Let’s talk about the community benefit fund
With the dwindling CNMI budget and talks of cutting government costs by 50%, the 25% cut on pension for government retirees, and the Public School System wanting to secure 25% of the general revenue, the House of Representatives minority bloc is asking: Where is the community benefit fund?
The CBF is a contractual obligation of the Imperial Pacific International (CNMI) LLC, spelled out in the casino license agreement, as part of its contract with the CNMI government and the public. IPI was supposed to put in $10 million to the CBF in January 2018, $10 million in June 2018, and $20 million in October 2019, totaling $40 million. Only $3 million could be accounted for, based on the 2018 audited financial statement, leaving $37 million unaccounted for—an amount that minority leader Rep Edwin K. Propst (Ind-Saipan) said could be used to help the CNMI economy, the retirees, and PSS.
In an interview last January, press secretary Kevin Bautista explained that CBF is an escrow account managed by IPI, which then chooses which community projects to fund, with the endorsement of the governor.
“The one thing about the community benefit fund is that that money does not belong to the Commonwealth government. It belongs to the casino license holder, IPI,” Bautista said in the interview.
Rep. Tina Sablan (Ind-Saipan), however, said that the Office of the Governor has authority to enforce.
According to Section 16 of the Casino License Agreement, and according to both the Lottery Commission and the Casino Commission, the Governor’s Office has the authority to enforce this contractual obligation of IPI.
Sablan also stressed that Gov. Ralph DLG Torres cannot claim that he has no control or authority over the community benefit funds.
“His own enforcement commissions say that he does. The license agreement says that he does. And the records show that, at one point, in January 2018, the Governor’s Office was able to get IPI to place $12 million in escrow to ensure compliance with the community benefit fund obligations,” she said.
Based on the records the minority bloc received from the administration on their Open Government Act request, at least $10 million has been deposited into the escrow.
The governor’s records show that about $1.2 million in CBF has actually been distributed for only four programs or projects. CNMI Commonwealth Advocates for Recovery Efforts was given $425,000; $168,854 was given as a 50% down payment for the Tinian Slaughterhouse; MyPros Million Dollar Scholars Program was given $350,000; and $300,000 went to the CNMI Substance Abuse and Rehabilitation program.
Given the $10 million deposited in the escrow, at least $8.6 million remains unaccounted for.
“Where’s that money? Where is that money because that is a significant amount of money at a time when everybody’s broke. Where is that money and can we see it?” Propst asked.
Sablan reiterated that these missing funds could be used to pay retirement obligations, such as the 25% portion of pensions that the governor has announced he will be cutting, or to fund PSS for the rest of the year.
According to Sablan, the governor’s response to the minority’s Open Government Act request show that he and his office have done a poor job of maintaining records, tracking the CBF funds, and holding IPI to its CBF obligations.
“There is very little evidence of a rigorous process for reviewing and selecting proposals, or requiring accountability for the funds,” the legislator said. “Included in the governor’s response to our OGA request is a blank template of an application form and Standard Operating Procedures that IPI provided. But there is no evidence that these application forms or SOPs were followed.”
Sablan added that there are records showing various requests for CBF monies submitted to the governor and to IPI, but very few records documenting actual disbursement of funds.
Also, records from the Governor’s Office show that all documented CBF distributions occurred in 2018. There are no documented distributions in 2019 or 2020.
“This means that the governor cannot account for $38.8 million that IPI was obligated to distribute pursuant to Section 16 of the license agreement,” Sablan said.
She is encouraging IPI to release records showing that they had distributed money to other recipients than what the governor’s records show.
“The bottom line: the casino license agreement is not worth the paper it’s written on if the governor won’t enforce it. In my view, a failure to enforce a contractual agreement, to the detriment of the Commonwealth, is neglect of duty,” Sablan added.