City auditor faults agency's contracting
By Johnny Brannon
Advertiser Staff Writer
The agency that oversees the Blaisdell Center, Honolulu Zoo and Waikiki Beach concessions awarded a sole-source contract improperly, failed to collect money owed by other contractors and failed to keep track of important documents, according to a confidential draft audit obtained by The Advertiser.
The 44-page report is the first produced by the newly created City Auditor's Office and has been widely anticipated at City Hall. The draft says the Department of Enterprise Services lacks proper planning to become self-supporting and "is deficient" in the management, oversight and enforcement of contracts, causing the city to lose hundreds of thousands of dollars.
But Mayor Jeremy Harris' administration said the draft contains errors that should be corrected before the final report is made public next week. The department has issued a lengthy written response that auditors are reviewing.
Deputy City Managing Director Malcolm Tom said that no contracts cited in the draft were awarded improperly and that all contracting records are safe and accounted for.
The draft audit says the city improperly awarded a concession to operate a miniature train ride at the zoo on a sole-source basis. The ride has generated an average of $230 to $518 per day, but the city has subsidized its operation and collected no revenue, according to the report.
"Since this concession contract was not publicly advertised for bid, it is not known whether other businesses might have been interested and capable in operating this concession," the draft report says.
But Tom said the contract is actually a one-year permit that can be terminated with 30 days notice.
"It did not violate any laws and it was not awarded on a sole-source basis," he said.
The department is well-managed and is generating an annual profit of more than $1 million for the city, Tom said.
The draft audit says one beach concessionaire "has accrued arrears in excess of $202,000 and continues to stymie the department's efforts to enforce contract compliance."
Tom said that the allegation is true, but that the City Council twice rejected the administration's request for money to hire an attorney who would pursue the debt.
Another allegation raised by the auditors is that "contract irregularities diverted city concession revenue from the city treasury to a non-city organization."
Tom said the issue centers on a $560 payment made to a nonprofit group so it could include the zoo train in the annual Honolulu City Lights event. The money was authorized for the event and would have been spent on it whether it paid for the train or not, he said.
The draft audit also criticizes the department for diverting $142,000 to a series of international environmental conferences that the city hosted since 1998, which included mayors from dozens of countries.
"Such expenses distort the Department of Enterprise Services' operating budget and makes review by the City Council of the full cost of the environmental summit impossible," the report says.
Tom said the mayor has the authority to direct that resources be used to support such city-sponsored events.
City Auditor Leslie Tanaka said the final report will be released Tuesday. He could not be reached late yesterday to comment on the administration's criticisms of the draft.
Honolulu voters created the auditor's office through a 2002 amendment to the City Charter. Tanaka, a former deputy state auditor, is the first to hold the job.
Reach Johnny Brannon at jbrannon@honoluluadvertiser.com or 525-8070.
Correction: Deputy City Managing Director Malcolm Tom's comment about the allegation that a beach concessionaire has accrued arrears was mischaracterized in a previous version of this story.
