State tax department questioned on contracts - Hawaii News Now - KGMB and KHNL

State tax department questioned on contracts

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HONOLULU (HawaiiNewsNow) -

The state's deputy chief information manager said Wednesday it's "disconcerting" that the State Tax Department wants to take the lead in hiring a contractor for upgrades to its troubled computerized tax collection system.

Between 1999 and 2011, the state tax department paid the company, CGI Group, $87.5 million to modernize the state's tax collection system. But the system was plagued with problems and crashed from time to time. 

Now that the state is planning to spend at least $32 million more on upgrades to the tax computer systems.  

"The state relies on the Department of Taxation to bring in $6 billion revenue to support operations, so it's so critical, we cannot afford to fail this time," said Robert Su, the information technology services manager at the tax department who said he is the tax modernization program manager. 

But the state Deputy Chief Information Officer Randy Baldemor raised concerns that the tax department is trying to wrest control of management of the new tax system away from IT experts in his office. 

"The prior implementation was led by individuals that did not have IT background and experience. And that is a critical factor in terms of developing systems that you have the right expertise there," Baldemor told state senators at a briefing Wednesday morning at the State Capitol. 

Baldemor said tax officials are trying to make changes in a memorandum of understanding between his office and the tax department, so that IT officials in his office will no longer spearhead management of the new contract. 

The deputy state tax director assured lawmakers that the request for proposals from companies to bid on a new contract will hold the new contractor accountable. 

"It's much stronger, it's much more robust than the last RFP.  It provides a lot greater protections for the state.  But it is also an open and competitive bidding process," said Josh Wisch, an attorney and deputy state tax director.  

Lawmakers are also troubled that CGI won a $53 million contract to run the Hawaii Health Connector Obama care web site, which was unable to launch when it was supposed to on October 1 and is still experiencing problems. 

A statement released by CGI called its work for the tax department "a successful partnership" that resulted in the state collecting "more than $385 million in additional delinquent taxes that they would not have collected without the systems implemented by CGI." 

"These revenues are far in excess of original project estimates and would have otherwise gone uncollected," the CGI statement, released by a Honolulu PR firm on the Canada-based company's behalf. 

The senators also heard from a department employee who testified there's a dysfunctional atmosphere at the tax department, where he claimed administrators have tried to marginalize Su, the IT officer. 

And State Senate President Donna Kim raised questions about the ethics of a non-bid contract the tax department has with a company that lists one of its department branch chiefs as an agent in Hawaii. 

Kim revealed for more than seven years the woman, identified as a taxpayer services branch chief, has been listed in state business registration records as the agent of record for the company Symago.

The company holds a roughly $50,000 annual non-bid contract to maintain the tax department's phone records. 

"Do you think this is troubling?" Kim asked tax department Administrative Services Officer Lloyd Cerelejia. 

"Yes it is," he answered. 

"We did not find out that they had registered our employee as an agent until just recently.  But she's been registered as an agent since 2005," Cerelejia said. 

He said the employee denied being an agent for the company and tax officials said the case had been turned over to the State Ethics Commission, which is investigating.  The contract expires in January of 2014, Cerelejia said, adding that it has not been renewed with the company. 

State business records show the "agent address" for Symago's Hawaii operation is "Hawaii Department of Taxation, Taxpayer Services Branch, 830 Punchbowl Street." 

"I find this highly irregular," Kim said. "Well, under the circumstances perhaps maybe not that irregular looking at the record of (the tax deparment) and some of the things that have gone on there.  And that's very troubling."