Hawaii auditor warns of control gaps in homeless tiny home payments

Auditor Les Kondo issued an early warning to Hawaii lawmakers and state officials about the administration of the state’s “kauhale” tiny home initiative for people experiencing homelessness, saying preliminary findings raise the risk that public funds could keep flowing for “unsupported or inappropriate costs” unless governance improves. In a letter written Monday, Kondo said his office’s preliminary work found weaknesses in how the initiative’s contracts were managed and how HomeAid Hawai‘i invoices were reviewed before payment, prompting his call for immediate corrective attention.

Kondo said he was raising “alarm bells” while the audit is still underway rather than waiting for a final report, writing that waiting “will likely result in continued exposure of public funds to unsupported or inappropriate costs.” He added that, in his view, the “current control environment does not provide reasonable assurance that improper billing will be detected or prevented.”

The auditor’s letter described the initiative’s spending volume and the scope of the problems his staff has identified so far. Kondo said payments tied to the tiny home effort and administered through HomeAid Hawai‘i have cost taxpayers nearly $40 million. He also said his office had identified almost $1.7 million in invoices that were not consistent with state requirements, and he pointed to examples including payments that were later credited back to the state, as well as other issues involving substantiation and whether costs fit the contract’s scope.

Kondo’s preliminary review included instances where contracts’ payments were made in large lump sums rather than in smaller installments that Kondo said the state’s contract with HomeAid required. His letter also cited more than $900,000 in payments that he said lacked substantiation, and he said some travel and meal expenses “appear inconsistent with State policies.” Kondo characterized the problems as “significant deficiencies” in the homelessness office’s processes, including what he described as a limited understanding of best practices in contracting, the absence of defined management structures, and a lack of enforcement of contract terms.

Kondo also wrote that his office found no evidence of a “meaningful review” of invoices submitted by HomeAid Hawai‘i before the state issued payment. He told lawmakers and state leaders that the audit team is still conducting field work and reviewing contracts, invoices and expenditures, and he urged corrective actions that can be taken before the audit ends. Those steps, according to his letter, included an independent review of payments made to HomeAid, temporary conditions on reimbursements, and enhanced oversight and review procedures.

The audit and Kondo’s letter arrive after earlier reporting by Honolulu Civil Beat that found documentation gaps in the program, including a lack of documentation for more than $14 million worth of work. The AP report said Kondo’s early findings were shaped in part by those issues, and it described the initiative’s contracting environment as moving quickly under emergency procurement rules.

Hawaii’s Office of Homelessness and Housing Solutions oversees the initiative, and the AP report said Jun Yang, the office director, was not aware of the letter when he was reached by phone Monday night. In a written response later in the evening, Yang said the state takes oversight of public funds seriously and welcomed the audit, but he argued the letter reflects only part of the picture. Yang wrote that “this letter presents 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.”

Yang also said the state’s no-bid contracts to HomeAid Hawai‘i were issued under an emergency order from Gov. Josh Green that suspended normal bidding requirements to speed up housing and services for people experiencing homelessness. The director said the work is done in coordination with legal counsel, and he said the state would continue to provide the auditor’s office with information and documents upon request. The AP report said officials with the Department of Human Services, which also oversees payments related to the initiative, could not be reached Monday night, and Green’s office also could not be reached.

HomeAid Hawai‘i, the nonprofit that received some of the payments under review, said it is cooperating with the audit. The AP report said HomeAid CEO Kimo Carvalho told reporters in a written statement that the nonprofit takes the auditor’s preliminary letter seriously and believes the auditor’s concerns will be addressed as HomeAid provides more materials, adding that it engaged independent auditors to reconcile its accounts and that adjustments are common in large, fast-moving emergency projects.

Kondo’s letter acknowledged that the audit is ongoing and that preliminary findings may change as his office continues reviewing the state’s oversight and the contracts supporting the tiny home initiative. Even so, the auditor’s warning set up a more immediate policy question for lawmakers: whether the state should tighten conditions on reimbursements and invoice review while the final audit report has not yet been issued.