$2.29M questioned costs in PUA

An independent audit has determined that the CNMI is not in compliance with some requirements regarding the Unemployment Insurance Program of the U.S. Department of Labor and that questioned costs in the total amount of $2,292,260 exist.

In a report on Monday, auditing company Deloitte & Touche LLC said that questioned costs of $2,071,943 exist for noncompliance with eligibility program requirements, and questioned costs of $219,547 exist for noncompliance with allowable costs/cost principles requirements.

Deloitte also found $770 in questioned cost exists for noncompliance with the CNMI Department of Labor’s Division of Employment Services’ Standard Operating Policies and Procedures for Pandemic Unemployment Assistant and Federal Pandemic Unemployment Compensation Programs activities allowed or unallowed requirements.

These were among the many deficiencies that Deloitte outlined in its report, which was submitted Monday to Gov. Arnold I. Palacios.

The Office of the Public Auditor hired Deloitte to audit the financial statements of the Department of Public Lands major fund, and the aggregate remaining fund information of the CNMI as of and for the year ending Sept. 30, 2020, and the related notes to the financial statements.

Deloitte was also engaged to audit the financial statements of government activities and each of the remaining major funds.

The findings of deficiencies and questioned costs with respect to Unemployment Insurance Program are in the Deloitte’s report on the CNMI’s compliance with each major federal program, report on internal control over compliance, and report on schedule of expenditures of federal awards required by the uniform guidance.

Deloitte said they identified certain deficiencies in internal control that they consider to be material weaknesses and significant deficiencies.

In response to the auditor’s findings, acting Finance secretary Tracy B. Norita said that Finance will revisit the internal controls of each agency to ensure that it aligns with the compliance requirements and the CNMI’s policies.

Norita added that the CNMI just recently launched its new financial system (Tyler Hub Munis) in October 2021, which is designed to monitor the proper process of each transaction based on CNMI policies and internal controls.

She said they will also ensure that all personnel handling the grants will be aware and knowledgeable of the overall compliance requirements for each federal award.

Norita said they will also ensure that a proper approval process will be in place to review the completeness and accuracy of the expenditures.

UI Programs are meant to provide temporary income assistance to qualified unemployed individuals and help stabilize the economy. The CNMI Department of Labor, as the administering agency, plays a fundamental role in ensuring the integrity of UIPs.

Deloitte said individuals are only entitled to benefits if they are no longer working (or their hours of work have been reduced) through no fault of their own and that individuals must be able and available to work. Claimants are eligible to receive a PUA and FPUC if they file an initial application and weekly certifications.

With respect to the $2,071,943 in questioned costs, Deloitte said the cause is that CNMI Labor did not monitor compliance with its Standard Operating Policies and Procedures for PUA and PFUC Programs and lacks a systematic filing of relevant documents over applicable eligibility program requirements.

Deloitte said a total of $2,049,172 in PUA and PFUC overpayments was reported during fiscal year 2020, which amount is questioned.

On the $219,547 questioned costs, the auditor said the cause is that the CNMI did not effectively monitor cumulative expenditures against the approved and authorized funding limits for each expenditure category.

Deloitte said the CNMI did not effectively utilize reports generated from the expert system (HireMarianas) to verify that all claims were properly assessed and processed.

The auditor said overtime expenditures were incurred without proper approval.

The auditor said certain program cumulative expenditures as of Sept. 30, 2020, exceeded the approved budget by expenditure category and indirect costs charged to certain grant awards were not included in the approved budget.

With respect to the $770 questioned costs, the auditor said this was because CNMI Labor did not properly document or certify employees who received UIP training and did not adequately support program transactions.