SCR62 SD1

WHEREAS, in 2015, the Department of Taxation initiated a tax system modernization project to upgrade and replace the entire technical system used by the Department over a period of five years, to be fully completed by 2020; and

WHEREAS, the project is expected to not only upgrade all of the Department of Taxation's systems, but also to improve taxpayer services and ensure the enforcement of tax laws for the taxpayers of Hawaii; and

WHEREAS, in 2016, the State entered into a contract with a private organization, AdvanTech, LLC (AdvanTech), under a $1,431,000 contract to oversee the $60,000,000 project; and

WHEREAS, AdvanTech was hired as an independent verification and validation consultant to ensure that the tax system modernization project progresses as planned and that the systems work as promised by the contractors; and

WHEREAS, in its October 2017 Year 2, Assessment 3, report, AdvanTech stated that a Department of Taxation official had instructed AdvanTech on which topics of the tax system modernization project should and should not be addressed in the report; and

WHEREAS, the report further states that a Department of Taxation official had requested changes be made to the report prior to full disclosure to the public – a practice that is considered "not the norm" for AdvanTech; and

WHEREAS, the interference from the Department of Taxation of the contents of the report indicates a lack of credibility of the report, and confusion ensued as to why the interference from the Department of Taxation was permitted; and

WHEREAS, the lack of credibility in the report has resulted in the termination of the contract with AdvanTech, and this body finds that an audit of the current tax system modification project should be conducted; and

WHEREAS, the interference by Department of Taxation personnel in the conduct of an independent review of the tax system modernization project also heightens other concerns regarding management and personnel decisions by the Department; and

WHEREAS, the now full-time project manager of the tax system modification project lacks expertise and pertinent educational background in information technology, a concern which has previously been brought to the attention of the Department of Taxation regarding previous management hires but has not been appropriately addressed; and

WHEREAS, prior to taking over as project manager full-time, the current project manager was inexplicably working as a full-time employee under the Department of Labor and Industrial Relations while simultaneously working with the Department of Taxation as the sometimes project manager for the tax system modernization project; and

WHEREAS, there have also been significant, unexplained shifts in personnel relating to the tax modernization project, including the shifting of six project management office personnel from the control of the Department of Taxation to the control of the Office of Enterprise Technology Services and a subsequent request for a return of those personnel back to the Department of Taxation, all within a six-month period; now, therefore,

BE IT RESOLVED by the Senate of the Twenty-ninth Legislature of the State of Hawaii, Regular Session of 2018, the House of Representatives concurring, that the Auditor, in collaboration with the State Procurement Office, if necessary, is requested to conduct a financial and management audit of the tax system modernization project of the Department of Taxation, focusing on the project's contracts to ensure that appropriate procurement procedures are being executed; and

BE IT FURTHER RESOLVED that the Auditor is requested to investigate any contractual or liability concerns stemming from the contracted vendor, AdvanTech, being asked to alter an independent, contractually-mandated report by state personnel, including which parties, if any, may be held responsible for violating the agreement and any other possible outcomes; and

BE IT FURTHER RESOLVED that in the investigation of the tax system modernization project of the Department of Taxation, the Auditor is urged to use all powers granted to the Auditor by the Hawaii State Constitution and 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 Department of Taxation is requested to cooperate with the Auditor to the fullest extent possible during the conduct of the financial and management audit; and

BE IT FURTHER RESOLVED that the Auditor is requested to submit a report of findings and recommendations of the audit to the Legislature no later than twenty days prior to the convening of the Regular Session of 2019; and

BE IT FURTHER RESOLVED that certified copies of this Concurrent Resolution be transmitted to the Auditor and Director of Taxation.

Report Title:

Tax System Modification; State Auditor; Financial and Management Audit

THE SENATE	S.C.R. NO.	62
TWENTY-NINTH LEGISLATURE, 2018		S.D. 1
STATE OF HAWAII