‘CIP funds cannot be used for operational expenses’

The U.S. Department of the Interior’s Office of Insular Affairs said yesterday that capital improvement project funds “cannot be used for operational expenses of the CNMI government,” but it is still reviewing Gov. Benigno R. Fitial’s request to OIA to allow him to “redirect” over $4.35 million in CIP money from the Puerto Rico dump closure project to pay for public school and hospital “utility costs,” “housing allotments for doctors and nurses,” and hospital “payroll allotments.”

But utility, housing allowance, and payroll costs fall under “operational” costs and not a capital improvement costs, Capital Hill sources privy to CIP and federal funds issues said.

Fitial wrote a request letter to Interior Assistant Secretary for Insular Affairs Tony M. Babauta. The date in that letter is Feb. 8, 2012.

A copy of that letter was requested and obtained from the Fitial administration yesterday afternoon.

OIA said it received a letter from Fitial on Wednesday, April 18.

Rebecca Zepeda, policy advisor at OIA, said in response to Saipan Tribune email interview that Fitial’s request “is still under consideration.”

“.However, OIA recognizes that a recipient’s Capital Improvement Project (CIP) priorities may change due to unforeseen circumstances. As a result, from time to time, CIP funds could be requested for redirection from their original purpose to facilitate the efficient and effective use of grant funds,” she said.

When asked whether there will be conditions attached, Zepeda said there is none currently being contemplated as the request is still being considered.

“Additionally, CIP funds cannot be used for operational expenses of the CNMI government,” Zepeda said.

When asked whether OIA has communicated any warning or put the CNMI on notice for not spending CIP money fast enough, Zepeda said “OIA has expressed its concern regarding the CNMI’s unspent balance of CIP funding and continues to work closely with the CNMI to reduce the balance by ensuring that projects are implemented as quickly and efficiently as possible.”

She said additionally, in 2009, OIA revised the CIP competitive allocation criteria to measure the rate at which CIP funds are expended by each recipient government.

“Since the competitive allocation criteria determine the amount of annual CIP funding allocated to the territories, the expenditure rate of CIP funding does impact the amount received by the CNMI annually. However, considerations are made to account for large-scale projects which require multi-year funding,” she added.

Fitial, in his two-page letter to OIA’s Babauta, said the CNMI requests the redirection of prior grant awards “in order to meet an immediate shortfall in revenues that threatens continued operation of the Commonwealth Public School System and the Commonwealth Healthcare Corp.”

“In specific, we are seeking authority for the short-term redirection of funds from the Puerto Rico Dump Closure Project to utility costs (“Redirected Funds”). The Redirected Funds taken from the Puerto Rico Dump Closure Project will be restored by an amended FY 2013 CIP grant application,” Fitial told Babauta.

The total proposed redirection is $4,351,407, for “utility costs.”

These include $87,294 previously given to the Puerto Rico Dump closure project in grant year 2006; $2,990,160 from 2007; and $1,273,953 from 2008.

Fitial said the proposed redirected CIP funds will be used as follows: $2 million for PSS and $2,351,407 to CHC.

He said the over $2.35 million request from CHC consists of the following expenses: $390,000 for housing allotments for doctors and nurses for the period covering December 2011 through February 2012); $570,000 for payroll allotments for all employees for December and January; and $1,391,407 utility delinquency from Oct. 1, 2011 to Jan. 27, 2012.

Fitial asks OIA to provide flexibility to the CNMI in the use of CIP funds “to meet unanticipated costs increases that are directly affecting the essential services of healthcare and education.”

The governor placed CHC under a state of emergency again on April 20 to allow for reprogramming of funds and for CHC to continue to contract with International Consulting Services LLC for medical billing services without going through standard procurement rules-all to help prevent a hospital shutdown.

Delegate Gregorio Kilili Sablan (Ind-MP) earlier said that by end-September, the CNMI will have a total of unspent CIP funds of $54 million.

Zepeda said the figure is currently $52 million.

At $52 million, the CNMI is the territory with the highest amount of unspent CIP funds, Zepeda said.