YEAR-END REPORT Violation of procurement regulations tops abuse

“I would define it as a success,” said Public Auditor Leo LaMotte when asked to describe the year 1998.

“We’ve made important decisions on protest appeals, important audit reports and our Ethics unit has been very successful in taking ethics presentation to different government agencies,” he added.

This year, the Office of Public Auditor released six regular audit reports and 16 letter reports, mostly about procurement.

LaMotte said procurement continues to be the most important priority of their audit and investigation efforts this year.

He said the biggest problem is that government officials and employees do not follow CNMI Policies and Procedures and Rules and Regulations.

“Procurement is part of that regulation. We’ve found that procurement regulations are still not being followed,” he said.

But, according to LaMotte, there are agencies, employees and officials who made efforts to comply with the procurement regulations.

Important OPA findings

Perhaps the most important review OPA did over the last year pertains to protest submitted by offerors on the planned 80-megawatt power plant billed as the most expensive project of the local government.

The board of directors of the Commonwealth Utilities Corporation had made a decision awarding Marubeni Sithe the $1.2 billion project.

The public auditor reviewed the criteria used by a special group assigned to review proposals submitted by some 13 companies. It found that some of people who were tasked the review process lacked the expertise to make sound judgment on which company should build the 80-megawatt power plant.

Subsequently, CUC decided to scrap its decision on Marubeni Sithe and begin from scratch. It sought technical expertise via Request for Proposal for an independent firm to review all submissions. A decision has yet to be reached on which company would take up the review process, but a determination should be forthcoming by next year.

Another report recently released by OPA focused on the abuse of government funds by former government officials. These abuses which topped more than $100,000 are either returned or violators must face prosecution between now and next year.

The former Marianas Visitors Bureau (now MVA) violated procurement regulations between fiscal years 1992-1998. Throughout the period, it:

• procured services from 9 foreign advertising companies amounting to more than $7.34 million without following competitive selection procedures,

• paid the companies without valid government contracts,

• entered into “open-ended” agreements with several companies instead of firm fixed-price contracts, and

• compensated several companies using the cost-plus-a-percentage-of-cost method specifically prohibited under the regulations or the cost reimbursement method without justification.

As a result, public funds were illegally spent by MVA in violation of procurement regulations and there was no assurance that expenditures totaling more than $14.22 million were necessary or were procured at a fair and reasonable price.

Opinion on government spending
This month, the Office of Public Auditor was requested to provide comments and suggestions on how the CNMI government can reduce expenditures without affecting basic public services.

LaMotte, in a letter to Rep. Melvin Faisao, said the government can save $10 million if it strictly complies with a freeze on hiring and deferment of salary increases.

“The government should evaluate the personnel needs of all branches, departments and agencies to determine whether their present workloads justify their existing number of employees,” he said, adding “taxpayers should not be burdened with the salaries of unneeded and unproductive employees.” Additionally, LaMotte recommended a reduction in overtime costs which should be limited only to essential services.

The government should consider privatizing some of its functions since it would result in cost savings, he said, because the government does not have to maintain inefficient and unskilled workers who are paid very high wages and salaries and also receive substantial employee fringe benefits.

Furthermore, loss of government equipment and construction materials would be minimized, if not, totally avoided.

Overall, the role of OPA has increasingly put government managers and emloyees that everybody must play by the rules especially on procurement and hard to come taxpayers’ contributions are disposed.