OPA faults CDA’s building renovation

The Office of the Public Auditor has reproached the Commonwealth Development Authority for its failure to observe prudence as called for by the CNMI government-wide cost-cutting program when it decided to renovate its building in Gualo Rai.

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 over $5,000, according to the final OPA report released yesterday.

However, if CDA occupies the building only during the present lease term and does not exercise the additional five year lease 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.

Public Auditor Leo LaMotte said CDA did not provide the CNMI Administration and the Legislature with complete information on its planned renovation of the structure on its leased property.

Mr. LaMotte said CDA understated funding required for the renovation when it submitted its Fiscal Year 1999 budget to both the executive and legislative branches of the government.

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 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.

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’s 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.

Nevertheless, the OPA has taken CDA Board Chair John S. Tenorio 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 to prohibit the transfer of unused budget authority to subsequent years, as well as provide sanctions for violations.

Functional building

However, Mr. Tenorio pointed out the lease agreement was locked in at $1.25 per square foot for a period of 10 years. “By obtaining an extension of two years for a period of five years, the lessee negotiated an additional lease period of seven years.”

He said that over this additional period, the lease rental would increase by .856 cent in order to recover the renovation cost for a total square foot price of $2.107.

According to Mr. Tenorio, CDA had negotiated for a 10-year extension of the 20-year lease agreement before the renovation because the government lending agency intends to continue occupying the building.

He claimed the Office of the Public Auditor failed to review important documents, including minutes of the meeting when the CDA board discussed the renovation project, during its investigation.

He said official meeting records would reveal that he excused himself during the discussion and, eventually, when the board voted in favor of the renovation of the CDA building.

Mr. Tenorio stressed that the Development Authority complied with existing policy to announce the project for at least 30 days in order to solicit proposals and select the best offer submitted.

He said three companies have actually submitted proposals and that CDA has all these documented. He added that the lending agency has the legal capability to administer its own procurement and supplies regulation being an autonomous government office.

He also disputed OPA claims that 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.

Mr. Tenorio also admitted that CDA had been short-sighted in giving out an interest-free loan to the property’s lessor but promptly added that the board will try to recover the interest which he was sure the lessor would not dispute.