors, you know, Goodfellow brothers, you know, and all of the, site work and houses and

The audit shows where the 140,000,000 went to. Senator Sayama, any other follow-up questions before go on with court? Because I have before the house does. And we still have less condo doing a a rebuttal.

Yes. I'd like to go back to the question regarding the in house processes for these control mechanisms, that should have touched on that she... Some training for staff. You know, that might be great, but I don't think this committee is satisfied. And, certainly, the auditor's report has indicated a lack of training and control mechanisms for approval of these expenses by homemade.

So how are... How is OHHS and DHS addressing that?

I can start first. Thank you, Senator. The... I I think I had mentioned, that there was a a a lack of understanding for the staff that were in the office prior. I've actually looked at all the different positions that were there and the staff that sat in those positions to get a sense of what and why.

And there were, some, gaps is the best way I can say it without. What I have come into, create is an office of of professionals. And this does include SPO training that is required by the state. And that also includes, some mechanisms that we can provide safety, for the funding that comes through, and, an opportunity to also, at the end of the day, through the contract, to claw back any funds if we find them to be, inaccurate or or misrepresented.

Okay. So thank you. This will be the last round. Yeah.

Thank you very much.

Okay. You you good, Jackson? Senator Sayama?

Yes, Chair.

Yeah. I I don't think we're gonna get... We're gonna be sufficiently satisfied with everything today. Okay? But let's answer.

K. Senator DeCort.

Thank you so much. So you both have stood by the invoices and the reimbursements and... Well, maybe not you director, but had mentioned that you find that the invoices and their reimbursements were all justified, all reasonable. You looked over them, maybe not while they were coming in, but since the auditors report, you were able to say that those were reasonable costs.