‘Back off on CNMI’s $515M pie’

David DLG. Atalig

The Office of the Public Auditor, Office of the Attorney General, and the CNMI Department of Finance have issued comments that are all unfavorable to a bill that the House of Representatives passed Friday to require legislative appropriation for about $515 million that’s allocated to the CNMI for government operations under the American Rescue Plan.

OPA, OAG, and Finance issued their respective positions to House Bill 22-33 last Thursday and Friday after House Committee on Ways and Means chair Rep. Donald M. Manglona (Ind-Rota) sought comments from these agencies. OPA said they don’t have enough staff and space for this purpose; the OAG said the CNMI simply has to comply with the rules sets by the U.S. Secretary of Treasury on how to use the money, so there is no need for the CNMI to enact a law on how to use these funds; and the Finance Department said the current crisis requires flexibility to respond to needed expenditures and adjust as situations change, so adding another layer to fiscal regulation and oversight could backfire.

Under House Bill 22-33 that Manglona authored and co-sponsored by six other Democrats, the public auditor shall establish a task force to monitor expenditure of all Coronavirus State Fiscal Recovery Fund monies and report on the task force’s findings to the Legislature every quarter.

Public Auditor Kina B. Peter said in order to staff this a task force, OPA would potentially need to not only double its current auditing staff but also require additional space to house the task force. She pointed out that monitoring expenses will be across many government agencies.

“The operational and capacity build up required to achieve this new mandate is not realistic,” Peter said.

Lillian Tenorio

Deputy attorney General Lillian A. Tenorio said an enactment of a Commonwealth law is not required for the CNMI to receive funds under the American Rescue Plan Act of 2021. What is required of the Commonwealth, Tenorio said, is to comply with the procedures in Section 602(d), the use restrictions in Section 602(c), and other obligations that may be imposed by the U.S. Secretary of Treasury.

Finance Secretary David DLG Atalig said further authorization or appropriation for the Coronavirus State Fiscal Recovery Fund of the American Rescue Plan is unnecessary.

Atalig said Finance commends the intent of this legislation to provide for additional layers of fiscal regulation and oversight, but they also recommend to the committee additional consideration to account for the ongoing crisis impacting the fiscal condition of the Commonwealth.

Atalig said the nature of this crisis, and the unknown and evolving situations that give rise to serious health and public safety concerns require flexibility to respond to needed expenditures and adjust as situations change.

In OPA’s comments, Peter suggested adding provisions requiring individual agencies receiving the funds to forward reports on spending to the Legislature. Peter said each agency has bookkeepers and accountants with the skillsets to manage and report on finances.

Alternatively, Peter said, the Legislature could require the Department of Finance to track the spending and report back to the Legislature. She said the department is constitutionally mandated to control and regulate the expenditure of public funds.

Peter said OPA has serious concerns regarding their ability to meet the new mandates assigned in House Bill 22-33 because of their need to remain independent as required by their existing statutory and constitutional mandates and from a practical capacity standpoint.

She said OPA requires independence to perform its auditing functions as constitutionally-mandated and its investigatory function as required by statute.

“The more OPA becomes entangled in outside agencies or engages in other government branch’s basic operations, the less autonomy OPA retains, which is required to audit and investigate,” Peter said.

In order to maintain independence with the new mandate, OPA would require separating staff assigned to the task force from their existing staff working on their other mandates, which would impact their productivity, she said.

She said OPA currently has an audit staff of seven and that they do not have the capacity to achieve this new mandate while meeting their other statutory and constitutional mandate.

Kina B. Peter

“This would be detrimental to the success of executing on our current mandate and meeting the expectations outlined on this proposed bill,” Peter said.

Peter said the influx of money from the Coronavirus State Fiscal Recovery Fund to be distributed throughout the government does not increase the amount of money available to OPA for operations.

In the OAG’s response, Tenorio said while the Legislature’s lawmaking authority under the CNMI Constitution is often described as plenary in nature, the authority is not without limits.

“Such authority may be circumscribed by the constitutions of the United States or the Commonwealth or federal statute,” she said.

Tenorio said the federal law provides for the legal structure within which the Coronavirus State Fiscal Recovery Fund funding would be allocated. Among the restrictions is the permissible uses of the Commonwealth’s share of an $450 million that would be allocated by the U.S. Secretary of Treasury within the coming months.

In Finance’s response, Atalig said the CNMI remains under a state of emergency and the Commonwealth must safeguard its ability to respond to developments that may arise in the future for the safety of the community members, particularly those most vulnerable.

The secretary said the resources provided by U.S. Congress aims to support these efforts, and provide essential financial resources to respond effectively to increased requirements of the CNMI government, the COVID-19 Task Force and the islands’ public safety and healthcare system.

He said in the initial calculation of priorities for proposed expenditures, a significant shortfall in government resources was caused by prior response activities to address the crisis.

He said the present crisis caused a large deficit to the government and the appropriated amount provided by U.S. Congress may seem vast but when placed into perspective of the magnitude of costs already incurred to respond to this pandemic, the purpose and availability of this new resource is limited.

He said the resources provided under the American Rescue Plan fill the currently unfunded and large component of the CNMI’s long-term deficit.

Atalig said as Finance secretary he is compelled to inform Manglona of the need to retire the outstanding cumulative deficit that continues to loom over the Commonwealth’s finances.

Atalig said while conversation, oversight, and cooperation in the adequate expenditure of these resources are welcome, the fact of the matter remains that the purpose of the available resources has already been identified for COVID-19 Public Health Emergency, Offset Revenue Loss, Bolster Economic Recovery, and Provide Premium Pay for Essential Workers as outlined in the accompanying provision of the American Rescue Plan.

Additionally, he said, these funds are accompanied by rigorous reporting and oversight mechanisms within the federal government, and are locally monitored by the CNMI Office of the Public Auditor, thus the need to be treated as a grant governed by the accountability procedures already in place under CNMI and federal law.

He said the CNMI is adept at the management and fiscal controls of federal funds and has the statutory obligation to ensure the prudent use of these resources.

Atalig said they look forward to finalizing the spending plan for the CNMI in relation to these funds provided under the American Rescue Plan Act, and anticipate cooperation with the Legislature as they use these resources to establish a firmer financial footing following the devastating natural disasters that have impeded the CNMI’s progress.