NMC gets good audit report but…

The Northern Marianas College has received a good audit report from independent auditor Burger Comer Magliari, which audited NMC’s financial statements for the years ended Sept. 30, 2022 and 2021, but did find three significant deficiencies relating to payroll.

Burger Comer Magliari, which was hired by the Office of the Public Auditor to do the audit on NMC, informed the college’s board of regents, about their findings last June 27. OPA released the report to the media yesterday.

The auditor said it is their opinion that NMC’s financial statements present fairly, in all material respects, the respective financial position of the college as of Sept. 30, 2022 and 2021.

The auditor said NMC’s changes in financial position and cash flows for the years ended in accordance with generally accepted U.S. accounting principles.

The auditor said it is their opinion that the schedule of expenditures of federal awards is fairly stated, in all material respects, in relation to the basic financial statements as a whole.

NMC’s net position was $39,597,882 and $34,689,505 as of Sept.30, 2022 and 2021, respectively, and experienced an increase of $4,908,377 in fiscal year 2022.

The college’s total assets increased $6,469,552 in fiscal year 2022. Total liabilities and deferred inflows of resources during fiscal year 2022 increased to $1,561,176.

Burger said they did not identify any deficiencies in internal control that they consider to be material weaknesses.

They did identify, however, certain deficiencies in internal control that they consider to be significant deficiencies.

But Burger said the results of their tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

The auditor said it is their opinion that NMC complied, in all material respects, with the types of compliance requirements that could have a direct and material effect on each of its major federal programs for the year ended Sept. 30, 2022.

Burger said they believe that the audit evidence they have obtained is sufficient and appropriate to provide a basis for their opinion on compliance for each major federal programs.

On financial statements and federal awards, the auditor found three significant deficiencies.

On the first and second items, the criteria are that NMC’s internal control policies and procedures require that personnel action forms must be reviewed and approved prior to the renewal of employment.

With respect to the first item, the auditor said for one of 115 items tested, or 1% of the sample, they noted that the personnel action form was signed after the effective date of the renewal of the employment.

Regarding the second item, the auditor said for three of 115 items tested, or 3% of the samples selected for testing, they noted that the renewed employment contract was signed after the effective date of the employment.

The auditor found that NMC did not comply with their payroll internal control requirements in which personnel action forms should be signed prior to renewal of employment.

With this situation, the auditor said, the employee is working without properly documented approval from authorized personnel.

The auditor said this happened as the NMC staff who are responsible for monitoring personnel renewals did not review these personnel files in a timely manner.

The auditor recommended that human resources personnel adhere to the internal control policies and procedures relevant to renewal of employment.

The auditor said ample time to process employment documents should be available to ensure that the required approvals are obtained prior to renewal of employment.

Adding another recommendation with respect to item number 2, the auditor said NMC should maintain and review a schedule showing the expiration dates of all existing employment contracts to ensure that renewals are processed before the expiration dates.

Item 3 was with respect to U.S. Department of Agriculture Cooperative Extension Services, in which the auditor found significant deficiency and repeat finding from a prior audit.

The criteria are that the Code of Federal Regulations on cost principles, allowable costs must be adequately documented and that charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed.

These records must be supported by a system of internal controls that provides reasonable assurance that the charges are accurate, allowable, and properly allocated.

Further, according to the Code of Federal Regulations, records such as employment contracts or agreements must be retained by employers for at least three years from their last effective date.

The auditor noted that for three of 115 items tested, or 3% of the sample, the contract form was signed after the effective date of the renewal of employment.

The auditor said NMC did not comply with federal regulations requirements in which contract forms should be signed prior to a renewal of employment.

With this situation, the auditor said, the employee is working without properly documented approved from authorized personnel.

For the third item, the auditor made the same first two recommendations he gave to the first two items.

As for the corrective action plan, with respect to item 1, NMC chief financial officer David Attao said the college partially agrees with the auditor’s finding as the situation is unique to disputes that arise between the employee and supervisor during the employee personnel action renewal process.

Attao said personnel actions are implied as renewed per employee contract terms.

Pertaining to item 2, Attao said NMC partially agrees with the auditor’s finding as the three contracts were implied as renewed per employee contract terms.

As to item 3, the CFO said the college partially agrees with the auditor as it is related to finding in item 2.

He said the three contracts were implied as renewed per employee contract terms.

In order to resolve the three findings, Attao said the college will update and revise its rules on employee evaluations and employee grievances to provide the supervisor and employee a 90-day grace period to conduct the evaluation, to add and engage a grievance process as needed, and to provide time for any dispute resolutions or negotiations.

After such actions take place, Attao said, a final decision must be reached at least 30 days prior to the contract’s expiration date in the event of a non-renewal or renewal of personnel action.