State auditor documents 2013

NEIL ABERCROMBIE
GOVERNOR
AARON S. FUJIOKA
ADMERSTRATOR
STATE OF HAWAII
STATE PROCUREMENT OFFICE
P.O. Box 119
Honolulu, Hawaii 96810-0119
Telephone: (808) 5874700
e-mail: state.procurementoffice@hawailgov
http://hawailgovispo
April 4, 2013
SPO 13-130
The Honorable Donna Mercado Kim, President
The Senate
State Capitol, Room 409
The Honorable Joseph Souki, Speaker of the House
House of Representatives
State Capitol, Room 431
Honolulu, Hawaii 96813
Dear President Kim and Speaker Souki:
SUBJECT: Review of Office of the Auditor Procurement Contracts for
Professional Services, Auditing Services
This memo is in response to your March 4, 2013 request to have the State Procurement
Office (SPO) review the subject contracts. The Office of the Auditor (OA) submitted for your
consideration 13 form SPO-016, Report of Procurement Violation, for professional services
procurements for auditing services during the period FY 07 thru FY 12
The SPO reviewed each form, and the following is provided for your consideration,
including recommendation on how to proceed.
FINDINGS
2/26/13 State Auditor memo to Senate President and House of Representative Speaker
conveying Auditor's determination on failure to adhere to certain state
procurement requirements.
The table below provides details of each contract.

The Honorable Donna Mercado Kim, President SPO 13-130
April 4, 2013
Page 2
6129110 Ohata Chun Yuen, LLP #59372 FY 10-12 HCDA $ 114,000
6/14107 Nishihama & Kishida CPA's Inc #55929 FY 07-09 DHS 1,185,000
6/29/10 #59373 FY 10-12 OHS $ 1,215,000
Subtotal $ 2,400,000
8/17/10 Macias Gini & O'Connell LLP #59536 FY 10-12 EUTF $ 375,000
6/19/07 KPMG LLP #55954 FY 07-09 DOT Airports $ 1,266,000
6/30/10 #59353 FY 10-12 $ 1,266,000
1/6/10 #58896 FY 09-12 ERS $ 580,000
6/30/10 #59352 FY10-12 DOE $ 1,095,000
6/15/07 KMH LLP #55946 FY 07-09 DOT Highways $ 768,000
6/28/10 #59340 FY 10-12 $ 867,000
6/28/10 #59339 FY 10-12 HPHA $ 960,000
1216/11 #59339 FY 11, Sup #2 $ 115,000
8/27/09 Kobayashi, Kanetoku, Doi, Lum &
Yasuda CPAs LLC
#58559 FY 10-12 DAGS Stadium
Authority
$240,000
6/29/10 #59341 FY 10-12 DOT-Harbors $ 543,000
Subtotal $ 783,000
6/19/07 Grant Thornton LLP #55953 FY 07-09 DOE $ 1,095,000
10/31/08 #55953,Sup #1 FY 07 $ 275,000
6/30/07 Ernst & Young, LLP #56151 FY 07-09 DOT-Harbor $ 525,000
6/15/07 Egami & Ichikawa CPAs, Inc #55947 FY 07-09 DOT-Admin $ 100,500
6/29/10 #59338 FY 10-12 DAGS- State Motor
Pool/ Parking
Revolving Fund
$ 144,000
Subtotal $244,500
6/28/07 Deloitte & Touche LLP #56021 FY 07-09 CAFR $ 2,385,000
8/12/08 #56021, Sup #1 CAFR FY07 $ 130,696
9/24/09 #56021, Sup #2 CAFR FY08 $ 126,880
6/30/10 #59351 CAFR FY 10-12 $ 4,230,000
6/28/10 CW Associates #59337 FY 10-12 DOT-Admin $ 102,000
6/29/10 Akamine, Oyadomari & Kosaki
CPAs Inc
#59336 FY 10-12 AG $ 294,000
6/12/07 Accuity LLP #55924 FY 07-09 DOH $ 1,029,000
6/28/10 #59332 FY 10-12 DOH $ 1,180,000
6/16/08 #57123 FY 08-09 DOA $ 258,000
6/28/10 #59335 FY 10-12 HHFDC $ 717,000
6/28/10 #59334 FY 10-12 DHHL $ 456,000
TOTAL $ 23,637,076

April 4, 2013
Page 3
According to each form SPO-016, the OA inadvertently failed to obtain procurement
delegation authority from the Legislative Branch's Chief Procurement Officers (CP0s), Senate
President and House of Representatives Speaker, for any procurement method beyond the
dollar levels of $50,000 prior to 1/10/07 and $100,000 after 1/10/07. The initial procurements of
these auditing service contracts were conducted by either the individual department or DAGS,
from which responsibility to conduct these audits were subsequently transferred to OA for
contract administration. Upon contract renewal, OA staff did not obtain procurement delegation
authority from the CP0s.
The Hawaii Public Procurement Code, HRS chapter 1030 states:
§103D-207 Centralization of procurement authority. Except as otherwise provided in
sections 1030-208, 1030-209, and 103D-210, all rights, powers, duties, and authority relating to
the procurement of goods, services, and construction, and the management, control,
warehousing, sale, and disposal of goods, services, and construction now vested in, or
exercised by, the governmental bodies of the State and counties are hereby transferred to the
respective chief procurement officers.
§1030-208 Delegation of authority by the chief procurement officer. Subject to the
rules of the policy board, each chief procurement officer may delegate any authority or duty
conferred 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 and
guidance to obtain the written delegation. For example, SPO issues written procurement
delegations to each department head, and includes instructions and guidance to allow the
department head to further delegate procurement authority to procurement officers (i.e. division
chiefs, branch chiefs, executive directors, etc.) SPO memos and delegation forms are available
at 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; and
4. Added a reminder in their award-decision memo to indicate whether procurement
delegation authority is required.
Attached for your information is a listing of OA attendees of SPO procurement
workshops, which reflects OA's efforts to meet compliance requirements.

April 4, 2013
Page 4
A complete listing of SPO training workshops, is available to all CPO jurisdictions, and is
viewable at htte://hawaii.00viseo/oeneralttraininq-and-informational-sessions.
DETERMINATION
These procurement violations are determined to be inadvertent, a mistake on the part of
staff(s) not knowledgeable on the requirements and process. OA has implemented corrective
actions 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 taken
corrective 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. Fujioka
Attachment

State Procurement Office
Attendance at Procurement Workshops
Office of the State Auditor
from 2006 to 03131113
Workshop No. Workshop Title Date Attended
Akinaka, Sarah No. of Classes Attended= 1
127 Detecting and Preventing Antitrust Violations 5/19/09
2Calvin, Hangai No. of Classes Attended= 1
176 pCard Program Changes and Updates 11/4/10
3 Choo, David No. of Classes Attended= 2
127 Detecting and Preventing Antitrust Violations 5/22109
170 Overview of Procurement Practices - HRS Chapter 103D 4/7/10
4 Endo, Lauren No. of Classes Attended- 3
120 Small Purchases 417/10
170 Overview of Procurement Practices - HRS Chapter 103D 417/10
Fujii, Arvin No. of Classes Attended= 2
6 Hangai, Calvin No. of Classes Attended= 1
7Hao, Sean No. of Classes Attended= 3
135 Contract Administration 12/15/10
170 Overview of Procurement Practices - HRS Chapter 1031) 10/14/10
8 Hayamoto, Adelyne No. of Classes Attended= 7
105 Competitive Sealed Proposals 6/8/12
105 Competitive Sealed Proposals 6/6/12
141 Reporting/Posting Awards 6/14/12
9 Hibbard, Rachel No. of Classes Attended= 2
170 Overview of Procurement Practices - MRS Chapter 103D 3/14/13
wHiga, Debbie No. of Classes Attended= 8
140 Overview of the SPO Website and Posting Procurement Awards, Notices and 9/4/12
Solicitations
Attendance at SPO Procurement Workshops by Attendee - Office of the Auditor 2006-03131/13 Page 1 of 4

Workshop No. Workshop Title
141 Reporting/Posting Awards
155 Infra and Out-of-State Travel Procedures
170 Overview of Procurement Practices - HRS Chapter 103D
175 pCard Overview and Updates
Date Attended
10/4/12
9/28/12
3/14/13
9/27/12
11 Higa, Marlon No. of Classes Attended= /
12 Ito, Adele No. of Classes Attended=1
Solicitations
/3 Kawamoto, Roy No. of Classes Attended= 2
14 Kubota, Stanley No. of Classes Attended=1
15 Lee, Norman Na of Classes Attended= 2
16 Lum, Spencer
127 Detecting and Preventing Antitrust Violations
/ 7 Matsumoto, Greg
125 Exemptions from HRS Chapter 103D
135 Contract Administration
170 Overview of Procurement Practices - HRS Chapter 1031)
15 Mukai, Pat
155 Infra and Out-of-State Travel Procedures
19 Murata, Jennifer
20 Oda, David
21 Oftana, Tricia
235 Overview of Procurement of Health & Human Services
22 Oshiro, Jayna
23 Racuya-Markrich, Kathleen
No. of Classes Attended= 1
5/19/09
No. of Classes Attended=4
11/15/12
12/3/12
4/7/10
12/12/12
9/28/12
9/27/12
5/19/09
5/19/09
4/7/10
5/22/09
3/17/10
4/7/10
5/11/09
5/19/09
4/7/10
5/22/09
Attendance at SPO Procurement Workshops by Attendee - Office of the Auditor 2006-03131/13 Page 2 of4

31 Vasconcellos Jr, Danny
nVasconcellos, Danny
235 Overview of Procurement of Health & Human Services
No. of Classes Attended=1
4/7/10
5/22/09
5/11/09
Workshop No. Workshop Title
Date Attended
3/17/10
3/14/13
4/7/10
24 Rawls, Ron No. of Classes Attended=4
100 Competitive Sealed Bids 2/14/13
100 Competitive Sealed Bids 2/12/13
120 Small Purchases 1/22/13
126 Procurement Code of Ethics and Compliance with HRS Chapter 103D 1/16/13
25 Rawls, Ronald No. of Classes Attended=1
26 Ray, Rachel No. of Classes Attended= 3
120 Small Purchases 11/17/06
176 pCard Program Changes and Updates 11/4/10
199p11 Price List Telecommunication Equipment Info Session 11/19/08
27Shilgi, Ron No. of Classes Attended= /
170 Overview of Procurement Practices - HRS Chapter 1030 3/14/13
nTamashiro, Trevor No. of Classes Attended=1
29 Trifonovitch, Kelli No. of Classes Athwkled=1
30 Trifonovitch, KeIli Abe Na of Classes Attended=1
33Velasco, Nicole No. of Classes Attended= 2
Solicitations
34 Wiles, Greg No. of Classes Attended=1
33Wilson, Stephen No. of Classes Attended= 2
36Wong, Jerry No. of Classes Attended=6
Solicitations
141 Reporting/Posting Awards 10/4/12
Attendance at SPO Procurement Workshops by Attendee - Office of the Auditor 2006-03/31/13 Page 3 of 4

37Wong,
110
120
135
141
155
175
185
190
is-1303Cloud
Russell
Emergency and Sole Source Procurements
Small Purchases
Contract Administration
Reporting/Posting Awards
Infra and Out-of-State Travel Procedures
pCard Overview and Updates
Prevailing Wage, Certified Payroll and Contracting Agency Responsibilities
SPO Price and Vendor Lists/Cooperative Contracts
Info Session WSCA Public Cloud Hosting VL 13-16
9/27/12
10/23/12
9/13/12
10/4/12
9/28/12
9/27/12
10/18/12
1/24/13
3/13/13
Workshop No
170
170
Date Attended
3/14/13
4/7/10
• Workshop Title
Overview of Procurement Practices - HRS Chapter 1030
Overview of Procurement Practices - HRS Chapter 103D
38Yamane, Jan No. of Classes Attended=3
39Yee, Sterling
170
5/22/09
4/7/10
95
Overview of Procurement Practices - HRS Chapter 1030
Grand Total Attendance
Attendance at SPO Procurement Workshops by Attendee - Office of the Auditor 2006-0341/13 Page 4 of 4

DONNA MERCADO KIM
PRESIDENT
RONALD D KOUCHI
VICE PRESIDENT
SAM SLOM
MINORITY LEADER Ilrbe ipenate
STATE CAPITOL
HONOLULU, HAWAII 96813
FIRST DISTRICT
GILBERT KAHELE
SECOND DISTRICT
RUSSELL E RUDERMAN
THIRD DISTRICT
JOSH GREEN
FOURTH DISTRICT
MALAMA SOLOMON
March 4, 2013
FIFTH DISTRICT
GILBERT SC KEITMAGARAN
SIXTH DISTRICT
ROSALYN H BAKER
SEVENTH DISTRICT
J KALANI ENGLISH
EIGHTH DISTRICT
RONALD 0 KOUCHI
NINTH DISTRICT
SAM SLOM
TENTH DISTRICT
LEE IHARA. JR
ELEVENTH DISTRICT
BRIAN I TANIGUCHI
TWELFTH DISTRICT
BRICKWOOD GALUTERIA
THIRTEENTH DISTRICT
SUZANNE CHUN OAKLAND
FOURTEENTH DISTRICT
DONNA MERCADO KIM
FIFTEENTH DISTRICT
GLENN WAKAI
SIXTEENTH DISTRICT
DAVID Y IGE
SEVENTEENTH DISTRICT
CLARENCE K NISHIHARA
EIGHTEENTH DISTRICT
MICHELLE N KIDANI
NINETEENTH DISTRICT
WILL ESPERO
Aaron Fujioka, Administrator
State Procurement Office
P.O. Box 119
Honolulu HI 96810-0119
Dear 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 for
professional services.
As the Chief Procurement Officers for the Senate and House of Representatives, we
would like to request your assistance in reviewing the attached forms related to
those contracts and make recommendations on how to proceed, including providing
comments as deemed appropriate.
We thank you in advance for your assistance on this matter. If you have any
questions, please contact Terrence Aratani at 587-7200 or Denise Liu at 586-6100
from our staff
Sincerely,
TWENTIETH DISTRICT
MIKE GABBARD
TWENTY-FIRST DISTRICT
MAILE S L SHIMADUKURO
TWENTY-SECOND DISTRICT Donna Mercado KimDONOVAN M DELA CRUZ
Senate PresidentTWENTY-THIRD DISTRICT
CLAYTON HEE
TWENTY-FOURTH DISTRICT
JILL N TOKUDA
TWENTY-FIFTH DISTRICT
LAURA H THIELEN
CHIEF CLERK
CAROL TANIGUCHI
Joseph M. Souki
Speaker of the House
Attachments

4f:.....•••••••..
„ 9 „
JAN K. YAMANE
Acting State Auditor
(808) 587-0800
FAX: (808) 587-0830
c
STATE OF HAWAII
OFFICE OF THE AUDITOR
465 S. King Street, Room 500
Honolulu, Hawaii 96813-2917
February 26, 2013
The Honorable Donna Mercado Kim
President of the Senate
Hawaii State Capitol, Room 409
Honolulu, Hawai` i 96813
The Honorable Joseph M. Souki
Speaker of the House of Representatives
Hawaii State Capitol, Room 431
Honolulu, Hawai` i 96813
Dear Madam President and Mr. Speaker:
Last year, the Auditor determined that her office inadvertently failed to adhere to certain state
procurement approval requirements in connection with contracts for financial statement audit services
provided by CPA firms between 2004 and 2012. The Auditor self-reported the violations to the State
Procurement Office (SPO) on standard forms provided by the SPO. Subsequently, however, the SPO
informed 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 of
this letter is to provide you with an explanation of the background and circumstances that led to the
violations and to request your assistance in completing the Chief Procurement Officer Comments section
on page 3 of the SPO procurement violation reports.
Background
Each year, the Office of the Auditor requests a procurement delegation of authority letter, approved by
both the President of the Senate and the Speaker of the House of Representatives, which establishes
procurement limits for the State Auditor. Additional approvals by the Senate President and House
Speaker are required for procurement actions that exceed certain dollar limits. In particular, prior to
January 10, 2007, procurement actions (for goods or services) exceeding $50,000 required the additional
approvals; 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 of
various state departments and agencies, as performed by CPA firms. Previously, the contracts were
managed by DAGS or the department/agency being audited. Many of these contracts were three-year
contracts and were transferred "mid-term" to the Office of the Auditor. When new contracts with the
CPA firms were procured by the Office of the Auditor, neither the Auditor nor her staff were aware that
the 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 been
submitted 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 and
House Speaker approvals were not obtained. We informed the previous Senate President and House

The Honorable Donna Mercado Kim
The Honorable Joseph M. Souki
February 26, 2013
Page 2
Speaker of those violations in a letter dated August 9, 2012, and prepared 13 procurement violation
reports (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 to
complete the process.
Request for Assistance
Please review the 13 procurement violation reports (enclosed) and provide any comments you may have
in 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. Yamane
Acting State Auditor
Enclosures

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