Full text
OFFICE OF
INSPECTOR GENERAL
DEPARTM ENT OF THE TREASURY
WASHINGTON, D.C. 20220
August 8, 2023
MEMORANDUM FOR JESSICA MILANO, ACTING CHIEF RECOVERY OFFICER,
DEPARTMENT OF THE TREASURY
FROM:
Deborah L. Harker /s/
Assistant Inspector General for Audit
SUBJECT:
Desk Review of the Commonwealth of the Northern
Mariana Islands’ Use of Coronavirus Relief Fund
Proceeds (OIG-CA-23-039)
Please find the attached desk review memorandum1 on the Commonwealth of the
Northern Mariana Islands’ (CNMI) use of Coronavirus Relief Fund (CRF) proceeds.
The CRF is authorized under Title VI of the Social Security Act, as amended by
Title V, Division A of the Coronavirus Aid, Relief, and Economic Security Act
(CARES Act). Under a contract monitored by our office, Castro & Company, LLC
(Castro), a certified independent public accounting firm, performed the desk
review. Castro performed the desk review in accordance with the Council of the
Inspectors General on Integrity and Efficiency Quality Standards for Federal
Offices of Inspector General standards of independence, due professional care,
and quality assurance.
In its desk review, Castro found that CNMI personnel did not complete the
required quarterly Financial Progress Reports (FPR) for Cycles 12 through 3.3 In
addition, Castro personnel reviewed documentation for a non-statistical selection
of 24 transactions reported in the quarterly reports. Castro found that the
expenditures related to Contracts greater than or equal to $50,000, Aggregate
Reporting less than $50,000,4 and Aggregate Payments to Individuals5 did not
comply with the CARES Act and Department of the Treasury’s (Treasury)
1 The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) assigned the Department of
the Treasury Office of Inspector General with responsibility for compliance monitoring and
oversight of the receipt, disbursement, and use of Coronavirus Relief Fund (CRF) payments. The
purpose of the desk review is to perform monitoring procedures of the prime recipient’s receipt,
disbursement, and use of CRF proceeds as reported in the grants portal on a quarterly basis.
2 Calendar quarter ending June 30, 2020.
3 Calendar quarter ending December 31, 2020.
4 Recipients are required to report CRF transactions greater than or equal to $50,000 in detail in the
grants portal. Transactions less than $50,000 can be reported as an aggregate lump-sum amount
by type (contracts, grants, loans, direct payments, and transfers to other government entities).
5 Obligations and expenditures for payments made to individuals, regardless of amount, are
required to be reported in the aggregate in the grants portal to prevent inappropriate disclosure of
personally identifiable information.
Page 2
Guidance, which resulted in total questioned costs of $11,146,813.35 (see attached
schedule of monetary benefits). Additionally, Castro determined that CNMI’s risk
of unallowable use of funds is high.
Castro recommends that Treasury Office of Inspector General (OIG) request
missing documentation from CNMI management and follow-up on necessary
reporting corrections. Further, based on CNMI’s responsiveness to our requests
and CNMI’s ability to provide sufficient documentation, Castro recommends that
Treasury OIG determine if a full scope audit is feasible.
At the time of fieldwork, Castro noted that CNMI had not filed their required Single
Audit reports for Fiscal Years 2020, 2021 or 2022. CNMI’s FY2020 Single Audit
report was published on February 3, 2023. In this Single Audit report, the auditor
was not able to differentiate between the type of funding (Federal Emergency
Management Agency or CRF) that was used for contracts and other payments. We
plan to follow-up on the findings identified by the auditor in the Single Audit
report. Castro and Treasury OIG personnel met with CNMI management to
discuss the questioned costs and reporting issues.
In connection with our contract with Castro, we reviewed Castro’s desk review
memorandum and related documentation and inquired of its representatives. Our
review, as differentiated from an audit performed in accordance with generally
accepted government auditing standards, was not intended to enable us to
express an opinion on the CNMI’s use of the CRF proceeds. Castro is responsible
for the attached desk review memorandum and the conclusions expressed
therein. Our review found no instances in which Castro did not comply in all
material respects with the Council of the Inspectors General on Integrity and
Efficiency’s Quality Standards for Federal Offices of Inspectors General.
We appreciate the courtesies and cooperation provided to Castro and our staff
during the desk review. If you have any questions or require further information,
please contact me at (202) 486-1420, or a member of your staff may contact Lisa
DeAngelis, Deputy Assistant Inspector General for Audit, at (202) 487-8371.
cc:
Michelle. A. Dickerman, Deputy Assistant General Counsel, Department of
the Treasury
Victoria Collin, Chief Compliance & Finance Officer, Office of Recovery
Programs, Department of the Treasury
Christopher Sun, Director of Data and Reporting, Office of Recovery
Programs, Department of the Treasury
Tracy B. Norita, Acting Secretary of Finance, Commonwealth of the
Northern Mariana Islands
Page 3
Margaret Bertha C. Torres, Director of Administrative Services,
Commonwealth of the Northern Mariana Islands
Wayne Ference, Partner, Castro & Company, LLC
Page 4
Attachment
Schedule of Monetary Benefits
According to the Code of Federal Regulations,6 a questioned cost is a cost that is
questioned due to a finding:
(a) which resulted from a violation or possible violation of a statute,
regulation, or the terms and conditions of a Federal award, including for
funds used to match Federal funds;
(b) where the costs, at the time of the review, are not supported by
adequate documentation; or
(c) where the costs incurred appear unreasonable and do not reflect the
actions a prudent person would take in the circumstances.
Questioned costs are to be recorded in the Department of the Treasury’s
(Treasury) Joint Audit Management Enterprise System (JAMES).7 The amount will
also be included in the Office of Inspector General (OIG) Semiannual Report to
Congress. It is Treasury management's responsibility to report to Congress on the
status of the agreed to recommendations with monetary benefits in accordance
with 5 USC Section 405(b) of the Inspector General Act of 1978.
Recommendation
Questioned Costs
Recommendation No. 1
$11,146,813.35
The questioned cost represents amounts provided by Treasury under the
Coronavirus Relief Fund. As discussed in the attached desk review, $11,146,813.35
is the CNMI’s expenditures reported in the grant-reporting portal that lacked
supporting documentation.
6 2 CFR § 200.84 – Questioned Cost
7 JAMES is Treasury’s audit recommendation tracking system.
1635 King Street
Alexandria, VA 22314
Phone: 703.229.4440
Fax: 703.859.7603
www.castroco.com
Desk Review of the Commonwealth of the Northern Mariana Islands
1
August 8, 2023
OIG-CA-23-039
MEMORANDUM FOR DEBORAH L. HARKER,
ASSISTANT INSPECTOR GENERAL FOR AUDIT
FROM:
Wayne Ference
Partner, Castro & Company, LLC
SUBJECT:
Desk Review of the Commonwealth of the Northern Mariana
Islands
On June 16, 2022, we initiated a desk review of the Commonwealth of the
Northern Mariana Islands’ (CNMI) use of the Coronavirus Relief Funds (CRF)
authorized under Title VI of the Social Security Act, as amended by Title V,
Division A of the Coronavirus Aid, Relief, and Economic Security Act (CARES
Act).1 The objective of our desk review was to evaluate CNMI’s documentation
supporting its uses of CRF proceeds as reported in the GrantSolutions2 portal and
to assess the risk of unallowable use of funds. The scope of our desk review was
limited to obligation and expenditure data for the period of March 1, 2020 through
March 31, 2022 as reported in Cycles 13 through 84 in the GrantSolutions portal.
As part of our desk review, we performed the following:
1) reviewed CNMI’s quarterly Financial Progress Reports (FPRs) submitted in
the GrantSolutions portal through December 31, 2021;5
1 P.L. 116-136 (March 27, 2020).
2 GrantSolutions, a grant and program management Federal shared service provider under the
U.S. Department of Health and Human Services, developed a customized and user-friendly
reporting solution to capture the use of CRF payments from recipients.
3 Calendar quarter ending June 30, 2020.
4 Calendar quarter ending March 31, 2022.
5 The scope of our desk review included the period March 1, 2020 to March 31, 2022 (Cycles 1
through 8); however, CNMI submitted its final GrantSolutions closeout submission in Cycle 7
(Calendar quarter ending December 31, 2021).
Desk Review of the Commonwealth of the Northern Mariana Islands
2
2) reviewed the Department of the Treasury’s (Treasury) Coronavirus Relief
Fund Guidance as published in the Federal Register on January 15, 2021;6
3) reviewed Treasury’s Office of Inspector General (OIG) Coronavirus Relief
Fund Frequently Asked Questions Related to Reporting and
Recordkeeping;7
4) reviewed Treasury OIG’s monitoring checklists8 of CNMI’s quarterly FPR
submissions for reporting deficiencies;
5) reviewed other audit reports issued, such as Single Audit reports, and
those issued by the Government Accountability Office and other applicable
Federal agency OIGs for internal control or other deficiencies that may
pose risk or impact CNMI’s uses of CRF proceeds;9
6) reviewed Treasury OIG Office of Investigations (OI), the Council of the
Inspectors General on Integrity and Efficiency Pandemic Response
Accountability Committee (PRAC),10 and Treasury OIG Office of Counsel
input on issues that may pose risk or impact CNMI’s uses of CRF proceeds;
7) interviewed key personnel responsible for preparing and certifying CNMI’s
GrantSolutions portal quarterly FPR submissions, as well as officials
responsible for obligating and expending CRF proceeds;
8) made a non-statistical selection of Contracts greater than or equal to
$50,000, Aggregate Reporting less than $50,000,11 and Aggregate Payments
to Individuals12 data identified through GrantSolutions reporting; and
6 Coronavirus Relief Fund Guidance as published in the Federal Register (January 15, 2021)
https://home.treasury.gov/system/files/136/CRF-Guidance-Federal-Register_2021-00827.pdf
7 Department of the Treasury Office of Inspector General Coronavirus Relief Fund Frequently Asked
Questions Related to Reporting and Recordkeeping OIG-20-028R; March 2, 2021.
8 The checklists are used by Treasury OIG personnel to monitor the progress of prime recipient
reporting in the GrantSolutions portal. GrantSolutions quarterly submission reviews are designed
to identify material omissions and significant errors, and where necessary, include procedures for
notifying prime recipients of misreported data for timely correction. Treasury OIG follows the CRF
Prime Recipient Quarterly GrantSolutions Submissions Monitoring and Review Procedures Guide,
OIG-CA-20-029R to monitor the prime recipients quarterly.
9 At the time of fieldwork, CNMI had not filed their required single audit reports for Fiscal Years
2020, 2021 or 2022.
10 Section 15010 of P.L. 116-136 established the Pandemic Response Accountability Committee
within the Council of the Inspectors General on Integrity and Efficiency to promote transparency
and conduct and support oversight of covered funds (see Footnote 20 for a definition of covered
funds) and the coronavirus response to (1) prevent and detect fraud, waste, abuse, and
mismanagement; and (2) mitigate major risks that cut across program and agency boundaries.
11 Recipients are required to report CRF transactions greater than or equal to $50,000 in detail in
the GrantSolutions portal. Transactions less than $50,000 can be reported as an aggregate lump-
sum amount by type (contracts, grants, loans, direct payments, and transfers to other government
entities).
12 Obligations and expenditures for payments made to individuals, regardless of amount, are
required to be reported in the aggregate in the GrantSolutions portal to prevent inappropriate
disclosure of personally identifiable information.
Desk Review of the Commonwealth of the Northern Mariana Islands
3
9) evaluated documentation and records used to support CNMI’s quarterly
FPRs.
Based on our desk review procedures, we determined that the expenditures
related to Contracts greater than or equal to $50,000, Aggregate Reporting less
than $50,000, and Aggregate Payments to Individuals did not comply with the
CARES Act and Treasury’s Guidance, which resulted in total questioned costs of
$11,146,813.35. Additionally, we determined that CNMI’s risk of unallowable use
of funds is high. Castro recommends that Treasury OIG request missing
documentation from CNMI management and follow-up on necessary reporting
corrections. Further, based on CNMI’s responsiveness to Treasury OIG’s requests
and its ability to provide sufficient documentation, we recommend Treasury OIG
determine if a full scope audit is feasible.
Non-Statistical Transaction Selection Methodology
Treasury issued a CRF payment to CNMI of $36,284,217.70. As of Cycle 7,13 CNMI’s
cumulative obligations and expenditures were both $36,284,217.70. CNMI’s
cumulative obligations and expenditures by payment type, as reported in
GrantSolutions through Cycle 7,14 is summarized below.
Payment Type
Cumulative
Obligated Amount
Cumulative
Expenditure Amount
Contracts >= $50,000
$ 32,046,253.45
$ 32,046,253.45
Loans >= $50,000
$ -
$ -
Grants >= $50,000
$ -
$ -
Transfers >= $50,000
$ -
$ -
Direct Payments >= $50,000
$ -
$ -
Aggregate Reporting < $50,000
$ 1,353,926.31
$ 1,353,926.31
Aggregate Payments to Individuals (in any
amount)
$ 2,884,037.94
$ 2,884,037.94
Totals
$ 36,284,217.70
$ 36,284,217.70
Castro made a non-statistical selection of Contracts greater than or equal to
$50,000, Aggregate Reporting less than $50,000, and Aggregate Payments to
Individuals. Selections were made using auditor judgment based on information
and risks identified in reviewing audit reports, the GrantSolutions portal reporting
anomalies15 identified by the Treasury OIG CRF monitoring team, and review of
CNMI’s FPR submissions. Castro noted CNMI did not obligate or expend CRF
13 Calendar quarter ending December 31, 2021.
14 Calendar quarter ending December 31, 2021.
15 Treasury OIG has a pre-defined list of risk indicators that are triggered based on data submitted
by recipients in the FPR submissions that meet certain criteria. Castro reviewed these results
provided by Treasury OIG for CNMI.
Desk Review of the Commonwealth of the Northern Mariana Islands
4
proceeds for Loans greater than or equal to $50,000, Grants greater than or equal
to $50,000, Transfers16 greater than or equal to $50,000, or Direct Payments
greater than or equal to $50,000; therefore, we did not make a selection of
transactions from these categories.
The number of transactions (24) we selected to test were based on CNMI’s total
CRF award amount and our overall risk assessment of CNMI. To allocate the
number of transactions (24) by payment type (Contracts greater than or equal to
$50,000, Aggregate Reporting less than $50,000, and Aggregate Payments to
Individuals), we compared the obligation type dollar amounts as a percentage of
cumulative obligations for Cycle 7.17 Additionally, Treasury OIG provided
information on anomalies identified for CNMI. Castro reviewed the summarized
information on the anomalies for CNMI; however, the review did not result in any
additional selections as there were no outliers or potential duplicate payment
transactions identified.
Background
The CARES Act appropriated $150 billion to establish the CRF. Under the CRF,
Treasury made payments for specified uses to States and certain local
governments; the District of Columbia and U.S. Territories, including the
Commonwealth of Puerto Rico, the United States Virgin Islands, Guam, American
Samoa, and CNMI; and Tribal governments. Treasury issued a CRF payment to
CNMI for $36,284,217.70. The CARES Act stipulates that a recipient may only use
the funds to cover costs that—
(1) are necessary expenditures incurred due to the public health emergency
with respect to the coronavirus disease 2019 (COVID-19);
(2) were not accounted for in the budget most recently approved as of
March 27, 2020; and
(3) were incurred between March 1, 2020 and December 31, 2021.18
16 A transfer to another government entity is a disbursement or payment to a government entity
that is legally distinct from the prime recipient.
17 Calendar quarter ending December 31, 2021.
18 P.L. 116-260 (December 27, 2020). The period of performance end date of the CRF was extended
through December 31, 2021 by the Consolidated Appropriations Act, 2021. The period of
performance end date for tribal entities was further extended to December 31, 2022 by the State,
Local, Tribal, and Territorial Fiscal Recovery, Infrastructure, and Disaster Relief Flexibility Act,
Division LL of the Consolidated Appropriations Act, 2023, P.L. 117-328, December 29, 2022, 136
Stat. 4459.
5
Desk Review of the Commonwealth of the Northern Mariana Islands
Section 15011 of the CARES Act, requires each covered recipient19 to submit to
Treasury and the PRAC, no later than 10 days after the end of each calendar
quarter, a report that contains (1) the total amount of large covered funds20,21
received from Treasury; (2) the amount of large covered funds received that were
expended or obligated for each project or activity; (3) a detailed list of all projects
or activities for which large covered funds were expended or obligated; and (4)
detailed information on any level of sub-contracts or sub-grants awarded by the
covered recipient or its sub-recipients.
The CARES Act assigned Treasury OIG the responsibility for compliance
monitoring and oversight of the receipt, disbursement, and use of CRF proceeds.
Treasury OIG also has authority to recoup funds in the event that it is determined
a recipient failed to comply with requirements of subsection 601(d) of the Social
Security Act, as amended, (42 U.S.C. 801(d)).
Desk Review Results
Based on Castro’s review of the Quarterly FPR submissions through
December 31, 2021, we determined CNMI did not comply with the reporting
timeline as required under Department of the Treasury’s Guidance OIG-CA-20-021,
Coronavirus Relief fund Reporting and Record Retention Requirements. CNMI
completed FPRs for Cycles 422 through 7;23 however, they did not complete FPRs
for Cycles 124 through 3.25 As all CRF proceeds were expended as of Cycle 7, there
were no additional FPRs or checklists available for Cycle 8.26
We found that Contracts greater than or equal to $50,000, Aggregate
Reporting less than $50,000, and Aggregate Payments to Individuals did not
comply with the CARES Act and Treasury’s Guidance. The transactions selected
for testing were not selected statistically, and therefore results cannot be
extrapolated to the total universe of transactions.
19 Section 15011 of P.L. 116-136 defines a covered recipient as any entity that receives large
covered funds and includes any State, the District of Columbia, and any territory or possession of
the United States.
20 Section 15010 of P.L. 116-136 defines covered funds as any funds, including loans, that are made
available in any form to any non-Federal entity, not including an individual, under Public Laws 116-
123, 127, and 136, as well as any other law which primarily makes appropriations for Coronavirus
response and related activities.
21 Section 15011 of P.L. 116-136 defines large covered funds as covered funds that amount to more
than $150,000.
22 Calendar quarter ending March 31, 2021.
23 Calendar quarter ending December 31, 2021.
24 Calendar quarter ending June 30, 2020.
25 Calendar quarter ending December 31, 2020.
26 Calendar quarter ending March 31, 2022.
Desk Review of the Commonwealth of the Northern Mariana Islands
6
The following table includes the cumulative expenditures and the expenditure
amount tested. Additionally, this table includes a summary of Castro’s testing
results. Within the table below, we have included a summary of unsupported and
ineligible expenditures identified as questioned costs. In the far-right column, we
have identified the expenditures that Castro tested without exceptions noted. See
the Desk Review Results section below this table for a detailed discussion of
questioned costs and other issues identified.
Summary of Expenditure Testing and Recommended Results – As of Cycle 727
Payment Type
Cumulative
Expenditure
Population
Amount
Cumulative
Expenditure
Tested Amount
Unsupported
Exception
Ineligible
Exception
Castro Reviewed
Value Without
Exception
(per Support)
Contracts >=
$50,000
$ 32,046,253.45
$ 11,093,139.95
$ 11,093,139.95
$ -
$ -
Grants >= $50,000
$ -
$ -
$ -
$ -
$ -
Loans >= $50,000
$ -
$ -
$ -
$ -
$ -
Transfers to Other
Government
Agencies >=
$50,000
$ -
$ -
$ -
$ -
$ -
Direct Payments
>= $50,000
$ -
$ -
$ -
$ -
$ -
Aggregate
Reporting <
$50,000
$ 1,353,926.31
$ 45,956.40
$ 45,956.40
$ -
$ -
Aggregate
Payments to
Individuals (in any
amount)
$ 2,884,037.94
$ 20,016.89
$ 7,717.00
$ -
$ 12,299.89
Totals
$ 36,284,217.70
$ 11,159,113.24
$ 11,146,813.35
$ -
$ 12,299.89
Contracts Greater Than or Equal to $50,000
We determined CNMI’s Contracts greater than or equal to $50,000 did not comply
with the CARES Act and Treasury’s Guidance. Of the 18 transactions tested, we
identified exceptions in all 18 transactions, resulting in unsupported questioned
costs of $11,093,139.95.
For all 18 contract transactions selected for testing, CNMI management was
unable to demonstrate what federal grant funding was used to pay for the
expenses incurred and reported. Specifically, CNMI’s contracts included language
stating that only Federal Emergency Management Agency (FEMA) funds were to
27 Calendar quarter ending December 31, 2021.
Desk Review of the Commonwealth of the Northern Mariana Islands
7
be used to cover the expenditures. In addition, the supporting documentation,
including the general ledger, did not include a specific CRF or FEMA funding code
or specific account number to indicate whether CRF or FEMA grant funds were
used for these expenditures. Although the contracts stated FEMA funding was
required and the general ledger did not identify the type of funding, CNMI
management included these contract expenditures in the CRF GrantSolutions FPR
submissions. CNMI management did not provide us with sufficient documentation
to determine the eligibility of these expenditures.
Aggregate Reporting Less Than $50,000
We determined CNMI Aggregate Reporting less than $50,000 did not comply with
the CARES Act and Treasury’s Guidance. We tested one transaction and noted
exceptions resulting in unsupported questioned costs of $45,956.40.
CNMI management was unable to demonstrate what federal grant funding was
used to pay for the expenses incurred and reported. Specifically, CNMI’s contracts
included language stating that only FEMA funds were to be used to cover the
expenditures. In addition, the supporting documentation, including the general
ledger, did not include a specific CRF or FEMA funding code or specific account
number to indicate whether CRF or FEMA grant funds were used for these
expenditures. Although the contracts stated FEMA funding was required and the
general ledger did not identify the type of funding, CNMI management included
these Aggregate Reporting expenditures in the CRF GrantSolutions FPR
submissions. CNMI management did not provide us with sufficient documentation
to determine the eligibility of these expenditures.
Aggregate Payments to Individuals
We determined CNMI’s Aggregate Payments to Individuals did not comply with
the CARES Act and Treasury’s Guidance. We identified exceptions in two of the
five Aggregate Payments to Individuals expenditure transactions tested, resulting
in unsupported questioned costs of $7,717.00.
CNMI management did not provide sufficient supporting documentation during
our testing procedures. CNMI management did not provide the requested labor
distribution journals, payroll registers, timesheets, or pay stubs to support the
GrantSolutions expenditures.
Desk Review of the Commonwealth of the Northern Mariana Islands
8
Conclusion
Based on our desk review procedures, we determined that the expenditures
related to Contracts greater than or equal to $50,000, Aggregate Reporting less
than $50,000, and Aggregate Payments to Individuals did not comply with the
CARES Act and Treasury’s Guidance, which resulted in total questioned costs of
$11,146,813.35. Additionally, we determined that CNMI’s risk of unallowable use
of funds is high.
Castro recommends that Treasury OIG request missing documentation from CNMI
management and follow-up on necessary reporting corrections. Further, based on
CNMI’s responsiveness to Treasury OIG’s requests and its ability to provide
sufficient documentation, we recommend Treasury OIG determine if a full scope
audit is feasible.
*****
All work completed with this letter complies with the Council of the Inspectors
General on Integrity and Efficiency’s Quality Standards for Federal Offices of
Inspectors General, which require that the work adheres to the professional
standards of independence, due professional care, and quality assurance to
ensure the accuracy of the information presented.28 We appreciate the courtesies
and cooperation provided to our staff during the desk review.
Sincerely,
Wayne Ference
Partner, Castro & Company, LLC
28 https://www.ignet.gov/sites/default/files/files/Silver%20Book%20Revision%20-%208-20-12r.pdf