State audit critical
of Hawaii Health SystemsThe health agency defends itself
by citing an independent audit
The Hawaii Health Systems Corp., a quasi-public agency charged with oversight of state hospitals, needs to develop better policies for hiring independent contractors and establish better accountability standards, according to an audit released yesterday.
Poor management of procurement practices has added to the agency's dependence on state funds and raised questions about self-dealing within the agency, according to the report from State Auditor Marion Higa.
"The corporation has not embraced the state's commitment to open, competitive bidding, but instead adopted procurement practices that clash with government accountability," according to the report's summary.
"Lenient policies and a lack of oversight" lead to contract abuses and millions of dollars in nonbid contract awards, it said.
The agency disputed the report's findings, noting that the Hawaii Health Systems Corp. has received a "clean, unqualified financial audit" the past six years by the independent accounting firm Deloitte & Touche.
"In other words, there are no serious accounting or control issues that would be cause for public concern," health systems President and Chief Executive Officer Thomas M. Driskill Jr. said in a statement.
He also noted that the health agency pays 90 percent of its annual costs with earned income and relies on the state for 10 percent of the $335 million worth of health care services provided each year by the agency. Nationwide, state hospitals rely on public funds for about 20 percent of health care costs, he said.
The auditor's report said the Hawaii Health Systems' practices should undergo the same budgetary scrutiny that applies to other public contracts.
For example, the hiring of expensive independent contractors to perform the same functions as lower-paid employees "illustrates an award process that emphasizes convenience over competition," the report said.
Driskill noted that while the agency does not adhere to the state procurement system, it does follow practices outlined in the 1996 act that established the corporation.
"HHSC has exercised innovative autonomy in both procurement and financing and consequently saved millions of dollars," Driskill said. "At the same time, the corporation has met all legal requirements by ensuring competition consideration, overall board review and public accountability -- key components of our decision processes."
He said the corporation's management efforts have been able to increase cash collections from $203 million in fiscal 1999 to $277 million so far in fiscal 2004.
The Hawaii Health Systems Corp. was established in 1996 as an independent agency administratively attached to the state Department of Health. It operates 12 public hospitals and health facilities on five islands.
