Review of the CNMI’s use of $36.2M CRF proceeds finds $11.1M questioned costs
A desk review by an independent public accounting firm hired by the Office of the Inspector General to check the CNMI’s use of $36.2 million in Coronavirus Relief Fund proceeds showed that the expenditures related to some contracts did not comply with the Coronavirus Aid, Relief, and Economic Security Act and U.S. Department of Treasury’s guidance, which resulted in a total of $11.1 million in questioned costs.
Wayne Ference of the Castro & Company LLC states in his report dated Aug. 8, 2023—a copy of which was obtained by Saipan Tribune yesterday from the Senate—that, based on their desk review procedures, those that did not comply are related to contracts greater than or equal to $50,000, aggregate reporting less than $50,000, and aggregate payments to individuals.
Castro also determined that the CNMI’s risk of unallowable use of funds is high.
Castro recommends that the Office of the Inspector General ask for some missing documentation from the CNMI and follow up on necessary reporting corrections.
Based on the CNMI’s responsiveness to the Treasury OIG’s requests and its ability to provide sufficient documentation, Castro said they recommend that the Treasury OIG determine if a full scope audit is feasible.
The accounting firm initiated on June 16, 2022, its review of the CNMI’s Coronavirus Relief Funds to evaluate documentation supporting its uses of CRF proceeds as reported in the GrantSolutions portal and to assess the risk of unallowable use of funds.
The scope of the desk review was limited to obligation and expenditure data for the period of March 1, 2020 through March 31, 2022, as reported in Cycles 1 though 8 in the GrantSolutions portal.
The CARES Act appropriated $150 billion to establish the CRF. Treasury issued a CRF payment to the CNMI for $36.2 million.
The CARES Act stipules that a recipient may only use the funds to cover costs that are necessary expenditures incurred due to the public health emergency with respect to COVID-19, were not accounted for in the budget most recently approved as of March 27, 2020; and were incurred between March 1, 2020 and Dec. 31, 2021.
Castro determined that the CNMI’s contracts greater than or equal to $50,000 did not comply with the CARES Act and Treasury’s Guidance.
Of the 18 transactions tested, Castro identified exceptions in all 18 transactions, resulting in unsupported questioned costs of $11,093,139.
Castro found that for all 18 contract transactions selected for testing, the CNMI management was unable to demonstrate what federal grant funding was used to pay for the expenses incurred and reported.
Specifically, Castro said, the CNMI’s contracts included language stating that only Federal Emergency Management Agency funds were to be used to cover the expenditures.
Castro said the supporting documentation, including the general ledger, did not include a specific CRF or FEMA funding code or specific account number to indicate whether CRF or FEMA grant funds were used for these expenditures.
Castro said CNMI management did not provide them with sufficient documentation to determine the eligibility of these expenditures.
On CNMI aggregate reporting less than $50,000, Castro tested one transaction and noted exceptions resulting in unsupported questioned costs of $45,956.
On the CNMI’s aggregate payments to individuals, the accounting firm identified exceptions in two of the five aggregate payments to individuals expenditure transactions tested, resulting in unsupported questioned costs of $7,717.97
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