A Hawaii County Council committee on Tuesday unanimously approved a bill that would require nonprofits applying for county grants to certify they have policies governing nepotism, conflicts of interest and auditing.

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A Hawaii County Council committee on Tuesday unanimously approved a bill that would require nonprofits applying for county grants to certify they have policies governing nepotism, conflicts of interest and auditing.

The Committee on Governmental Operations and External Affairs voted 9-0 to send to the full council with a favorable recommendation Bill 156 — a measure requiring nonprofit organizations to certify under penalty of perjury that they adhere to bylaws delineating “the manner in which business is conducted, including management, audit, and fiscal policies and procedures.”

The bill also requires these organizations to guarantee they have written policies “against nepotism and regarding the management of actual and potential conflicts of interest.”

Council members were quick to note that this proposed legislation was not an implication of any wrongdoing by nonprofits, but is rather a means of streamlining grant application processes and cutting down on paperwork.

The bill was introduced by council Chair Holeka Inaba, who explained this distinction to his fellow council members.

”Right now, the current process is that (Department of) Finance gets all of the applications and has to go through the bylaws and the conflict of interest policies and the nepotism policies to confirm that they meet the standards required by our code, which means a lot of work,” Inaba said. “In some cases, there may have been perhaps some confusion or disagreement as to whether language provided by these organizations does it fact meet our requirements … so what this bill does is replace the need for any department to have to go in and look at these bylaws and these conflict of interest and nepotism policies and instead receive a certification by the organization that they have those policies.”

This procedural change was questioned by committee Chair Jenn Kagiwada, who sought clarification from Inaba that the council was not challenging whether nonprofits receiving county grant funds already had these policies in place or not.

“(It) has to do with documentation and staff time and all that?” Kagiwada asked. “It’s not necessarily that we were doubting that they had bylaws or something, but it was just sometimes cumbersome to dig through all the paperwork to document it?”

Inaba responded to her question with a simple “yes.”

Puna Councilman Matt Kaneali‘i-Kleinfelder took a more pointed approach, subtly implying that an outsized portion of grant funding received by some nonprofits was going toward employee benefits and perks.

“I’ve been watching intently, watching the nonprofits play in and out of the media … mostly on the side of being at-caution if the nonprofits were to stop functioning,” Kaneali‘i-Kleinfelder said. “In that light, what I see is a tremendous amount of tax-based resources being applied to nonprofits, which is good when they do something for the community, but on the back end of that is a tremendous amount of tax money from state, federal and county sources being applied directly to nonprofits to the point where they’re competing with staff for the county, competing with staff across the board — 401(k), retirement plans, brand new vehicles.”

Because of this, he said, county officials should be seeking proof that the tens of millions of dollars they’ve appropriated in recent funding cycles is producing tangible results.

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“The feedback that I’m looking for is what the return on investment for the state and county and federal money that’s being applied to the nonprofits is,” he said.

He added that Bill 156 was necessary to ensure these organizations were following the rules and being held accountable.

“This kind of a bill begins to create the backbone of really making sure that nonprofits aren’t (operating) outside of the box and are playing by the same rules that we all play by, and they’re doing the utmost for the community with (that) tax base,” he said.

Addressing the nepotism provision in the bill, Inaba offered a real-life hypothetical situation using the county’s Waiwai Grant Program as an example. Waiwai is an annual grants-in-aid initiative providing at least $2.5 million to nonprofit organizations funding programs and services that “yield direct benefits to the public and accomplish public purposes.”

“For example … a real example for myself: my mother being the executive director of Laiopua 2020, if they submitted an application for the Waiwai Program — which is a council-overseen grant program — they should be disclosing that I’m on the council as part of their application,” he said.

Laiopua 2020 is a nonprofit community center in Kailua-Kona. It’s built on Hawaiian Home Lands and focuses on uplifting Native Hawaiian homesteaders and the greater Kona Coast community through workforce development, affordable housing, cultural education and youth mentorship.

Before calling for a vote to approve the bill, Kagiwada again questioned Inaba — this time about potential unintended consequences.

“Can one council member kind of go after a nonprofit if they have concerns about that nonprofit?” she asked, “or is this really working through the Department of Finance and the body — I just want to make sure that we’re not opening this up for individuals to go after individual organizations without some checks and balances.”

To answer this, Inaba deferred to Deputy Corporation Counsel Renee Schoen. Schoen clarified that the main purpose of the bill was about setting eligibility standards for receiving grants — something that is done by a “permitted interaction group” or the Finance Department and not by individual council members.

“I don’t believe that the situation you are speaking of would come into play,” she said.

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Email Stefan Verbano at [email protected].