THE U.S. Department of Treasury, Office of Inspector General, has found approximately $11 million in questioned costs on the CNMI’s use of Coronavirus Relief Funds commonly known as “CARES Act Funds.”
The questioned costs were among several other adverse findings identified by the audit, which reviewed and assessed obligation and expenditure data for the period of March 1, 2020 through March 31, 2022. The desk audit, transmitted to the CNMI Department of Finance on Aug. 9, 2023, was performed by Castro & Company, LLC, a certified independent public accounting firm located in the Washington, D.C. Metro area, that specializes in providing services to the federal government.
“We have publicly discussed my predecessor’s irresponsible spending and the misallocation of funds, so the findings from this audit should perhaps come as no surprise,” said CNMI Gov. Arnold I. Palacios. “Unfortunately, the extraordinarily high amount of questioned costs that the Inspector General has found in the previous administration’s use of CARES Act funds means that we will have to dedicate more of our already-limited resources to fully address these issues and implement corrective action.”
As background, the U.S. Treasury provided a total of $36,284,217.70 in CARES Act Funds to the CNMI. Allowable uses of CARES Act Funds are:
1) Necessary expenditures incurred due to the public health emergency with respect to the coronavirus disease 2019 or Covid-19;
2) Expenditures that were not accounted for in the budget most recently approved as of March 27, 2020; and
3) Expenditures incurred between March 1, 2020 and Dec. 31, 2021.
In its desk review, the audit firm found the following:
• CNMI personnel did not complete the required quarterly Financial Progress Reports for Cycles 1 through 3 (March 1, 2020 – Dec. 31, 2020).
• Contracts greater than $50,000 did not comply with CARES Act and Treasury Guidance.
• Contracts, payments to individuals, and aggregate reporting less than $50,000, did not comply with CARES Act and Treasury Guidance.
• CNMI’s risk of unallowable use of funds is high.
• Desk audit resulted in total questioned costs of $11,146,813.35.
A questioned cost is a finding that is due to:
• A violation or possible violation of a statute, regulation, or the terms and conditions of a federal award, including funds used to match federal funds;
• Where the costs, at the time of the review, are not supported by adequate documentation; or
• Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances.
“We will continue to refer findings to the Office of the Attorney General Office and hold individuals accountable for any activities deemed illegal or in direct violation of the CARES Act funds guidelines and requirements,” Governor Palacios said.
“The Department of Finance takes these desk audit findings seriously and will continue to work with the Inspector General to provide missing documentation and make necessary reporting corrections,” said Tracy Norita, secretary of Finance.
“Additionally, we support the Inspector General’s recommendation for a full scope audit. This will allow our department and other enforcement agencies to hold government officials accountable for any illegal or unauthorized expenditures of CARES Act Funds.”
