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Tuesday, October 3, 2000

Ewa Villages report
could prevent fraud

Bullet The issue: A consulting firm engaged by the city in the wake of the Ewa Villages fraud scandal has submitted its report.
Bullet Our view: The findings and recommendations should help prevent such scandals from recurring.

IT'S too late now to prevent the Ewa Villages fraud scandal that cost taxpayers $5.8 million through the conniving of two former city housing officials. But there ought to be lessons learned from that fiasco to keep something similar from happening in the future.

In an attempt to learn such lessons, the city commissioned the consultant firm Deloitte & Touche to examine its procedures and recommend improvements.

The company's report was released Friday, with the firm's recommendations accompanied by city responses. Mufi Hannemann had suggested the city might have been deliberately delaying release of the report because it contained material that might have damaged Jeremy Harris in the mayoral election. The mayor denied that, contending the report couldn't be released until the city responses were complete.

In retrospect, it appears unlikely that the report would have affected the mayoral election if it had been released sooner. Months of publicity over the trial of one of the accused officials, Michael Kahapea, did not appear to damage Harris politically.

Deloitte & Touche observed, "Although the Ewa Villages Revitalization Project was a very large undertaking, there did not appear to be a detailed review of the internal control policies and procedures established for each of the project's activities or compliance testing with such policies and procedures." Such a review might have uncovered the weaknesses that permitted this massive theft to occur.

Among the report's findings and recommendations:

Bullet There was a lack of adequate written policies and procedures relating to the handling and processing of relocation claims for the project.

Bullet The duties of individuals responsible for relocation activities in such projects should be separated.

Bullet The city should follow standardized procurement rules for transactions for which the city takes responsibility.

Bullet City employees should receive more training on rules, internal controls, procurement policies and detection of fraud.

Bullet The city should mail checks directly to vendors to reduce the risk of altered checks or unauthorized payments.

Responding for the Harris administration, Corporation Counsel David Arakawa said the city immediately took steps to change policies and procedures as soon as the fraud was discovered. It separated the property management and relocation functions and initiated specialized training for employees handling relocation.

Written guidelines have been established for handling relocation claims. Relocation checks are being mailed and can no longer be picked up.

It's impossible to guarantee that no one will ever again be able to steal from the city. But if these safeguards had been in place, the Ewa Villages fraud might have been prevented. At least these corrective measures should make it more difficult to defraud the city in the future. Too bad nobody thought of doing this sooner.

China’s ’Net censorship

Bullet The issue: China has announced rules to censor Internet use within its borders.
Bullet Our view: The rules will interfere with the exchange of ideas on the Internet in China and should draw protests from countries that embrace freedom.

CHINA has published sweeping measures aimed at strangling Internet companies but technology and the scope of the World Wide Web may render the repressive move futile. However, the new regulations are certain to complicate any free exchange of ideas via China-based Web sites, a setback that should provoke international protest.

The rules were approved by China's cabinet two weeks ago and published this week in the official Xinhua Daily Telegraph. They hold companies responsible for blocking vast categories of illegal content on the Web sites and email chat rooms. They ban content that subverts state power, supports cults, "harms the reputation" of China or hurts efforts to reunify China and Taiwan.

Existing Chinese Internet content and service providers have two months to provide information about their businesses to the government to obtain licenses or else face being fined or shut down. Approval is needed also in order to receive foreign capital, cooperate with foreign businesses or attempt domestic or overseas stock listings.

China announced a total ban on foreign capital for domestic Internet content providers last year but refrained from enforcing it except when companies sought overseas stock listings. Many Internet providers in China are funded almost entirely by overseas investors.

Service providers -- the companies that connect people with the Internet -- must record times that their customers log on to the Internet, their account numbers, addresses and telephone numbers. Internet content providers must inform the government about the information they provide and when they publish it.

"This creates a system that would require such a scale of enforcement that it could potentially occupy the whole efforts of ICPs," said Duncan Clark, managing partner of Beijing-based Internet consultancy BDA China. However, Clark predicted that technology will respond with "a whole new generation of encryption techniques" to elude authorities.

China's attempt to clamp down on Internet service and content providers is unfortunate but not surprising. Nations that cherish freedom of expression need to register their strong disapproval.

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