SHEFA defends itself from OPA critique

The administrators of a municipal scholarship program, who have been accused of misusing public funds, say the agency has been responsible in managing its funds.

The Saipan Higher Education Financial Assistance board of directors, in the first two installments of its three-part response to the Office of the Public Auditor’s review of the program, said the program had kept a balanced budget since SHEFA was created in 2004.

The SHEFA board based its claim on its own “objective” analysis of the program.

“Indeed, the SHEFA board is touted a model in fiscal restraint, operating in a fiscally conservative manner,” the board said.

The group said the agency’s financial records show the SHEFA board has not availed of “publicly financed lavishes and government financed perks” such as off-island trips, new vehicles, cellular phones, and state-of-the art office equipment.

Ninety-seven percent of SHEFA’s budget is used for the benefit of the scholars, the board said. It added that the program has helped over 100 scholars, who have graduated from colleges and universities on Saipan and elsewhere in the United States.

The SHEFA board also said the agency has awarded over $5 million in scholarship grants to Saipan students, while spending under $9,000 in board compensation from 2004 to 2006. During the same period, the board said, the board was paid a monthly average of $250. The members each got below $50 a month for attending board meetings or work session, and were not paid for outreach activities, appeal hearings, and meetings with other government agencies.

The SHEFA board also defended its practice of hiring contractors, instead of keeping civil service employees.

“Given this climate of uncertainty and unpredictability, it is most imprudent to hire full-time staff during the formative period of program development. Besides, operation funds are inadequate to attract or recruit an individual best qualified to operate a new and evolving approach,” said the board.

OPA’s allegation about the contractors’ seemingly repetitive tasks was explained in these terms: “[What] appears at first blush to be unmeritorious engagement in seemingly duplicative and repetitive task orders would, upon closer scrutiny, prevail as a necessary antecedent in facilitating program growth, development, renewal and expansion in order that SHEFA becomes viable and a sustainable program, just as any new and emerging program would require, no matter the modality of delivery—whether performed or ascribed by negotiated deliverables by the governing board or by prescriptive and ministerial list of position description assigned a civil servant, the latter proposition ill advised given the uncertain beginning of and externally induced instability sown into the program, not to mention the external tinkering with SHEFA has been subjected to since 2006 to this day as in the extant case.”

In a report last April, OPA said SHEFA had misused public funds through questionable hiring and improper payments to board members. OPA’s review showed the agency had hired contractors without following procurement regulations. Both contractors were CNMI government retirees and may have been “double dipping,” or receiving both salary and pension benefits. The two also seemed to be doing the same job, OPA said.

OPA also found inadequate documentation to support the payments made to some SHEFA board members. Some board members were compensated for work other than board meetings, and the board did not comply with the Boards and Commissions Reform Act of 2006.

OPA urged the Saipan and Northern Legislative Delegation to work with House and Senate members on how SHEFA and the CNMI Scholarship Office could be merged, without getting rid of the separate financial aid program for Saipan students.

Saipan Local Law 13-21, which established SHEFA, initially provided a continuous yearly appropriation of $1.2 million from Saipan poker license fees. This funding was allotted in fiscal years 2004 and 2005.

In October 2004, an additional $150,000 was appropriated for the program’s operational costs. The money was intended to cover operational expenses starting FY2004 until fully used. In the same month, an additional $1.2 million was appropriated for the “Saipan local scholarship account.”

In October 2005, a Saipan local law increased the continuous yearly appropriation for the scholarship fund from $1.2 million to $3 million, and provided a non-lapsing yearly appropriation of $200,000 for SHEFA’s operational costs.

From FY2004 to FY2006, SHEFA received total allotments of $5.83 million, of which $5.57 million went to financial assistance and over $250,000 went to operations (mostly personnel).