Superintendent Pat Hamamoto has reported possible criminal violations of the state Department of Education's procurement practices to the attorney general's office. The potentially fraudulent actions were found in a recent audit.

State Auditor Marion Higa said DOE contracts were awarded based on favoritism and documents used in the selection of contractors were falsified. In general, Higa said she found "a culture of disregard" for procurement rules and procedures within the DOE.

"If we had known it was going on for certain, we would have stopped it," Hamamoto said. "The only way you can get to it is to bring in a third party to do an audit."

Hamamoto requested the audit of the department's construction procurement practices, saying the DOE has been handling the work only since 2005. The department inherited its current procurement system from another state agency under the Reinventing Education Act of 2004.

Higa's audit covered the the fiscal year from July 1, 2006, to June 30, 2007. Higa said she found widespread circumventing of procurement laws and rules within the DOE and in particular within the Office of School Facilities and Support Services, which handles repair and maintenance of buildings.

"We encountered numerous instances of department personnel manipulating the professional services selection process and awarding contracts to predetermined consultants," Higa said.

In one case, an engineering firm with ties to the DOE was chosen for a $300,000 construction management contract. A high-ranking official in the firm was a former assistant superintendent, Higa said.

The process was led by a department head who hand-picked members for the selection committee, served as its chairman, sent the results and the documents to himself. He then approved the $300,000 contract to the firm.

In addition to alleged ethical or criminal violations, Higa said she found that the DOE was regularly spending large amounts to outsource work that could be handled within the department.

For instance, the department spent some $21 million on management contracts to oversee $160 million in construction work.

Hamamoto said she did not view those contracts to be wasteful, believing that the work could not have been handled by the current staff within the DOE.

"To manage these construction projects in-house, we would have to hire more people. We can't hire people in government," Hamamoto said.

Not only were those contracts wasteful, Higa said, but they were awarded with lack of competition and obvious conflicts of interest involved.

In one case, Higa found that a management consultant was assisting the department in the procurement process while also bidding for work. The consultant was later awarded a $2.4 million contract.

Hamamoto said the DOE inherited a procurement system from the Department of Accounting and General Services that was flawed. But she said most of the problems found in the audit don't stem from lack of procedures or policies.

"We had a lack of internal controls, a lack of enforcement of the policies and procedures," Hamamoto said.

"The enforcement of internal controls of checks and balance was not as strong as we would have liked it to be," she said.

Hamamoto said she requested the audit to examine the DOE's current procurement practices. Because the DOE had not conducted the awarding of construction projects before 2005, she said the department was seeking third-party recommendations to fix its current system.

Higa claims much of the problems stem from a mentality of "just get it done" regardless of procurement laws and procedures.

"Based on the numerous violations and unethical activities we observed during our audit, this mentality is apparently shared by many Office of School Facilities staff involved in procurement," Higa said.

Hamamoto noted that the DOE is under extreme pressure by the public to make sure schools are repaired and maintained quickly and efficiently.

"A lot of it came from just wanting to get the job done. Anything that became a roadblock ... they rather go around it. That's something that has to stop," Hamamoto said.

The DOE is currently engaged in creating "check points" within the process to ensure that contracts are awarded and handled appropriately, Hamamoto said. The DOE also intends to adopt Higa's recommendation to strengthen the procurement process and adopt internal checks and balances, she said.