State auditor documents 2013

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State auditor documents 2013

  1. 1. NEIL ABERCROMBIEGOVERNORAARON S. FUJIOKAADMERSTRATORSTATE OF HAWAIISTATE PROCUREMENT OFFICEP.O. Box 119Honolulu, Hawaii 96810-0119Telephone: (808) 5874700e-mail: state.procurementoffice@hawailgovhttp://hawailgovispoApril 4, 2013SPO 13-130The Honorable Donna Mercado Kim, PresidentThe SenateState Capitol, Room 409The Honorable Joseph Souki, Speaker of the HouseHouse of RepresentativesState Capitol, Room 431Honolulu, Hawaii 96813Dear President Kim and Speaker Souki:SUBJECT: Review of Office of the Auditor Procurement Contracts forProfessional Services, Auditing ServicesThis memo is in response to your March 4, 2013 request to have the State ProcurementOffice (SPO) review the subject contracts. The Office of the Auditor (OA) submitted for yourconsideration 13 form SPO-016, Report of Procurement Violation, for professional servicesprocurements for auditing services during the period FY 07 thru FY 12The SPO reviewed each form, and the following is provided for your consideration,including recommendation on how to proceed.FINDINGS2/26/13 State Auditor memo to Senate President and House of Representative Speakerconveying Auditors determination on failure to adhere to certain stateprocurement requirements.The table below provides details of each contract.
  2. 2. The Honorable Donna Mercado Kim, President SPO 13-130The Honorable Joseph Souki, Speaker of the HouseApril 4, 2013Page 26129110 Ohata Chun Yuen, LLP #59372 FY 10-12 HCDA $ 114,0006/14107 Nishihama & Kishida CPAs Inc #55929 FY 07-09 DHS 1,185,0006/29/10 #59373 FY 10-12 OHS $ 1,215,000Subtotal $ 2,400,0008/17/10 Macias Gini & OConnell LLP #59536 FY 10-12 EUTF $ 375,0006/19/07 KPMG LLP #55954 FY 07-09 DOT Airports $ 1,266,0006/30/10 #59353 FY 10-12 $ 1,266,0001/6/10 #58896 FY 09-12 ERS $ 580,0006/30/10 #59352 FY10-12 DOE $ 1,095,000Subtotal $ 4,207,0006/15/07 KMH LLP #55946 FY 07-09 DOT Highways $ 768,0006/28/10 #59340 FY 10-12 $ 867,0006/28/10 #59339 FY 10-12 HPHA $ 960,0001216/11 #59339 FY 11, Sup #2 $ 115,000Subtotal $ 2,710,0008/27/09 Kobayashi, Kanetoku, Doi, Lum &Yasuda CPAs LLC#58559 FY 10-12 DAGS StadiumAuthority$240,0006/29/10 #59341 FY 10-12 DOT-Harbors $ 543,000Subtotal $ 783,0006/19/07 Grant Thornton LLP #55953 FY 07-09 DOE $ 1,095,00010/31/08 #55953,Sup #1 FY 07 $ 275,000Subtotal $ 1,370,0006/30/07 Ernst & Young, LLP #56151 FY 07-09 DOT-Harbor $ 525,0006/15/07 Egami & Ichikawa CPAs, Inc #55947 FY 07-09 DOT-Admin $ 100,5006/29/10 #59338 FY 10-12 DAGS- State MotorPool/ ParkingRevolving Fund$ 144,000Subtotal $244,5006/28/07 Deloitte & Touche LLP #56021 FY 07-09 CAFR $ 2,385,0008/12/08 #56021, Sup #1 CAFR FY07 $ 130,6969/24/09 #56021, Sup #2 CAFR FY08 $ 126,8806/30/10 #59351 CAFR FY 10-12 $ 4,230,000Subtotal $ 6,872,5766/28/10 CW Associates #59337 FY 10-12 DOT-Admin $ 102,0006/29/10 Akamine, Oyadomari & KosakiCPAs Inc#59336 FY 10-12 AG $ 294,0006/12/07 Accuity LLP #55924 FY 07-09 DOH $ 1,029,0006/28/10 #59332 FY 10-12 DOH $ 1,180,0006/16/08 #57123 FY 08-09 DOA $ 258,0006/28/10 #59335 FY 10-12 HHFDC $ 717,0006/28/10 #59334 FY 10-12 DHHL $ 456,000Subtotal $ 3,640,000TOTAL $ 23,637,076
  3. 3. The Honorable Donna Mercado Kim, President SPO 13-130The Honorable Joseph Souki, Speaker of the HouseApril 4, 2013Page 3According to each form SPO-016, the OA inadvertently failed to obtain procurementdelegation authority from the Legislative Branchs Chief Procurement Officers (CP0s), SenatePresident and House of Representatives Speaker, for any procurement method beyond thedollar levels of $50,000 prior to 1/10/07 and $100,000 after 1/10/07. The initial procurements ofthese auditing service contracts were conducted by either the individual department or DAGS,from which responsibility to conduct these audits were subsequently transferred to OA forcontract administration. Upon contract renewal, OA staff did not obtain procurement delegationauthority from the CP0s.The Hawaii Public Procurement Code, HRS chapter 1030 states:§103D-207 Centralization of procurement authority. Except as otherwise provided insections 1030-208, 1030-209, and 103D-210, all rights, powers, duties, and authority relating tothe procurement of goods, services, and construction, and the management, control,warehousing, sale, and disposal of goods, services, and construction now vested in, orexercised by, the governmental bodies of the State and counties are hereby transferred to therespective chief procurement officers.§1030-208 Delegation of authority by the chief procurement officer. Subject to therules of the policy board, each chief procurement officer may delegate any authority or dutyconferred upon the chief procurement officer by this chapter to designees or to any department,agency or official within their respective jurisdictions.Hawaii Administrative Rules that implement these statutes provide the requirements andguidance to obtain the written delegation. For example, SPO issues written procurementdelegations to each department head, and includes instructions and guidance to allow thedepartment head to further delegate procurement authority to procurement officers (i.e. divisionchiefs, branch chiefs, executive directors, etc.) SPO memos and delegation forms are availableat htto://hawaiimov/soo/state-countv-Dersonnel-manual/procurement-deleoation/orocurement-deleaation-authoritv.The OA has taken the following corrective actions:1. Issued and read applicable procurement statutes, rules, policies, and procedures;2. Reviewed available guidance at the SPO website;3. Participated in SPO sponsored training, including• SPO 115, Professional Services,• SPO 141, Reporting/Posting awards,• SPO-140, Posting Procurement Awards, Notices and Solicitations,• SPO-135, Contract Administration; and4. Added a reminder in their award-decision memo to indicate whether procurementdelegation authority is required.Attached for your information is a listing of OA attendees of SPO procurementworkshops, which reflects OAs efforts to meet compliance requirements.
  4. 4. The Honorable Donna Mercado Kim, President SPO 13-130The Honorable Joseph Souki, Speaker of the HouseApril 4, 2013Page 4A complete listing of SPO training workshops, is available to all CPO jurisdictions, and isviewable at htte://hawaii.00viseo/oeneralttraininq-and-informational-sessions.DETERMINATIONThese procurement violations are determined to be inadvertent, a mistake on the part ofstaff(s) not knowledgeable on the requirements and process. OA has implemented correctiveactions to prevent recurrence.SPO recommends approval of the violations with the following CPO comments:The procurement violations are approved with the understanding that OA has takencorrective action and has established a process that will prevent future recurrence.If you have any questions, please call me at 587-4700.Sincerely,Aaron S. FujiokaAttachment
  5. 5. State Procurement OfficeAttendance at Procurement WorkshopsOffice of the State Auditorfrom 2006 to 03131113Workshop No. Workshop Title Date AttendedAkinaka, Sarah No. of Classes Attended= 1127 Detecting and Preventing Antitrust Violations 5/19/092Calvin, Hangai No. of Classes Attended= 1176 pCard Program Changes and Updates 11/4/103 Choo, David No. of Classes Attended= 2127 Detecting and Preventing Antitrust Violations 5/22109170 Overview of Procurement Practices - HRS Chapter 103D 4/7/104 Endo, Lauren No. of Classes Attended- 3120 Small Purchases 417/10127 Detecting and Preventing Antitrust Violations 5/19/09170 Overview of Procurement Practices - HRS Chapter 103D 417/10Fujii, Arvin No. of Classes Attended= 2127 Detecting and Preventing Antitrust Violations 5/19/09170 Overview of Procurement Practices - HRS Chapter 103D 417/106 Hangai, Calvin No. of Classes Attended= 1127 Detecting and Preventing Antitrust Violations 5/19/097Hao, Sean No. of Classes Attended= 3127 Detecting and Preventing Antitrust Violations 4/5/11135 Contract Administration 12/15/10170 Overview of Procurement Practices - HRS Chapter 1031) 10/14/108 Hayamoto, Adelyne No. of Classes Attended= 7105 Competitive Sealed Proposals 6/8/12105 Competitive Sealed Proposals 6/6/12127 Detecting and Preventing Antitrust Violations 5/19/09135 Contract Administration 6/12/12141 Reporting/Posting Awards 6/14/12170 Overview of Procurement Practices - HRS Chapter 103D 3/14/13170 Overview of Procurement Practices - HRS Chapter 103D 417/109 Hibbard, Rachel No. of Classes Attended= 2127 Detecting and Preventing Antitrust Violations 4/5/11170 Overview of Procurement Practices - MRS Chapter 103D 3/14/13wHiga, Debbie No. of Classes Attended= 8135 Contract Administration 9/13/12140 Overview of the SPO Website and Posting Procurement Awards, Notices and 9/4/12SolicitationsAttendance at SPO Procurement Workshops by Attendee - Office of the Auditor 2006-03131/13 Page 1 of 4
  6. 6. Workshop No. Workshop Title141 Reporting/Posting Awards155 Infra and Out-of-State Travel Procedures170 Overview of Procurement Practices - HRS Chapter 103D175 pCard Overview and UpdatesDate Attended10/4/129/28/123/14/139/27/1211 Higa, Marlon No. of Classes Attended= /127 Detecting and Preventing Antitrust Violations 5/22/0912 Ito, Adele No. of Classes Attended=1140 Overview of the SPO Website and Posting Procurement Awards, Notices and 9/4/12Solicitations/3 Kawamoto, Roy No. of Classes Attended= 2135 Contract Administration 9/13/12170 Overview of Procurement Practices - HRS Chapter 103D 3/14/1314 Kubota, Stanley No. of Classes Attended=1127 Detecting and Preventing Antitrust Violations 5/19/0915 Lee, Norman Na of Classes Attended= 2127 Detecting and Preventing Antitrust Violations 5/22/09170 Overview of Procurement Practices - HRS Chapter 103D 4/7/1016 Lum, Spencer127 Detecting and Preventing Antitrust Violations/ 7 Matsumoto, Greg125 Exemptions from HRS Chapter 103D135 Contract Administration170 Overview of Procurement Practices - HRS Chapter 1031)175 pCard Overview and Updates15 Mukai, Pat155 Infra and Out-of-State Travel Procedures175 pCard Overview and Updates19 Murata, Jennifer127 Detecting and Preventing Antitrust Violations20 Oda, David127 Detecting and Preventing Antitrust Violations170 Overview of Procurement Practices - HRS Chapter 103D21 Oftana, Tricia127 Detecting and Preventing Antitrust Violations135 Contract Administration170 Overview of Procurement Practices - HRS Chapter 103D235 Overview of Procurement of Health & Human Services22 Oshiro, Jayna127 Detecting and Preventing Antitrust Violations170 Overview of Procurement Practices - HRS Chapter 103D23 Racuya-Markrich, Kathleen127 Detecting and Preventing Antitrust ViolationsNo. of Classes Attended= 15/19/09No. of Classes Attended=411/15/1212/3/124/7/1012/12/12No. of Classes Attended= 29/28/129/27/12No. of Classes Attended= 15/19/09No. of Classes Attended= 25/19/094/7/10No. of Classes Attended= 45/22/093/17/104/7/105/11/09No. of Classes Attended= 25/19/094/7/10No. of Classes Attended= 45/22/09Attendance at SPO Procurement Workshops by Attendee - Office of the Auditor 2006-03131/13 Page 2 of4
  7. 7. 31 Vasconcellos Jr, Danny170 Overview of Procurement Practices - HRS Chapter 103DnVasconcellos, Danny127 Detecting and Preventing Antitrust Violations235 Overview of Procurement of Health & Human ServicesNo. of Classes Attended=14/7/10No. of Classes Attended= 25/22/095/11/09Workshop No. Workshop Title135 Contract Administration170 Overview of Procurement Practices - HRS Chapter 103D170 Overview of Procurement Practices - HRS Chapter 103DDate Attended3/17/103/14/134/7/1024 Rawls, Ron No. of Classes Attended=4100 Competitive Sealed Bids 2/14/13100 Competitive Sealed Bids 2/12/13120 Small Purchases 1/22/13126 Procurement Code of Ethics and Compliance with HRS Chapter 103D 1/16/1325 Rawls, Ronald No. of Classes Attended=1170 Overview of Procurement Practices - HRS Chapter 103D 3/14/1326 Ray, Rachel No. of Classes Attended= 3120 Small Purchases 11/17/06176 pCard Program Changes and Updates 11/4/10199p11 Price List Telecommunication Equipment Info Session 11/19/0827Shilgi, Ron No. of Classes Attended= /170 Overview of Procurement Practices - HRS Chapter 1030 3/14/13nTamashiro, Trevor No. of Classes Attended=1170 Overview of Procurement Practices - HRS Chapter 103D 3/14/1329 Trifonovitch, Kelli No. of Classes Athwkled=1170 Overview of Procurement Practices - HRS Chapter 103D 4/7/1030 Trifonovitch, KeIli Abe Na of Classes Attended=1127 Detecting and Preventing Antitrust Violations 5/19/0933Velasco, Nicole No. of Classes Attended= 2140 Overview of the SPO Website and Posting Procurement Awards, Notices and 8/11/11Solicitations170 Overview of Procurement Practices - HRS Chapter 103D 8/25/1134 Wiles, Greg No. of Classes Attended=1170 Overview of Procurement Practices - HRS Chapter 103D 4/14/1133Wilson, Stephen No. of Classes Attended= 2127 Detecting and Preventing Antitrust Violations 5/22/09170 Overview of Procurement Practices - HRS Chapter 103D 4/7/1036Wong, Jerry No. of Classes Attended=6127 Detecting and Preventing Antitrust Violations 5/19/09135 Contract Administration 9/13/12140 Overview of the SPO Website and Posting Procurement Awards, Notices and 9/4/12Solicitations141 Reporting/Posting Awards 10/4/12Attendance at SPO Procurement Workshops by Attendee - Office of the Auditor 2006-03/31/13 Page 3 of 4
  8. 8. 37Wong,110120135141155175185190is-1303CloudRussellEmergency and Sole Source ProcurementsSmall PurchasesContract AdministrationReporting/Posting AwardsInfra and Out-of-State Travel ProcedurespCard Overview and UpdatesPrevailing Wage, Certified Payroll and Contracting Agency ResponsibilitiesSPO Price and Vendor Lists/Cooperative ContractsInfo Session WSCA Public Cloud Hosting VL 13-16No. of Classes Attended= 99/27/1210/23/129/13/1210/4/129/28/129/27/1210/18/121/24/133/13/13Workshop No170170Date Attended3/14/134/7/10• Workshop TitleOverview of Procurement Practices - HRS Chapter 1030Overview of Procurement Practices - HRS Chapter 103D38Yamane, Jan No. of Classes Attended=3127 Detecting and Preventing Antitrust Violations 5/19/09170 Overview of Procurement Practices - HRS Chapter 1030 3/14/13170 Overview of Procurement Practices - HRS Chapter 1030 4/7/1039Yee, Sterling127 Detecting and Preventing Antitrust Violations170No. of Classes Attended= 25/22/094/7/1095Overview of Procurement Practices - HRS Chapter 1030Grand Total AttendanceAttendance at SPO Procurement Workshops by Attendee - Office of the Auditor 2006-0341/13 Page 4 of 4
  9. 9. DONNA MERCADO KIMPRESIDENTRONALD D KOUCHIVICE PRESIDENTSAM SLOMMINORITY LEADER Ilrbe ipenateSTATE CAPITOLHONOLULU, HAWAII 96813FIRST DISTRICTGILBERT KAHELESECOND DISTRICTRUSSELL E RUDERMANTHIRD DISTRICTJOSH GREENFOURTH DISTRICTMALAMA SOLOMONMarch 4, 2013FIFTH DISTRICTGILBERT SC KEITMAGARANSIXTH DISTRICTROSALYN H BAKERSEVENTH DISTRICTJ KALANI ENGLISHEIGHTH DISTRICTRONALD 0 KOUCHININTH DISTRICTSAM SLOMTENTH DISTRICTLEE IHARA. JRELEVENTH DISTRICTBRIAN I TANIGUCHITWELFTH DISTRICTBRICKWOOD GALUTERIATHIRTEENTH DISTRICTSUZANNE CHUN OAKLANDFOURTEENTH DISTRICTDONNA MERCADO KIMFIFTEENTH DISTRICTGLENN WAKAISIXTEENTH DISTRICTDAVID Y IGESEVENTEENTH DISTRICTCLARENCE K NISHIHARAEIGHTEENTH DISTRICTMICHELLE N KIDANININETEENTH DISTRICTWILL ESPEROAaron Fujioka, AdministratorState Procurement OfficeP.O. Box 119Honolulu HI 96810-0119Dear Mr. Fujioka:We are in receipt of a letter from the Office of the Auditor dated February 26, 2013.The letter requests our approval of certain past procurement contracts forprofessional services.As the Chief Procurement Officers for the Senate and House of Representatives, wewould like to request your assistance in reviewing the attached forms related tothose contracts and make recommendations on how to proceed, including providingcomments as deemed appropriate.We thank you in advance for your assistance on this matter. If you have anyquestions, please contact Terrence Aratani at 587-7200 or Denise Liu at 586-6100from our staffSincerely,TWENTIETH DISTRICTMIKE GABBARDTWENTY-FIRST DISTRICTMAILE S L SHIMADUKUROTWENTY-SECOND DISTRICT Donna Mercado KimDONOVAN M DELA CRUZSenate PresidentTWENTY-THIRD DISTRICTCLAYTON HEETWENTY-FOURTH DISTRICTJILL N TOKUDATWENTY-FIFTH DISTRICTLAURA H THIELENCHIEF CLERKCAROL TANIGUCHIJoseph M. SoukiSpeaker of the HouseAttachments
  10. 10. 4f:.....•••••••..„ 9 „JAN K. YAMANEActing State Auditor(808) 587-0800FAX: (808) 587-0830cSTATE OF HAWAIIOFFICE OF THE AUDITOR465 S. King Street, Room 500Honolulu, Hawaii 96813-2917February 26, 2013The Honorable Donna Mercado KimPresident of the SenateHawaii State Capitol, Room 409Honolulu, Hawai` i 96813The Honorable Joseph M. SoukiSpeaker of the House of RepresentativesHawaii State Capitol, Room 431Honolulu, Hawai` i 96813Dear Madam President and Mr. Speaker:Last year, the Auditor determined that her office inadvertently failed to adhere to certain stateprocurement approval requirements in connection with contracts for financial statement audit servicesprovided by CPA firms between 2004 and 2012. The Auditor self-reported the violations to the StateProcurement Office (SPO) on standard forms provided by the SPO. Subsequently, however, the SPOinformed us that we need to obtain "comments" from our respective Chief Procurement Officers (CP0s):the President of the Senate and the Speaker of the House of Representatives. Accordingly, the purpose ofthis letter is to provide you with an explanation of the background and circumstances that led to theviolations and to request your assistance in completing the Chief Procurement Officer Comments sectionon page 3 of the SPO procurement violation reports.BackgroundEach year, the Office of the Auditor requests a procurement delegation of authority letter, approved byboth the President of the Senate and the Speaker of the House of Representatives, which establishesprocurement limits for the State Auditor. Additional approvals by the Senate President and HouseSpeaker are required for procurement actions that exceed certain dollar limits. In particular, prior toJanuary 10, 2007, procurement actions (for goods or services) exceeding $50,000 required the additionalapprovals; after January 10, 2007, the additional approvals threshold increased to $100,000.In 2004, the Office of the Auditor began managing contracts for annual financial statement audits ofvarious state departments and agencies, as performed by CPA firms. Previously, the contracts weremanaged by DAGS or the department/agency being audited. Many of these contracts were three-yearcontracts and were transferred "mid-term" to the Office of the Auditor. When new contracts with theCPA firms were procured by the Office of the Auditor, neither the Auditor nor her staff were aware thatthe contracts needed the additional approvals; consequently, they were not obtained.In 2012, we determined that many of the financial statement audit services contracts should have beensubmitted to the Senate President and House Speaker for approval. We therefore researched our 2004—2012 contract records and compiled a list of contracts with CPA firms for which Senate President andHouse Speaker approvals were not obtained. We informed the previous Senate President and House
  11. 11. The Honorable Donna Mercado KimThe Honorable Joseph M. SoukiFebruary 26, 2013Page 2Speaker of those violations in a letter dated August 9, 2012, and prepared 13 procurement violationreports (including corrective action plans) and inadvertently submitted them to the SPO on January 8,2013. The SPO has informed us that we need to obtain comments from our respective CPOs in order tocomplete the process.Request for AssistancePlease review the 13 procurement violation reports (enclosed) and provide any comments you may havein the Chief Procurement Officer Comments section on page 3 of each violation report. Upon completion,please return the forms to the Office of the Auditor for our records.If you have any questions or concerns, please feel free to contact me.Sincerely,Jan K. YamaneActing State AuditorEnclosures

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