SCR78 SD1.DOC

WHEREAS, in 1999, the Department of Taxation (Department) entered into a benefits funded contract with American Management Systems, Inc., which later became CGI Technologies and Solutions, Inc. (CGI), to create the Integrated Tax Information Management System (ITIMS) project; and

WHEREAS, ITIMS helped modernize an aging technical infrastructure, created new business processes, and allowed reallocation of department staff to better serve the citizens and taxpayers; and

WHEREAS, at the end of this five-year project, the Department had integrated collections, net income, and business taxes collectively into one application, which allowed the majority of the tax clearance functions to be automated and the Department's customer service representatives to provide a one‑stop service to taxpayer inquiries; and

WHEREAS, ITIMS was further enhanced by integrating a legacy cashiering system and a data capture and imaging system known as ITIMS Imaging System; and

WHEREAS, ITIMS was instrumental in implementing the county surcharge on state taxes established by Act 247, Session Laws of Hawaii 2005; and

WHEREAS, in January 2008, the Department entered into another contract with CGI to collect new delinquent taxes, with the new contract paid on a contingent fee basis, whereby CGI receives one third of all new delinquent taxes collected, up to a cap of $25,000,000, subject to the State's realization of $75,000,000 in total additional tax collections; and

WHEREAS, in testimony before the Senate Committee on Ways and Means on January 21, 2010, the Department stated that in the first eighteen months of the contract with CGI, new delinquent tax collections have reached $66,000,000, with $22,000,000 paid to CGI; and

WHEREAS, the Department also stated that the total amount of delinquent taxes to be collected by the end of the contract on June 30, 2011, is estimated to be $110,000,000, with a maximum of $25,000,000 to be paid to CGI; and

WHEREAS, in addition, the Department stated that prior to the current $25,000,000 delinquent tax collection contract between the Department and CGI, CGI had contracted with the Department – through sole source or procurement exemptions – for over $60,000,000 related to ITIMS and its enhancements and improvements, as follows:

(1) 1999-2004 – Initial contract to build ITIMS cost $53,000,000;

(2) 2005-2006 - Enhancements to the system such as imaging, cashiering, and electronic filing cost $3,500,000;

(3) 2006-2009 - Production improvements cost $3,000,000;

(4) 2006-2008 - County surcharge on general excise tax cost $3,000,000; and

(5) 2008-2011 - Current project to collect delinquent taxes, integrate all taxes into one system, and train staff will cost up to $25,000,000 (current cost is $22,000,000); and

WHEREAS, these payment amounts are substantial, particularly in light of the Department's current annual budget of approximately $20,000,000, and the State should be assured that it is receiving full return on these expenditures and that the contract continues to be in the State's best public interest; and

WHEREAS, the Legislature finds that an audit of the current and past contracts should be conducted; now, therefore,

BE IT RESOLVED by the Senate of the Twenty-fifth Legislature of the State of Hawaii, Regular Session of 2010, the House of Representatives concurring, that the Auditor is requested to conduct a management and financial audit of all contracts between the Department of Taxation, CGI Technologies and Solutions, Inc., and its predecessor American Management Systems, Inc.; and

BE IT FURTHER RESOLVED that, in the investigation of all contracts between the Department of Taxation and CGI Technologies and Solutions, Inc., the Auditor is urged to use all powers granted to the Auditor by the Hawaii Constitution and the Hawaii Revised Statutes, including the power to issue subpoenas to compel the appearance of witnesses and the production of documents, to the fullest extent necessary to fulfill the purposes of the management and financial audit; and

BE IT FURTHER RESOLVED that the Director of Taxation and CGI Technologies and Solutions, Inc., are requested to cooperate with the Auditor to the fullest extent possible during the conduct of the management and financial audit; and

BE IT FURTHER RESOLVED the Auditor is requested to submit findings and recommendations of the audit to the Legislature no later than twenty days prior the convening of the Regular Session of 2011; and

BE IT FURTHER RESOLVED that the Department of Taxation is requested to establish and implement a transition plan wherein department personnel shall assume all functions performed by employees of CGI Technologies and Solutions, Inc., under the current delinquent tax collection contract; and

BE IT FURTHER RESOLVED that the Department of Taxation is requested to report to the Legislature on the development and implementation of the transition plan as soon as possible, but not later than August 31, 2010; and

BE IT FURTHER RESOLVED that certified copies of this Concurrent Resolution be transmitted to the Auditor and the Director of Taxation, who, in turn, is requested to transmit a copy to CGI Technologies and Solutions, Inc.

Report Title:

Auditor; Department of Taxation; CGI Contracts

THE SENATE	S.C.R. NO.	78
TWENTY-FIFTH LEGISLATURE, 2010		S.D. 1
STATE OF HAWAII