Posted by: Frank | 03/03/2011

AUDIT THE DoE – NOW!!!!! Read ON!!

Here is a photo of tea party’s arrival in Madison, Wisconsin.  One of Gov. Walker’s senators is caving-in to union pressure.  This is all-out war for the union bosses who are desperate not to lose mandatory membership (mandatory dues) and their fiscal stranglehold on the people (83%) of Wisconsin. School achievement is shameful.

Tell Senator Dale Schultz (R) to stand his ground with Gov. Walker to stop union tyranny:
 Email Sen. Schultz-   or message 1-800-978-8008

Peaceful WisconsinTea Party stands in Madison.
The document below reveals the widespread and shocking illegal
insider dealing, fraud, waste, cronyism, and chronic manipulation
of the Department of Education Procurement system.  This is only
one evidence of a culture inside the DoE at the levels of teacher principal
 and supervisor.
Governor Abercrombie and the Hawaii Legislature
have turned a blind eye to this corruption.
We will shine light on it with our signs today at 4 pm.

Hawaii Department of Education Procurement Audit, Part II, Details Insider Dealing, Waste and Alleged Corruption
Part II of a Series
By Laura Brown, 1/6/2010 2:12:45 PM

When Hawaii State Department of Education Superintendent Pat Hamamoto, for the first time in history, addressed the Hawaii State Legislature from the Senate chamber floor in 2004, she requested that the Department of Education take over management of the public school’s capital improvement and repair and maintenance program from the Department of Accounting and General Services. She said: “Give us (DOE) the resources and authority to do the job and then hold us accountable.” Her wish was granted by the Democratic majority, which dominates the Hawaii legislature and the DOE took over procurement responsibilities beginning in 2005.Five years later, on Dec. 28, 2009, Hamamoto abruptly “retired” nearly two years before her contract expired in October 2011. Her resignation comes in the wake of an audit released earlier this year that clearly details insider dealing, waste and alleged corruption in the Office of School Facilities and Support. See reports:

Part I:

Part II:

In Part I of the state audit, conducted by Grant Thornton LLP on the state’s behalf for FY 2007, auditors found “significant deficiencies, weaknesses and instances of non-compliance.” The firm recommended implementation of controls and oversight over the DOE’s procurement process. The DOE agreed to forward the findings to the Office of the Attorney General, Criminal Division, for a thorough investigation.

Part II of the expanded audit, conducted between August 2007 and November 2008, verified “inappropriate” procurement practices and a “culture of disregard” for procurement rules in the Office of School Facilities under the leadership of both former Assistant Superintendent Rae Loui and current Assistant Superintendent Randy Moore. The audit found that the current Assistant Superintendent “perpetuates the culture by demonstrating to his staff that compliance with procurement rules is secondary to getting the job done.”

As Chief Procurement Officer for the Department of Education, Hamamoto was accountable for the actions of her subordinates. Critics say Hamamoto set the tone for her administrators in her 2004 speech before the Legislature, when she admitted how she learned to “work around the system” – first as a teacher, later as a principal and then as a supervisor.

Audit Finds Several Contracts Awarded to Former Assistant Superintendent’s Employer

Rae Loui served as Assistant Superintendent from February 2003 to December 2005. Hawaii Administrative Rules, Standards of Conduct, specifically prohibits the department from entering into a contract with a business that has been assisted by a person employed by the department during the preceding 2 years.

Emails detailed in the audit show that Loui was employed by M&E Pacific as recently as March 2006. M&E Pacific and SSFM International received several DOE contracts during and after Loui’s tenure as Assistant Superintendent.

Under Loui’s direction, the DOE contracted SSFM International in 2005 at a cost of several million dollars to develop Factrak, a Facilities Management Tracking System.

Two years later, at a June 27, 2007 Board of Education meeting, Assistant Superintendent Randy Moore testified that the DOE was unable to take over facilities management from the Department of Accounting and General Services (DAGS) as required by Act 51, passed in 2004, because the Facilities Management system did not work with the DOE’s financial management system and required the manual tracking of costs per project.

In February 2007, the Auxiliary Services Branch began the process for a Request-for-Proposal for a facilities asset management (FAM) system. Department personnel conducted a series of “inappropriate” meetings in March and April, according to the audit.

A “predetermined” $325,000 construction management contract was awarded to M&E Pacific, an engineering firm where Loui was employed as Vice-President of Operations. The audit details how the process was “manipulated to give the impression of a fair and competitive selection.”

Three days later, M&E Pacific submitted a $100,325 invoice dated December 11, 2007, for “work completed to date,” which was paid by the department.

Other breaches of the procurement process noted in the audit include: 

  • On May 24, 2007, a 7-member selection committee, which included the Auxiliary Services Branch administrator, again selected M&E Pacific to provide construction management services for playground equipment projects across the state. Loui was directly involved in contract negotiations.
  • In 2006, the Hawaii State Legislature appropriated $160 million to renovate 96 schools under the Whole School Renovation Program. The Office of School Facilities outsourced many contracts that should have been in-house jobs.
  • The DOE spent nearly $21 million outsourcing basic management function, including overseeing, evaluating and negotiating with other vendors that should have been done in-house.
  • A project management consultant who was not named in the audit assisted the department in procuring significant management contracts while simultaneously competing for some of the work, and ultimately was awarded a related $2.4 million program management contract.
  • Department employees agreed to override proper procurement decisions and “falsify” official department records.
  • Office of School Facilities employees admitted requesting that contracted vendors bill for work not yet performed to avoid losing the funds for the project. Employees signed off that the work had been performed in order to obtain the final check, and then held the check until the work was actually completed.

Audit Finds Some Office of School Facilities Activities May Be Fraudulent and Illegal

Documents uncovered in the audit show that department employees have instructed contracted vendors to hire specific subcontractors who were previous DOE employees to perform work unrelated to the scope of services of the contract.

The work of the subcontractors was paid by the original contracted vendor, but also billed to the department.

For example, a former principal with no construction experience was paid $17,100 to provide restroom cleaning consultation at schools. In 2005, the department awarded and executed a contract for Project Management and Technical assistance on Repairs & Maintenance and Capital Improvement Projects in the amount of $600,000.

However, in the months prior to this award, the audit says Loui violated state procurement laws by instructing the construction consultant to hire a specific sub-consultant to perform work directly for the department and unrelated to the contract.

On February 5, 2005, one day after its execution, the contract was modified to add $100,000 and to allow the construction consultant to designate any other individuals to charge for work at the highest allowable rate. No justification was given for this modification, which was approved by the Procurement and Contracts Branch administrator, who reported directly to Loui. The invoices submitted by the construction consultant showed no details of the work performed, but the sub-consultant was paid $17,100 under the contract during February through June 2005.

A second sub-consultant, also a former public school principal with no construction experience, was paid $85,310 under the $100,000 modification from June 2005 to June 2006. Only one invoice during this period contained a description of the services performed by the second sub-consultant: “providing consultative services to ASAs and schools regarding Restroom Cleaning and Restoration Project.”

The former principal also was hired by the construction consultant as directed by the former assistant superintendent to perform work directly for the department.

Both the current Auxiliary Services Branch administrator and public works administrator acknowledged that they were aware of, and approved of, Loui’s actions.

The former principal was employed or contracted by the department in a variety of other ways, including being hired as a sub-consultant with a $100,000 allowance to perform similar services under a separate project management contract that is currently in progress.

The auditors would have dug deeper, but report the file for the $600,000 contract was missing most procurement-related documents, and the invoices submitted by the construction consultant for the first year of the contract were just as vague as the contract scope.

More Procurement ‘Abuse’, Audit Says

The audit also found 3 potentially “abusive” situations involving individuals paid under this contract.

  • The first individual was paid $65 per hour to provide fire security inspection services while providing similar services under another contract with the department.
  • Two other individuals provided clerical services at $22 per hour. One of these individuals was married to the head of the Construction Management Section at that time, and both processed other contractor invoices for the department while housed in the department’s facilities and while provided with security badges and network email accounts.

These services appear to be the direct responsibilities of the department, yet the department has not provided a reasonable explanation for outsourcing these services, the auditors says.

  • In addition, the two functions of contract solicitation/award and contract execution/approval reporting to the same assistant superintendent allowed that official to direct and control the entire contracting process for the Office of School Facilities.

Through recent reorganizations, these functions now report to separate assistant superintendents, providing added control by segregating the duties.However, construction contracts have been recently consolidated back under the current assistant superintendent of the Office of School Facilities.

Auditors Make Recommendations:

Auditors say that the DOE Procurement Audit, Part I & II, reveal “an organizational culture of disregard for procurement rules in the Office of Business Services (Office of School Facilities.)”

Actions documented by the auditors are potentially procurement fraud, committed by department personnel and the construction consultant and may be subject to civil and criminal penalties, as such, the DOE says it was referred to the Attorney General’s office. In addition, auditors made the following recommendations:

  • The DOE should perform a detailed investigation of this contract and the related use of sub-consultants.
  • The DOE should develop contracts with specific and detailed scope of work to avoid any potential abuse of state funds.
  • The superintendent should also reconsider the consolidation of procurement authority of construction contracts under a single assistant.

Although the Superintendent responded to the audit in a letter, reassuring controls had been put in place, current contracts in the Office of School Facilities will be explored further in Hawaii Reporter’s expose of mismanagement and waste in the DOE.

See part one of the series here: “Hawaii Department of Education Procurement Audit Reveals Waste and Potential Fraud

Laura Brown is the capitol reporter and researcher for Hawaii Reporter. Reach her at
Hawaii State Capitol News…

 © 2011 Hawaii Reporter, Inc
Since Gov. Abercrombie increased the Budget by
over $700 million and didn’t pay the $700 million
shortfall – and the union unfunded pensions are $7 billion –
and since the private sector is so regulated and taxed it can’t generate revenue-
The Gov. has admitted that he will “probably” be “forced”
to raise GE Taxes 1%= 25% increase.

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