“Our inspection found that historically and currently the CNMI suffers from insufficient capacity and inadequate training to oversee and monitor the implementation of federal programs to ensure accountability and transparency and to prevent fraud, waste and abuse. The addition of major ARRA funding has further strained this capacity,” the two offices said in their joint report that OPA released on April 28.
Of the $92.4 million ARRA money, more than $21 million had been spent for different projects as of June 2010, according to the report.
OPA and DOI-OIG jointly conducted a review and evaluation on how the CNMI monitor the implementation of the ARRA funded programs as part of the mandates of ARRA, more popularly known as the stimulus law, which aims to create jobs for Americans.
The other insular areas — the American Samoa, Guam and the U.S. Virgin Islands — were also separately audited.
Public Auditor Michael Pai told Gov. Benigno R. Fitial there are three major types of internal control weaknesses found during the review process. If these are left uncorrected, the CNMI will violate ARRA spending requirements.
“The results of our joint inspection revealed three areas of concern. These concerns are three major types of internal control weaknesses: (1) those created by the manner in which the Recovery Act was implemented, (2) those inherent in the insular area(s), and (3) those specific to the CNMI,” said Pai.
According to the joint report, the ARRA funding has weakened internal controls in the CNMI in that (1) recovery funds directly awarded to autonomous agencies fall outside the central government’s visibility and control; (2) prior audit findings and risk management tools were not utilized to identify areas of potential fraud, waste and abuse and potential noncompliance with legislation and grant requirements; (3) monitoring functions performed by the finance department were not adequate with respect to transfers and receipt of recovery funds; and (4) expenditure and award information on the CNMI’s official website for Recovery Act programs was not current and complete.
ARRA grants to autonomous agencies like the Public School System and Northern Marianas College, among others, are not subject to scrutiny by the CNMI ARRA Office, which is under the Department of Commerce.
This in turn has created a situation where there is no supreme oversight agency for the CNMI, the report said.
The inspection also showed poor documentation on how ARRA projects are tracked down by the CNMI government.
“Under ARRA, before any expenditure of funds can occur, each grantee must receive and sign a grant award notification. At the oversight office, a copy of this document should be maintained in the files for tracking purposes and should be compiled to support the universe of Recovery Act awards received by the central government. During our fieldwork, OPA found that the CNMI ARRA Office had not obtained copies of all signed awards,” the report stated.
“Further, OPA identified grants that were awarded prior to March 31st, 2010 which had not yet been identified by the CNMI ARRA Office. The oversight office has yet to obtain complete information, because funds were awarded prior to the complete hiring of staff members,” it added.
In Oct. 2010, Michael Ada resigned as Commerce secretary and ARRA point man in the CNMI and formed his company, Integrated Professional Solutions LLC.
The Fitial administration then awarded a sole source contract to Ada’s firm to oversee ARRA programs that were previously under the Department of Commerce.
OPA and DOI-OIGnoted that although there is a website — www.cnmiarra.net — providing information about ARRA projects in the CNMI, there is no hotline for reporting fraud, waste or abuse.
“There is no centralized hotline for reporting fraud, waste or abuse of ARRA funds. Although the website allows the public to send inquiries, a confidential hotline was not established for reporting potential fraud, waste and abuse of Recovery funds. Without a specific hotline within the CNMI ARRA office, grant recipient agencies and the public are left to report to the hotlines managed by OPA or the official ARRA hotline managed by the [Recovery Accountability and Transparency] board,” the report said.
OPA and DOI-OIG recommended that the CNMI take corrective actions to ensure fiscal accountability on how ARRA funds are spent.
These include a focus on identifying and recommending immediate action for the deficiencies and weaknesses in internal controls of grant recipients to prevent fraud and other irregularities rather than address them after the fact; and monitoring the functions of the finance department pertaining to federal fund drawdowns, deposits, disbursement, recording, and reporting.
Schedule of revenues and expenditures of federal awards should be requested on a monthly basis, the report further recommended.
To see the full report, go to http://www.opacnmi.com/content/report-cnmis-oversight-arra-funds.
