Follow–Up on Recommendations from Report No. 15-09, Procurement Examination of the Department of Health: Lack of Procurement Controls Exposes Health Department to Waste and Abuse
A Report to the Governor and the Legislature of the State of Hawai‘i
Report No. 18-13 October 2018 OFFICE OF THE AUDITOR STATE OF HAWAI‘I (excerpts)
Why we did the 2015 Audit
… In Report No. 15-09, Procurement Examination of the Department of Health: Lack of Procurement Controls Exposes Health Department to Waste and Abuse, we found DOH’s delegation of procurement functions to individual staff understandable due to the diversity of the department’s programs. However, we found there was minimal oversight over these staff and no process to provide them with procurement service support. When procurement issues arose, staff did not have clearly defined procedures for how they should obtain technical assistance. We found that DOH did not systematically review procurement activities to monitor and promote compliance to ensure that all staff adhere to key procurement requirements. Consequently, monitoring practices among divisions were generally informal and vastly inconsistent. We also found there was no oversight of contract administrators nor a periodic and systematic review to ensure that functions were being conducted appropriately.
In addition, we pointed to one contract in particular -- the contract for an audit of redemption centers -- that epitomized the flaws in DOH’s procurement process. We concluded that even minimal review and oversight should have detected numerous procurement violations and irregularities relating to this contract.
What we found this year
…we found that DOH has implemented one recommendation, partially implemented two recommendations, and has not implemented two recommendations; and that one recommendation is no longer applicable. …
The department should review its procurement of the Grant Thornton/PKF contract. If the department determines that a procurement violation has occurred, it must report this violation to the State Procurement Office and rectify its process to ensure such a violation does not occur in future.
Not Implemented - N/A
Comments Following the issuance of Report No. 15-09, DOH purportedly did an initial review of the Grant Thornton/PKF contract in July 2015 and concluded that no violation had occurred. At that time, the RFP could not be located, and the review was based only on the contract document. Moreover, we were not provided any documentation of such review. The ASO and the State Procurement Office also met in April 2018 to do another review of DOH’s procurement of the Grant Thornton/PKF contract. However, although the ASO was able to retrieve administrative files that contained portions of the initial RFP and contract documents, they were unable to locate the original RFP and a complete set of the original contract documents, which were lost during the subsequent relocation of the DOH division responsible for the procurement. As a result, they were unable to provide the State Procurement Office with all the necessary documentation to confirm or deny if a procurement violation transpired.
Because of DOH’s inability to provide all necessary documentation for the State Procurement Office to make a definitive determination if a procurement violation occurred, the State Procurement Office advised DOH not to submit a procurement violation to the State Procurement Office.
Despite DOH’s consultation with the State Procurement Office, DOH’s inability to provide all the necessary documentation has and will continue to prevent the State Procurement Office from conducting a meaningful review to determine if a procurement violation occurred. Consequently, Recommendation 6 has not been implemented and is no longer applicable….
read … Full Report
... here's what the State Procurement Office cannot review ....
2015 Audit Report -- Most Glaring Example: PKF Contract Grows 611%
…The most glaring example of the department’s lack of control over procurement is its 2009 contract with Grant Thornton LLP/PKF Pacific Hawai‘i LLP (PKF). The contract was executed to audit certified redemption centers in the department’s Deposit Beverage Container (DBC) Program. Originally bid at $76,400, the contract grew to $543,374—a 611 percent increase—while its scope shrank and the deliverables’ deadline were extended by a year. In the end, the two audits the department received, which was the result of a significantly flawed procurement process, was of little value. At the time of our fieldwork the department had yet to resolve its contract issues with PKF. The department has paid PKF approximately 97 percent of the contract; however, since the contract was so poorly executed, the State is unable to seek restitution….
read … 2015 Audit Report