An urgent warning has been issued by Hawaii's state auditor regarding significant deficiencies discovered in the state's tiny home initiative for the homeless, a program that has already cost taxpayers nearly $40 million. The preliminary audit findings, mandated by lawmakers following a Civil Beat investigation, reveal weaknesses in financial controls and oversight that demand immediate attention from governance officials.
Auditor Raises Alarm Over Public Fund Exposure
In a letter addressed to legislators and the state's human services director on Monday, Auditor Les Kondo explained his decision to sound early alarm bells about the kauhale initiative and payments to nonprofit HomeAid Hawai‘i. Kondo expressed concern that waiting for a final audit report would likely result in continued exposure of public funds to unsupported or inappropriate costs.
"The current control environment does not provide reasonable assurance that improper billing will be detected or prevented," Kondo wrote in his correspondence. He emphasized that in his professional judgment, immediate action was necessary to safeguard taxpayer money.
Substantial Financial Irregularities Identified
The audit has so far identified approximately $1.7 million worth of invoices that failed to meet state requirements. This includes $770,000 paid to HomeAid that was later credited back to the state, indicating those invoices contained improper costs. Additionally, more than $900,000 in payments lacked proper substantiation, covered work outside HomeAid's contract scope, or included travel and meal expenses that appeared inconsistent with state policies.
The findings build upon previous Civil Beat reporting that uncovered a lack of documentation for over $14 million worth of work. In numerous instances, only brief descriptions of services and materials were provided without supporting documents. Some contract payments were distributed in large lump sums rather than the smaller installments required by state agreements.
Emergency Context and Program Oversight
The tiny home initiative falls under the jurisdiction of the State Office of Homelessness and Housing Solutions. Director Jun Yang, reached by phone Monday night, stated he had not yet received Kondo's letter when initially contacted about the preliminary findings.
In a subsequent written statement, Yang acknowledged the state takes oversight of public funds seriously and welcomes a fair audit process. However, he cautioned that the auditor's letter presented "a one-sided glimpse which does not account for the full scope of documentation, the emergency context in which many of these decisions were made, or the extensive legal review and approvals that were part of the process."
The no-bid contracts to HomeAid were issued under an emergency order from Governor Josh Green that suspended normal bidding requirements to expedite housing development for homeless individuals. Yang emphasized this work was conducted in coordination with legal counsel.
Systemic Deficiencies in Contract Management
Kondo's letter highlighted "significant deficiencies" in the homelessness office's contracting and invoice review processes. These included limited understanding of contracting best practices, absence of defined management structures, and insufficient enforcement of contract terms. The audit found no evidence of meaningful review of invoices submitted by HomeAid before payment authorization.
Officials with the Department of Human Services, which shares oversight of payments related to the initiative, could not be reached for comment Monday night. Governor Green's office was similarly unavailable.
Calls for Corrective Action and Program Response
The auditor urged lawmakers and state leaders to implement several corrective measures, including an independent review of payments made to HomeAid, temporary conditions on reimbursements, and enhanced oversight procedures.
In response to the preliminary findings, HomeAid CEO Kimo Carvalho stated the nonprofit is cooperating fully with the audit and takes the concerns seriously. He expressed confidence that the auditor's issues would be addressed as HomeAid provides additional materials.
"HomeAid engaged independent auditors to reconcile its accounts and noted that adjustments are common in large and fast-moving emergency projects," Carvalho wrote in a statement to Civil Beat.
Ongoing Audit Process and Future Implications
Kondo emphasized that his office continues to conduct field work, reviewing contracts, invoices, expenditures, and assessing state oversight of kauhale contracts. He noted that findings may evolve as the audit progresses.
Yang confirmed the state will continue providing requested information and documents to the auditor's office, expressing confidence that "a complete and balanced review will reflect the full picture including the safeguards in place, the outcomes achieved and the lives impacted."
The audit represents a critical examination of Hawaii's approach to addressing homelessness through innovative housing solutions, balancing emergency response needs with proper fiscal stewardship of public resources.
