OPA: SHEFA funds misused

Officials in charge of the Saipan scholarship program have misused public funds through questionable hiring and improper payments to board members, the Office of the Public Auditor has found.

OPA conducted a review of the Saipan Higher Education Financial Assistance program at the request of Rep. Justo S. Quitugua.

In its report, Public Auditor Michael S. Sablan questioned SHEFA’s hiring practices. He said the agency hired two contractors where it appears that it should have hired employees.

Procurement regulations were not followed in the hiring, and the contracts did not contain any justifications.

Both contractors are CNMI government retirees and may have been “double dipping,” or receiving both salary and pension benefits.

The first contractor was originally hired in September 2004 on a 90-day employment contract as an administrative officer with a pro-rated salary of $37,000. Once the 90-day contract expired, the contractor was hired on another deal for one year at $37,000. OPA believes the contract was renewed year after year, as the contractor continues to report to SHEFA until now.

The other contractor had a contract dubious in several respects as it had highly unusual payment schedules. The first contract was for one year at $35,000 a year, and the second was for two years and eight months—an unusual contract term—with a rate of $45,000 a year.

Stark similarities were noted in the work required of both contractors.

OPA 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.

From fiscal year 2004 through FY2006, the five SHEFA board members altogether were compensated for 273 sessions. Certain board members were compensated for “work sessions,” which were review of applications and supporting documents.

OPA questioned why the board members had to be present in the “work sessions” when one of the contractors was hired for the purpose of reviewing applications and supporting documentation.

It was also found there was poor accountability for board members’ attendance for determining compensation, as board members did not always use the attendance log.

Board members were compensated for at least 15 sessions that lasted less than two hours. Under the law, board meetings are to be compensated at $60 for every session that lasts over four hours or $30 for sessions between two and four hours.

Further, OPA found that SHEFA has similar eligibility requirements—thought SHEFA applicants must be Saipan residents—and requires similar documentation as that required by the CNMI Scholarship Office.

OPA recommended that the Saipan and Northern Legislative Delegation consider consulting House and Senate members to determine how the two scholarship programs could be consolidated, without amending the eligibility criteria currently established in SHEFA rules and regulations.

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).