Hawaii Health Department Vulnerable to Waste and Abuse

NCPA October 26, 2015

An investigation by Hawaii's state auditor into the state's Department of Health (DOH) found that the department lacked clarity, consistency, and oversight with respect to how it procures goods and services. Specifically, the auditor found that the DOH's director entrusted procurement authority to her division staff, which is not a problematic decision on its own, but said staff were often unsupported by overseers or formal procedures. Likewise, personnel within the department were often unclear on their roles, responsibilities and to whom they were accountable, resulting in inconsistencies, inefficiencies and noncompliance with DOH's procurements. Consequently, the auditor believes that the DOH is susceptible to waste and abuse.

The auditor cited the example of the DOH's 2009 contract with Grant Thornton LLP/PKF Pacific Hawaii LLP (PKF) to audit the DOH's certified redemption centers in the Deposit Beverage Container Program. In October 2008, the DOH solicited and awarded its contract to PKF via a request for proposals, which is structured to solicit multiple bidders. However, only one bid was received, and the initial price was $76,400. Eventually though, the bid grew to $543,374, the contract was extended one year past its initial expiration date, and the number of redemption centers to be audited was decreased from six to two. PKF ultimately delivered two audits to the DOH; the first was accepted, while the second was rejected. However, the auditor questions the value of both reports given the lack of oversight throughout the contracting process.

The auditor recommends that the DOH increase organizational oversight over procurements, and clarify procurement roles, responsibilities and procedures. The auditor also suggested that the health director certify that staff responsible for procurements are satisfactorily trained and supervised, and finally, the DOH should review its contract with PKF and address procurement violations.

Source: "Procurement Examination of the Department of Health: Lack of Procurement Controls Exposes Department to Waste and Abuse," State of Hawaii Office of the Auditor, July 2015.