Audit shows misuse of funds at MHLO

The Marianas Hawaii Liaison Office misused public funds by making improper payments to personnel and failing to enforce laws and regulations on travel, official representation, and the Medical Referral Program, according to a report by the Office of the Public Auditor.

The report covers results of an OPA audit of the Hawaii Liaison Office from Oct. 1, 1999 through Dec. 31, 2002.

OPA audited expenditures paid out of the Operations Imprest Fund maintained by the MHLO and the Medical Referral Imprest Fund maintained by the Department of Public Health in Honolulu. In addition, MHLO payroll expenditures paid by the Department of Finance were also audited.

According to the OPA report, a former liaison officer received double benefits of both “Outside Commonwealth Service” differential and housing allowance for 46 months, totaling $141,765.

CNMI personnel regulations prohibit the payment of OCS differential—equivalent to 50 percent of base salary—if an employee is receiving housing benefits while on duty at locations outside the Commonwealth.

OPA noted that the duplication resulted in a double benefit of $51,295, the total amount paid for housing allowance. OPA added that an additional $39,175 could have been saved if only the housing allowance was paid rather than the 50 percent OCS differential.

The audit also showed that, contrary to CNMI government policy of granting housing allowance only to expatriated employees, MHLO or DPH provided housing allowances to three MHLO employees who were residing and hired in Hawaii.

This resulted in the improper payment of $54,645 to the three employees.

Furthermore, the report said two of the seven medical referral assistants working at MHLO were fully compensated despite not completing required work hours. This occurred because the timekeeper failed to record leave charges for tardiness of the two employees, OPA said.

“During two pay periods, the first employee was reporting late or leaving early, ranging from 15 to 55 minutes for a total unreported leave of 8 hours 45 minutes, while the second employee was late three times for a total of 1 hour 30 minutes. Despite only a 10-hour discrepancy, stricter compliance and adherence to internal controls are expected, particularly for an office the size of the MHLO,” OPA said.

The audit revealed violations of travel policies and procedures committed by MHLO and Finance.

OPA’s review of six travel authorizations issued in FYs 2000 and 2001 totaling $16,398 also showed that a travel authorization request and related travel voucher was submitted more than a year after the conclusion of travel.

Trip reports were not filed with travel vouchers for two travel authorizations.

OPA noted that a delay in the liquidation of travel advances resulted in travel expenses being understated in fiscal years 2000 and 2001. Due to lack of detailed trip reports, MHLO had no way to verify the purpose of the trips and whether the authorized purpose of the travels was achieved.

The auditing agency also found out that travel advances for three TAs were made without requiring the travelers to liquidate previous advances. Further, travelers for five TAs were advanced 100 percent of the total estimated per diem and other expenses, instead of 80 percent as allowed by the CNMI travel policy.

Also, payroll deduction was not promptly initiated for two TAs and had not been initiated for two TAs when travelers failed to submit travel vouchers and necessary documents within the required time period, OPA said.

The MHLO was faulted for inadequate documentation of official representation expenses.

A review of 37 vouchers showed that MHLO failed to adequately document the transactions in 27 instances. As a result, OPA had no assurance that $10,448 in official representation was incurred for public purposes.

Furthermore, OPA found that the Medical Referral Office did not require family or friend escorts of medical referral patients to file travel vouchers for subsistence allowance received from MHLO.

Such allowances for patients and escorts totaled $248,625 and $280,117 in FYs 2000 and 2001, respectively. Due to lack of documentation, there was no assurance of the subsistence allowances paid were properly used.

OPA also raised concern regarding 35 expenditures amounting $12,270. This amount included $6,014 for hosting meals and parties for CNMI students and medical referral patients and escorts; $5,212 for a bento program that provided a double benefit for patients and escorts for their first day in Hawaii; and $1,044 for the purchases of flower arrangements and fruit baskets.

Particular note was also taken of an MHLO contract that required Pagoda Hotel to block 20 rooms for medical referral patients effective Oct. 5, 2001.

The contract was renegotiated in April 2002 to revise it to 15 rooms, thereby reducing the contract price by $50,970 for the period between June 5 and Oct. 5, 2002. MHLO renegotiated the contract after finding that occupancy averaged less than 15 rooms during the eight months ending May 5, 2002.

OPA noted that the CNMI government could have saved $77,157 if MHLO had made a timely analysis of room usage and entered into a contract for 15 rooms right from the start.

OPA made various recommendations addressed to the MHLO, Finance, AGO, Public Health, and/or the Office of Personnel Management.

Attorney General Pamela Brown said the AGO would review OPA’s recommendation and asked for all documents related to it.

Marianas Hawaii Office administrator Jean Sablan, who was not the liaison office’s administrator during the period covered by the audit, assured OPA that she and her staff was now monitoring the occupancy rate at Pagoda Hotel. She added that, while she could not anything about actions made by previous management, internal controls had been put in place by the Hawaii office to address many of OPA’s concerns.

“There will be no hesitation on our part to install measures that you recommend in accordance to the law, to insure that improprieties of the past do not continue under my watch. I welcome such assessments as it should be so, for as long as it is conducted government-wide and with bi-partisan assiduity,” Sablan said.

Finance Secretary Fermin Atalig, acting Personnel director Mathilda A. Rosario, and acting Public Health Secretary Pedro T. Untalan agreed with most of OPA’s recommendations and vowed to ensure compliance.