The state auditor’s office ripped into the Hawaii Health Connector’s management in a report released Tuesday, calling its procurement practices “hasty and inept.”

The audit found that the Connector wasted more than $11 million in taxpayer money in part by awarding lucrative IT contracts to Mansha Consulting based on personal recommendations instead of finding the most qualified vendor at the best price.

“The Connector could neither justify its selection of Mansha nor the fixed fees awarded for each of the two Mansha contracts,” the audit says. “Furthermore, the Connector executed vague, poorly written contracts with flawed terms and conditions that prevented it from effectively monitoring and evaluating Mansha’s performance.”

Right, State Auditor Jan Yamane and Jeff Kissell Executive Director of the Hawaii Health Connector answer questions after the auditor presented her report.  9 nov 2015. photograph Cory Lum/Civil Beat

Acting State Auditor Jan Yamane, right, and Jeff Kissell, executive director of the Hawaii Health Connector, answer questions at a legislative hearing in November.

Cory Lum/Civil Beat

Jeff Kissel, executive director of the Connector, the state’s official health insurance exchange marketplace under the federal Affordable Care Act, said the board has steadily been working to make improvements stemming from the last audit.

He shared many of the concerns with the Mansha contracts but took issue with some of the findings. He said the report “largely ignores the fact that (the state Office of Information Management and Technology) essentially imposed Mansha and many of the terms and conditions in the contracts on the Connector and its Board.”

The auditor’s office, headed by Jan Yamane, said OIMT’s involvement did not absolve the Connector of its responsibility as a party to the contract with Mansha to ensure that those terms and conditions, including specified staffing levels, were appropriate.

The audit also found that the Connector’s board and management paid little attention to contract administration.

“By neglecting to establish a functional area dedicated to managing the Connector’s numerous contracts, the board prevented staff from effectively administering any of its numerous contracts worth $176.7 million,” the audit says. “Furthermore, the Connector was unable to demonstrate that the $15.3 million paid to Mansha were used as intended.”

Oversight under the Connector’s previous director was also found to be lacking.

The former director, Coral Andrews, executed a $168,000 contract amendment without the board’s knowledge or approval, the audit says. That was in addition to problems with contracts not being amended to reflect changes in scope of work or doing so on a timely basis.

“This led to higher contractual costs, further wasting public moneys, and could result in federal enforcement action,” the audit says. “Such practices constitute abuse of public funds, which involves behavior that is deficient or improper compared to what a prudent person would consider reasonable and necessary business practice in the circumstances.”

In January, the auditor slammed the Health Connector for bad planning and procurement practices, calling Andrews “an uncooperative executive director who withheld information” to the detriment of the board’s ability to monitor the development of its massive IT system.

In the previous audit, the auditors wanted to know more about a $12.4 million contract with Mansha Consulting because as far as they were able to see, the company failed to do what it was hired to do.

Kissell worked to right the Connector’s ship.

In January, he released a nearly 200-page report charting a path for the Connector to become sustainable, in part by helping Hawaii’s economy gain more than $500 million in federal tax benefits under the Patient Protection and Affordable Care Act.

The Connector, which the state invested $130 million in federal funding into and set up as a private nonprofit when it launched in October 2013, is now working to shift operations to the state. Future enrollees will sign up through the federal website, healthcare.gov.

Gov. David Ige announced in June that the state was taking steps to ensure a smooth transition for individuals seeking health care insurance in the November 2015 open enrollment.

The Centers for Medicaid and Medicare Services told the Connector earlier this summer that federal funds would no longer be available to support its long-term operations, according to the governor’s office.

Last week, Pacific Business News reported that the state is expected to extend the operations of the Connector through October 2016 at a cost of $3.3 million. Prior to that announcement, which came at the board’s meeting Friday, the Connector was set to cease operations later this month.

Read the complete audit and Kissel’s response below.

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