OPA chides CDA for costly renovation

The Commonwealth Development Authority has allegedly failed to observe prudence as called for by the government-wide cost-cutting program in the renovation of its building in Gualo Rai, according to a preliminary report prepared by the Office of the Public Auditor.

According to the draft OPA report, renovation of the structure along Middle Road will eventually increase CDA’s monthly rental of the property from $8,000 to $13,489, or a difference of more than $5,000.

However, if CDA occupies the building only during the present lease term and does not exercise the five-year option, rental may increase by $19,212 per month to $27,212.

CDA took on the renovation in exchange of a two-year extension of the lease plus an option of another five years. The Development Authority spent $461,095 for the project, including costs for the design, construction, and construction management.

The government’s lending arm has been leasing its office building from Ms. Margarita P. Kintol for the past 20 years. The latest lease contract renewal was signed in 1995.

The OPA draft report also noted that CDA failed to comply with proper procurement procedures which resulted to the lending agency spending more than what it should have on the project.

According to the Public Auditor, the Development Authority administration did not provide full disclosure of its planned renovation when it submitted its Fiscal Year 1998 budget to the Legislature.

OPA claimed awarding of the contract for the renovation was undertaken in violation of the Commonwealth Code by reprogramming money in excess of its annual budget to the project although it is not enough to cover the entire cost.

At the same time, the government’s lending arm was also accused of providing its lessor with an interest-free loan for the renovation of the parking lot.

Under the lease agreement, the lessor is responsible for the parking lot renovation costs. But CDA failed to include interest of the loan when Ms. Kintol agreed to absorb the costs through a monthly reduction in lease payments until the debt was liquidated.

The Public Auditor preliminary report also disclosed CDA failed to comply with existing CNMI procurement regulations in processing contracts for the renovation of the leased building.

OPA claims CDA solicited, reviewed and approved contracts without the approval of the Director of Procurement and Supply, adding that $279,800 construction contract was awarded sans the benefit of public bidding.

CDA Board Chair John S. Tenorio was contacted to comment on the OPA draft report but said he is reserving his statement until he has completely reviewed the audit report.

Nevertheless, the OPA has taken him to task in obtaining reimbursement of interest from the parking lot renovation cost lent to the property’s lessor, and ensure that all CDA officials attend a procurement regulation presentation.

The Department of Finance was also asked to require an assessment of the Development Authority’s capability to administer its own procurement regulations.

The Legislature has also been asked prohibit the transfer of unused budget authority to subsequent years, as well as provide sanctions for violations.