‘CNMI didn’t comply with performance requirements’

An independent audit found that the CNMI was noncompliant with period of performance requirements involving U.S. Department of Homeland Security’s disaster grants-public assistance, resulting in questioned costs amounting to $3,274,353 in fiscal year 2019.

In the government’s corrective action plan, the CNMI said the audit findings of Deloitte & Touche LLC highlight an area that was unintentionally overlooked—that of monitoring liquidation compliance.

With current financial and audit staff on board the CNMI Public Assistance Office, the CNMI said that monitoring guidelines addressing liquidation regulations will be prioritized and incorporated into administrative and program monitoring for immediate assessment and action.

This was some of the findings in Deloitte’s audit of the CNMI government’s financial statements as of and for the year ending Sept. 30, 2019. It was the Office of the Public Auditor that hired Deloitte to perform the audit.

In its report dated April 21, 2021, submitted to Gov. Ralph DLG Torres, Deloitte found several deficiencies in the CNMI’s internal control and compliance over financial reporting and major federal programs for the year ending Sept. 30, 2019.

One of the deficiencies that Deloitte consider to be material weaknesses pertains to the performance requirements process involving U.S. DHS disaster grants-public assistance (Presidentially declared disasters).

The auditor said that, in accordance with applicable period of performance requirements, a non-federal entity shall liquidate all obligations incurred under the award no later than 90 days after the end of the funding period. Further, Deloitte said, time extensions should be approved by the grantor.

Of three nonpayroll expenditures tested, totaling $3,274,353, of a total population of $18,495,365, the liquidation occurred after the 90-day liquidation end date, Deloitte said. The auditor said grant extension documentation was not provided.

One business unit’s questioned cost was $44,100, the second was $2,370,255, and the third was $859,998, for a total questioned costs of $3,274,352.

Deloitte said the CNMI did not effectively monitor compliance with applicable period of performance requirements and that questioned costs of $3,274,353 exist.

The auditor recommends that responsible personnel should monitor check payments so that liquidations occur timely.

Deloitte said grantor approval should be sought if extensions are needed.

In the government’s response, the governor’s authorized representative Virginia C. Villagomez said the CNMI made an effort to request a blanket grant of time extension, covering such remaining open projects. However, Villagomez said, the time extension request was submitted after the period of performance end date because the Public Assistance Office was still performing category A and B (debris and emergency) work until late 2019.

In its response, U.S. DHS acknowledged the CNMI’s challenges in completing the projects but only specific projects were approved for extensions, Villagomez said.

Villagomez said that effective immediately, the CNMI Public Assistance Office will include the liquidation regulations as a critical component of subrecipient monitoring processes alongside closeout reporting regulations.

She said the CNMI Public Assistance Office has monitored the completion of project work and deliverables within approved periods of performance. She said all CNMI Public Assistance projects will be examined to determine compliance with liquidation regulations by May 2021.

Villagomez said the Public Assistance Office’s immediate attention will be directed to correct any oversight in meeting liquidation of obligations requirements.

She said through the review, monitoring, and communication with CNMI Public Assistance projects, request(s) to Federal Emergency Management Office will be submitted for any projects that may need extensions to the period of performance end date, the closeout reporting, and liquidation deadline.