Connector audit cites officials’ ‘ineptitude’

A second state audit of the Hawaii Health Connector’s contracts with one of its main vendors further blasts the agency for a “multitude of missteps” that resulted in the abuse of public funds.

A follow-up report released Tuesday by state Auditor Jan Yamane reiterates findings in a January audit that sharply criticized officials of the state’s health insurance exchange for incompetent oversight of contract awards and wasting $11.6 million in taxpayer dollars.

It zeros in on a “seriously flawed” $21.6 million contract with Mansha Consulting LLC, whose main role was supervising the work of the Connector’s information technology developer CGI Group Inc., which won $74.2 million in contracts but delivered a problem-plagued system that opened two weeks late in October 2013.

The audit says the Connector’s first executive director, Coral Andrews, hired information technology consultant Mansha for $56,000 in March 2013 through an emergency sole-source contract to help the organization prepare for a design review of its computer system. A month later the exchange entered into a second sole-source contract, worth $12.4 million, for Mansha to oversee the integration of two IT systems — one at the Connector and the other at the state Medicaid health insurance program for low-income residents. That contract, which the Connector said was signed by interim Executive Director Tom Matsuda, was later increased to more than $21 million. However, the systems are still not integrated. Andrews and Matsuda couldn’t be reached for comment.

“The multitude of missteps and failures in procuring and administering the Mansha contracts exemplifies the Connector’s failure to adequately safeguard public funds,” the report said.

The “ineptitude” of Connector officials at overseeing and managing procurement “wasted and abused millions of dollars in public funds and left the Connector unable to demonstrate whether it complied with the terms and conditions of its federal grants,” the audit said.

“We found that instead of taking steps to ensure it selected the most qualified vendor at the best price, the Connector awarded Mansha a multimillion-dollar contract based on personal recommendations,” Yamane said in the report. “Furthermore, the Connector executed vague, poorly written contracts with flawed terms and conditions that prevented it from effectively monitoring and evaluating Mansha’s performance.”

The Connector previously said it paid Mansha $14.7 million before cutting off payments and launching its own investigation into the performance of the information technology vendor. An attorney for Mansha earlier told the Hono­lulu Star-Advertiser that the vendor is owed $4.2 million and was forced to lay off more than a dozen workers after the Connector stopped payments. The attorney said Tuesday the situation hasn’t been resolved. Virginia-based Mansha is the Connector’s second-highest-paid vendor behind CGI.

Connector officials said in their response that over the past year the agency has improved existing procurement and contract management practices. The Connector also said there are a number of errors and inconsistencies in the audit, including an assertion that “assumes Mansha is owed money” and that “the state of Hawaii’s taxpayers will be responsible” if the Connector doesn’t get federal funds to pay its contracts.

There are major errors in the audit report, some that are “egregious,” including a statement that “inept procurement practices wasted more than $11 million in taxpayer moneys,” said Jeff Kissel, the Connector’s executive director.

“The numbers the auditor used in the report don’t tie to any numbers the Connector supplied to them,” he said. “I don’t know where they got that. We disclosed all information about Mansha in public testimony at the Legislature and in public board meetings. Therefore this is not only a rehash of old news to grab new headlines, I would question the wisdom of the auditor’s choice to spend new state resources on this kind of activity.”

The Connector, created by the Affordable Care Act, will end operations in October 2016 after spending $130 million on the faulty exchange. The nonprofit is transferring operations to the state and will direct future enrollees to sign up through the federal Obamacare program, healthcare.gov. Connector operations fell apart in the middle of the auditing process, Yamane said, acknowledging that much of the information in the audit is dated.

Federal authorities froze roughly $70 million remaining of the Connector’s $204 million in grants when it couldn’t reach sustainability, resolve ongoing technology issues or connect with the Medicaid program that determines eligibility for Obamacare subsidies.