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Feds red-flag $11.1 million in CNMI's disputable spending of Covid relief fund

By Pacific Island Times News Staff

The U.S. Office of Inspector General has found approximately $11 million in questioned costs on the CNMI’s use of Coronavirus Relief Funds, commonly known as “CARES Act funds.”

The CNMI received a total of $36.3 million from the U.S. Treasury to assist the commonwealth in its response to and recovery from the Covid-19 pandemic.

The questioned costs were attributed to apparent violations of the terms and conditions of the federal award, as well as expenditures that were not supported by adequate documentation, and those that "appear unreasonable and do not reflect the actions a prudent person would take in the circumstances."

The questioned costs were among several other adverse findings identified by the audit, which reviewed and assessed obligation and expenditure data for the period of March 1, 2020 through March 31, 2022.

“We have publicly discussed my predecessor’s irresponsible spending and the misallocation of funds, so the findings from this audit should perhaps come as no surprise,” said CNMI Gov. Arnold Palacios.


“Unfortunately, the extraordinarily high amount of questioned costs that the Inspector General has found in the previous administration’s use of CARES Act funds means that we will have to dedicate more of our already-limited resources to fully address these issues and implement corrective action.”

The desk audit, transmitted to the CNMI Department of Finance on Aug. 9, was performed by Castro & Company, LLC, a certified independent public accounting firm located in the Washington, DC Metro area.

Based on CARES Act, federal relief funds are allocated for "necessary expenditures" incurred due to the Covid-related public health emergency; expenditures that were not accounted for in the budget most recently approved as of March 27, 2020; and expenditures incurred between March 1, 2020 and Dec. 31, 2021.


The audit found firm found the following:

  • The CNMI did not complete the required quarterly Financial Progress Reports for Cycles 1 through 3 (March 1, 2020 – Dec. 31, 2020).

  • Contracts greater than $50,000 did not comply with CARES Act and Treasury Guidance.

  • Contracts, payments to individuals, and aggregate reporting less than $50,000, did not comply with CARES Act and Treasury Guidance.

  • CNMI’s risk of unallowable use of funds is high.

“We will continue to refer findings to the Office of the Attorney General Office and hold individuals accountable for any activities deemed illegal or in direct violation of the CARES Act funds guidelines and requirements,” Palacios added.

“The Department of Finance takes these desk audit findings seriously and will continue to work with the Inspector General to provide missing documentation and make necessary reporting corrections,” said Tracy Norita, secretary of finance.

“Additionally, we support the Inspector General’s recommendation for a full-scope audit. This will allow our department and other enforcement agencies to hold government officials accountable for any illegal or unauthorized expenditures of CARES Act Funds.”

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