Rooted in Reason: Nurturing the Seeds of Liberty


Follow up: CGI vs. Department of Taxation by grassroothawaii
June 23, 2010, 11:03 am
Filed under: Uncategorized

By Kelsey Winther

Yesterday morning the chief of staff in the Office of the Governor, Barry Fukunaga published an editorial in the Star Advertiser defending the contract between CGI and the state Department of Taxation.  Fukunaga claims that the testimony of Dr. Tu Duc Pham (referenced in my June 22nd post) is invalid and the contract has been successful in bringing in new tax revenue.

For an independent investigator it is difficult to know conclusively what went on in the Department and if the contract was a wise use of funds.  Thus, in this follow up to a post I made a couple of days ago, I would like to take a step back and analyze what can be observed from the controversy.

Regardless of the accuracy of the story told by either Fukunaga or Pham, the situation reveals important truths about incentives within the operation of government.  The state government is not accountable to insure that it enters into good contracts or makes good use of tax money.  Its only accountability is to a largely uninformed citizenry.  When calls are made for investigation into internal affairs like the CGI case, the state does not really need to investigate, it only needs to paint a good picture for the media and defuse this issue.  This is exactly what Fukunaga’s editorial did.  Most Hawaii residents will take his word despite the fact that Mr. Fukunaga had almost no involvement with the daily affairs of the department.

The lack of accountability in the state is largely due to the lack of transparency.  When a profit motivated corporation enters into a contract it is responsible to its shareholders to ensure that the contract is being fulfilled by the outside vendor and is actually benefiting the company.  This profit motive increases the clarity required in the contract, the transparency of the corporation, and the concern that the contract is properly fulfilled.  When the “company” in question is not a profit seeking corporation but a state government the incentives for profitability are substantially reduced.  This resulted in an unclear contract where the DOTAX was not entirely sure what it required from CGI. Additionally, as the investigation has gone on there are still no answers to why the Department of Taxation wanted to cancel the contract or if CGI actually fulfilled their deal. There will always be a lack of transparency and concern for profit in the state because taxpayers are not investors who can decide to pay their taxes to a more profitable firm.

In the case of the CGI contract and other cases of government inefficiency it is necessary for taxpayers to use what mechanisms for accountability they have available.  We must elect individuals that seek to reduce government waste and encourage accountability and when they fail we should continue to push for greater transparency.

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