Report on Compliance with Statutory Requirements Based on Report No. 15-13, Study of State Departmental Engineering Sections That Manage Capital Improvement Projects

From Hawaii State Auditor, January, 2020

Introduction

The State’s Capital Improvement Program Budget for FY2019 was $2.02 billion and covered a broad spectrum of capital improvement projects (CIP) ranging from the construction of schools, hospitals, and highways to asbestos removal and reroofing. State CIP also includes infrastructure projects, such as installing utilities systems; natural resources projects, such as building and maintaining jetties, dams, and irrigation systems; and large-scale information technology (IT) system projects. Managing these projects is one of the State’s most significant and costly functions, requiring both organizational time and resources….

This report, requested by House Concurrent Resolution No. 193, Senate Draft 1 (2019 Regular Session) (HCR 193), assesses compliance with statutory requirements that were enacted based on our 2015 Study of Departmental Engineering Sections That Manage Capital Improvement Projects (Report No. 15-13). Act 241, Session Laws of Hawai‘i (SLH) 2016, codified at Section 103-12, Hawai‘i Revised Statutes (HRS), requires executive departments and state agencies that engage in CIP to implement those recommendations outlined in our report….

…The findings of the 2015 report were based primarily on self-reporting by agencies. Our methodology in 2019 relied on survey responses and includes an evaluation of supporting documents such as schedules and timelines.

Because of our shift to independent evaluations, certain departments and agencies deemed compliant with recommended best practices in 2015 were generally found non-compliant with comparable statutorily required practices in 2019. For example, in 2015, we reported the Natural Energy Laboratories of Hawai‘i Authority (NELHA) maintained a written schedule from the beginning to close of projects based solely on the agency’s survey response. This year, we undertook a more rigorous review, analyzing six sample NELHA schedules, and found none of them accounted for each required project phase: initiation, planning, design, bid, construction, and post-construction….

For our 2019 report, we surveyed 23 departments and agencies to determine how they managed their own CIP. We received 25 responses, three of which were from entities that did not manage their own CIP (the Department of Budget and Finance, the Department of Public Safety, and the Department of Labor and Industrial Relations); some departments provided separate responses from agencies under their administration. Overall, we found that no agency or department was compliant with all of the statutory requirements. Exhibit 1.1 shows how each department and agency evaluated in 2015 fared then and now regarding compliance with best practice standards, as codified in Section 103-12, HRS. …

Conclusion

Since the issuance of Report No. 15-13, our recommendations have been formalized in the Hawai‘i Revised Statutes. In addition to those recommendations, the Legislature added an annual training requirement. These mandates, which are intended to provide uniformity, transparency, and accountability, have been law since 2016.

However, our review of the implementation of these statutory requirements shows a low level of compliance to date by the various departments that manage their own CIP. It is difficult to pinpoint whether the lack of compliance is because departments are unclear about the requirements, are unaware of requirements, or if there are other causes or factors. We encourage DAGS and affected departments and agencies to discuss both requirements and strategies to effectuate compliance in this area….

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