The state auditor released a scathing report Wednesday slamming the Department of Transportation’s Airports Division for a "pattern of recurring violations and questionable practices" as it moved forward on a 12-year, $1.7 billion overhaul of Honolulu Airport.

According to the report, state airport officials repeatedly removed themselves from major contract decisions and negotiations on the modernization project, which broke ground earlier this month. They inappropriately handed the bulk of that responsibility to an outside manager, California-based Parsons Transportation Group Inc., it added.

Parsons, in turn, charged the state the highest possible rate for labor, billed the state for more than $1.2 million in questionable contract work, enjoyed rent-free office space at a state-owned building near the airport and was reimbursed $570,000 for its renovations of that building — a clear violation of its contract, the audit found. Under the contract’s terms, the state could not examine the calculations Parsons used to charge its labor rate, the report stated.

"This pattern of impropriety — in some cases persisting for several years — demonstrates Airports’ overreliance on contractors, outsourcing significant decision-making responsibilities to them while excessively accommodating their needs," the report added.

Parsons Transportation Group is not affiliated with Parsons Brinckerhoff, the New York-based firm contracted to help build Hono­lulu’s rail transit project.

The state audit covered fiscal years 2009 and 2010, when the Airports Division was responsible for about $266 million in procurements.

Brian Sekiguchi, former state deputy director for airports, and former Transportation Director Brennon Morioka oversaw the 12-year, $1.7 billion airport face-lift at the time of the audit.

Sekiguchi resigned from the department in August 2010, about a month after fiscal year 2010 ended. He left amid intense scrutiny by the Legislature when it was found the state had been paying $876,000 a year to sublease space in its own building near the airport.

That building, on Ualena Street, is the same one singled out in the audit released this week — where Parsons worked rent-free and was inappropriately reimbursed for renovations.

"You do get the sense, ‘Wow, was that really necessary or did the state pay more for services than should have?’" acting State Auditor Jan Yamane said Wednesday. "The department needs to provide better oversight."

Current Transportation Director Glenn Okimoto did not dispute the audit’s findings and department officials say they’re keeping a closer watch on public dollars used to procure goods and services. Ford Fuchi­gami, current deputy director for airports, took the post in January 2011.

"The new leadership quickly took steps to restructure the department’s procurement processes," a department statement released Wednesday said. "The procurement delegation was reduced and stronger centralized management controls were implemented." Staff now gets proper training to manage contracts, officials added.

Parsons has a 12-year contract valued at about $90 million to manage the modernization project, according to the audit report. The contract expires in 2018.

The division still doesn’t have the sufficient staff to handle the airport project on its own, but it now charges Parsons rent, Okimoto told Yamane in a May 3 letter. The division also reduced in 2011 the so-called "multiplier rate" Parsons had used to calculate its labor costs to 2.33 from 2.88, Okimoto added.

Okimoto further told Yamane that airport staff had recommended against the free office space and renovation reimbursements, but they were "overridden" by Sekiguchi.

Neither Parsons Transportation Group nor Seki­guchi could be reached for comment Wednesday. Department spokeswoman Caroline Sluyter said she couldn’t speak for prior administrations about whether Sekiguchi’s resignation had to do with the audit.

Field work for the audit wrapped in 2011 under Yamane’s predecessor, Marion Higa. "We had delays in the work," Yamane said of the audit’s 2013 release. She declined to specify on what those delays were, citing the department’s confidentiality policies.

Among some of the "questionable" expenses authorized by Parsons and flagged by the audit were an $876,000 "project cost and document control" contract awarded to a consultant, and more than $354,000 awarded to an architectural consultant from Texas.

Airport staff further failed to do their own construction costs analyses on other projects, the audit found. That led to the division paying $1 million to build a field office — about 30 times more than what it should cost, the report stated.

The division further failed to renew a security contract in a timely manner, forcing the division to exceed its original contract term limit by 16 months and nearly $38 million, according to the audit.

The airport upgrade, state officials say, falls under Gov. Neil Abercrombie’s "New Day" slate of improvement projects, a theme from his 2010 gubernatorial campaign. After taking office in December of that year, Abercrombie "directed the DOT to restructure its procurement process (and) ensure proper procurement training," Louise Kim McCoy, the governor’s spokeswoman, said in a statement Wednesday. "This administration continues to direct the DOT and all state departments to meet these standards."

The state auditor will re-examine the situation in 2016 to see whether the division has made the necessary reforms. Construction on the airport modernization project is expected to wrap up in 2017.

"We will revisit all of these issues," Yamane said Wednesday. "I think they’ve taken a positive step to move forward."

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