By Laura Brown
The Hawaii Department of Education (DOE) is struggling to pay its bills and the teachers’ union is adamant about raiding $35 million of the state’s emergency fund to infuse the education system with even more than its current $2.4 billion budget for 170,000 students.
But, off the radar of most citizens, the state auditor released a procurement audit of the Department of Education this year for Fiscal Year 7/1/06 – 6/30/07 highlighting procurement practices so wasteful that findings were forwarded to the Attorney General’s Criminal Division.
Now, many are asking if the DOE should be given any more of the taxpayers’ money if there is no accountability.
Some of the findings of the auditor include:
- Violations of purchasing cards exceeding limits and used for prohibited items like computers and travel coupons.
- Of contracts reviewed, budgets were based on vendor’s proposals and done after proposals were received.
- Significant budget overruns on staff purchase order contracts, some more than 100 percent or $50,000 over budget.
- When the Superintendent gave an exemption on state procurement laws to the Office of School Facilities in 2007, that department then issued 408 staff purchase orders totaling $10,222,1000.
- Work was often done before contracts were awarded or in place.
- Files are often not closed and are missing certifications of available funds (Form-C41).
- Financial reporting system does not list total number of purchases made, procurement method, related disbursements and ending encumbrances, i.e. there is no procurement reporting process.
The DOE’s failure to handle its own procurement of $840 million per year in goods and services follows the “de-linking” of the DOE from the Department of Accounting and General Services (DAGS) in the aftermath of Act 51, Session Laws of Hawaii 2004.
The Superintendent, in a 2004 speech before the House and Senate on the Senate Floor, decried the system as dysfunctional and claimed the DOE should take over. However, the audit notes that “taking over” procurement duties meant 200 DAGS employees were transferred to the DOE, along with all of their procurement forms and practices.
What did not transfer was leadership and oversight of the procurement process. Guidelines put in place were not mandated policies and procedures and there were no consequences for breaking the DOE’s guidelines.
“The Superintendent has not taken the action needed to establish a tone stressing an ethical and compliant procurement culture, “according to the audit.
Under the DOE’s control, procurement authority was “decentralized” to branch and school levels, but those put in charge of contracting for products and services were not trained. When the Assistant Superintendent of the Office of School and Facilities Support requested merger of the contract solicitation/award branch and the contract execution/approval branches and put under his jurisdiction, the Superintendent agreed even though the branches had been separated to prevent reporting to one Assistant Superintendent.
Then, in September 2008, construction contracts up to $1 million were removed from any review by the Procurement and Contracts Branch. These contracts were also removed from review by the Attorney General unless they were over $1 million.
Finding significant deficiencies and non-compliance with procurement law, the audit was expanded.
Recommendations from the audit, Part 1, include:
- DOE must develop a formal internal control system over procurement
- Develop a Code of Ethics and Conflicts of Interest Policy
- Institute a formal fraud risk management program
- Outsource the DOE’s internal audit function
- Develop budgets to prevent cost overruns
- Require administration to negotiate for reasonable prices
The DOE Procurement Audit, Part I & II, reveals “an organizational culture of disregard for procurement rules in the Office of Business Services (Office of School Facilities)” that will be explored further in Hawaii Reporter’s expose of mismanagement and waste in the DOE.
Laura Brown, capitol reporter and researcher for Hawaii Reporter, can be reached atmailto:LauraBrown@hawaii.rr.com
