Tuesday, August 14, 2012


Taxpayers pay for DOE wrongdoing

by Larry Geller

An article in yesterday’s paper, Private schools out public funds (Star-Advertiser p. B1, 8/13/2012), was woefully incomplete. I was also curious about what the headline might mean.

It appears that the writer may have swallowed a large quantity of Department of Education Kool-Aid.

The nub of the article is here:

At the center of the conflict are Loveland Academy and the Pacific Autism Center, which the state alleges have stymied its efforts to monitor children's prog­ress and failed to provide detailed billing for hundreds of thousands of dollars in tuition charges accrued over the last school year.

The Department of Education says it will not pay several months of back tuition to the institutions until they turn over more information on what services were provided for the billed amounts — and why those services were necessary.

The important information that you did not read in the article is that the Loveland Academy payment is in litigation, and that a hearing is scheduled to be held on August 21 in federal court to determine whether the court will hold the DOE in contempt and direct that a garnishee summons and sanctions be issued against it (see: State running up legal fees on contempt/sanctions order, 7/19/2012).

In other words, the DOE is supposed to pay. Period. This exposes the DOE spin reflected in the article. The DOE is defying the federal court. Of course, taxpayers will foot the bill for all of it. The case has gone to the 9th Circuit once—if Judge Mollway orders sanctions and the DOE appeals, it would be headed back for a second trip—and you and I would pay for that.

The DOE may want to know what the schools were doing for the money, but at the root of this is DOE failure to provide a “Free Appropriate Public Education” for special needs students. If a hearing officer or judge finds that a private school can do the job the DOE wouldn’t, then the DOE must pay the tuition for the private school.

The US Supreme Court noted in 1993 that the school system has a choice—provide the required education itself. DOE has that choice, but couldn’t, or wouldn’t, do it.

Conveniently for the DOE, if it withholds payment to the schools long enough, they may be forced to close. Without a doubt that is part of their strategy, but it comes at the expense of the students who will not get their federally-guaranteed education.

DOE’s failure to provide special needs students with a legally required educational benefit is a long-standing example of blatant disregard for the law. Taxpayers are forced to pay for the DOE’s failures. In the case of the Loveland litigation, the DOE may run up legal expenses of $1-1.5 million, which will ultimately be picked out of our pockets when the Legislature apportions money to cover settlement and legal costs. So there are no consequences for the DOE. Yup, we pay for their errant behavior.

It would be great if the Legislature required that these settlement and legal costs come out of the DOE budget. It might make them think twice.

The DOE often acts as though laws don’t apply to it. Within the DOE, individuals are seldom held accountable. I was looking for specific examples when I noticed that the legislative auditor just posted a new report on her website that reviews 2009 recommendations. In that year, the DOE was dinged for possible ethical and even fraudulent behavior on the part of its employees. So what corrections were made? I’ll get to that below, but first, here is another legal action that cost taxpayers plenty.

DOE ignored Hawaii’s mandatory reporting law and cost taxpayers $3.5 million

I’ve written several times about state and city prosecutors’ failure to enforce Hawaii’s mandatory reporting law against the DOE. Here are a couple of articles:

In a nutshell, HRS §350-1.1 designates that every employee in a public or private school—from the principal on down to the janitor—is a mandated reporter. Yet I could not locate a single instance where the law has been enforced against individuals within the DOE who fail to report. This endangers students in public schools and enables lawbreaking on the part of the DOE itself.

Here is one case where DOE cost taxpayers a cool $3.5 million in addition to resulting in severe injury to a child.

In 2010, the Department of the Attorney General provided testimony to the Legislature supporting payment of $3,485,815.38 out of taxpayer funds to settle a case of DOE wrongdoing. Here’s the gist of it:

The parental grandfather and the father of a now 15-year-old child alleged that employees of the Department of Education wrongfully failed to make mandatory reports of suspected child abuse after the minor's natural mother voluntarily had placed her with a caregiver. As a result, the minor was alleged to have suffered extensive and permanent injuries including brain damage from infections, loss of hearing in one ear, blindness in one eye, and the loss of her nose and upper lip and other injuries, the effect of which has left her unable to care for herself and unlikely to obtain employment. She was alleged to have needed some $481,000 in future cosmetic surgery and lifetime care.

The actual settlement was $5,750,000 but insurance paid part of it.

There are certainly more cases, but this is a great illustration, and is easier to understand than the often complex requirements of federal law governing special education.

DOE failure to comply with procurement law costs taxpayers big bucks

From the summary of the auditor’s findings in the just-posted report:

Procurement Audit of the Department of Education: Part 1 and Part 2, Report No. 09-03 and Report No. 09-04

In part 1 of our report, we found no evidence that the department has the mechanisms and functions to monitor and review procurement compliance on a regular basis. Even though our audit was based on a relatively small sample size, we uncovered numerous instances of non-compliance and violations of procurement rules and regulations. In addition to the high volume of violations, we also identified several risk factors and indications of potential fraud, which compelled us to expand the scope of our work. We issued a separate report presenting the results of that expanded work.

Part 2 of our report revealed an organizational culture of disregard for procurement rules in the Office of School Facilities and Support Services (OSFSS). That culture had allowed office directors, managers, and staff to believe they had the discretion to unilaterally determine whether compliance with procurement laws and rules was in the best interest of the department. As a result, non-compliant procurement practices were tolerated and, more importantly, unethical and possibly fraudulent behavior has been allowed to thrive.

The response to our audit was swift: the then-superintendent returned procurement authority for construction projects to the Procurement and Contracts Branch. However, five months after the then superintendent rescinded OSFSS’s procurement authority, the then-deputy superintendent restored it. In addition, despite the findings of our audits and its own independent investigator, the department did not take strong disciplinary measures against two of the three OSFSS employees who were found to have committed multiple procurement violations.

Today, two of the employees remain in their same jobs as heads of their respective OSFSS branches, which have been given even greater procurement authority with greatly reduced, if any, oversight by the Procurement and Contracts Branch. As a result, the risk of ethical misconduct in the OSFSS remains high, which creates a perception that the department has done little to address the issues.

The detailed report is full of morsels such as this one:

Our audit report had found that the former assistant superintendent violated state procurement laws by instructing a construction consultant to hire a specific sub-consultant to perform work for the department unrelated to the contract. The sub-contractor was identified as a former principal with no construction experience.

Or this one:

We currently found that the department decided not to impose serious disciplinary action against two of the three DOE employees who had committed multiple violations of board policy, the Ethics Code, and department procurement policy guidelines regarding various school projects. Instead, of the three department employees, one was suspended for three days without pay but only after receiving more than three months of paid leave. He then was allowed to return to his old job. The second employee was not suspended but temporarily assigned within the same branch after receiving nearly four months of paid leave and retired under his old position while earning the same salary as he had previously. The third employee was demoted and took a pay cut but was later returned to his old job.

In short, without the mechanisms and functions to monitor procurement compliance at OSFSS, the department has made little progress since our initial report in 2009. In fact, we would argue that by returning procurement authority to the OSFSS and returning staff who committed multiple violations of the Procurement Code to their previous positions after relatively little punishment, the culture of disregard that we found three years ago has only been reinforced.

The report also mentions evidence that criminal behavior may have occurred, but the Attorney General could not proceed because the statute of limitations had expired.

Here’s one final example:

In Report No. 09-04, Procurement Audit of the Department of Education: Part 2, we discovered numerous instances in which department personnel manipulated the professional services selection process and awarded contracts to predetermined consultants. For instance, for a $300,000 construction management project selection, the Project Control Section head bypassed established procedures by hand-picking the selection committee members and recommending a specific firm. The public works administrator then led the committee as its chair, documented the results selecting the recommended firm, addressed the results to himself as public works administrator, and approved the results on behalf of the branch.

We also found several other alarming practices within the OSFSS that appeared to be fraudulent and unethical. In one example, a high-ranking department official instructed a consultant to hire a specific subconsultant in exchange for additional contract funding, thereby evading the competitive procurement process. The sub-consultant, who had close ties with the department, performed work under a department program that was unrelated to the contract’s scope. Another inappropriate action involved selection committee members agreeing via email to change a prior selection decision to award the project to a vendor who was previously unranked, but had been improperly allowed to begin work on the project. The committee then falsified the selection documents to reflect the modified decision as the original selection.

This short article is unavoidably incomplete. I have other reports illustrating that the DOE has ignored laws that apply to it, but there needs to be a point where I bring things to a stop. Enough for now.

Where failure to comply results in legal costs, the Legislature does not hesitate to pick our pockets and let the DOE off without consequences.

In these difficult economic times, this should no longer be tolerated.


I agree with you Larry. This example is one of the "greatest hits of the worst" in coverage. Somebody needs to teach them how to peel an onion over there, or at least remember the history behind the issues. A little off subject,but while I am at it, I am amazed that absolutely no one, mainstream or alternative media, seems to be interested in the reasons why it took the Ethics people almost two years to take an action about the Catholic Church and Family Forum unregistered lobbying. Perhaps this does relate to the SA DOE article. This stuff is the result of no one asking questions.

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