OPA cites Guam education agency for yet another waste of federal funds

Auditors flag $14.6M in errant purchase of idle AC units

By Pacific Island Times News Staff

The Guam Department of Education mismanaged contracts for the federally funded procurement of air-conditioning units, resulting in $14.6 million in questioned costs and exposing the agency to potential legal action, according to the Office of Public Accountability.

The procurement of the AC units, which remain stored in a warehouse, was funded with money from the American Rescue Plan Act.

The investigative audit, conducted in collaboration with the department's Internal Audit Office, focused on compliance with applicable laws, regulations, board policies, standard operating procedures, and federal grant agreements related to the invitation for bid for the outright purchase, installation and preventive maintenance of air conditioning units. 

The audit was initiated after a site inspection was conducted for another collaborative audit on textbooks, where auditors discovered a warehouse full of AC units and questioned GDOE personnel about them.

OPA also received hotline tips and citizens’ concerns from stakeholders, including GDOE board members and Senators in the Guam Legislature, about these AC units and sought to learn the reason why they were not installed in the schools.

Key Findings

·  $2.7 million in ARP-funded AC units not timely placed into service: GDOE did not ensure that 286 packaged tonnage units it procured were installed and placed into service during the ARP period of performance.

Although installation was a required component of the contract, the units remain uninstalled and stored at GDOE's Piti Warehouse. As a result, approximately $2.7 million in federally funded equipment did not provide its intended programmatic benefit during the grant period and remains questionable. GDOE is not in compliance with federal regulations governing the use of federally acquired equipment.

· An estimated $9.5 million in additional costs to local funds: IFB 009-2023 was awarded for the purchase, installation, and preventive maintenance of AC units. However, GDOE did not effectively enforce the contractor’s installation obligations after disputes arose over the additional work required to place 286 packaged-tonnage units into service. The contractor subsequently submitted a quotation totaling approximately $9.5 million for additional installation-related work. Because responsibility for completing installation remains unresolved and ARP funding has expired, the government of Guam's local financial resources face potential future costs to place the units into operation.

· Improper modification of firm fixed-price contracts resulted in $1.0 million in Questioned Costs: GDOE increased contract compensation through internal purchase order modifications rather than utilizing contract amendments and change orders required by procurement regulations and the executed agreements. These actions weakened transparency and accountability in contract administration and undermined the cost-control protections inherent in firm-fixed-price contracting.

·  $1.3 million in unauthorized procurement activities and unrecorded Liabilities: GDOE incurred $1.3 million in obligations for AC installation services, materials, and related costs that were not supported by documented procurement authority and were not recorded as liabilities in the Department's financial records, weakening accountability over public funds.

·  GDOE approved contractor payments despite documented installation deficiencies resulting in $ 154,000 in $154,000in Questioned Costs: Quality-control inspections performed by GPA engineering personnel identified numerous installation deficiencies requiring corrective action and included recommendations that a portion of contractor payments be withheld until deficiencies were resolved. Despite these findings, GDOE continued approving contractor payments without documented evidence that identified deficiencies had been corrected and accepted, reducing assurance that public funds were expended only for satisfactory, contract-compliant work.

· Improper asset tracking: GDOE has not established fixed asset records or affixed asset tags to the 286 uninstalled units that remain in storage. This limits GDOE's ability to accurately track equipment and demonstrates weaknesses in internal controls over asset management. These findings demonstrated a failure to effectively administer and enforce the terms of IFB. As a result, GDOE may be exposed to legal liability, financial loss and administrative and statutory violations. Collectively, the audit identified $3,845,760 in questioned costs and approximately $10.8 million in additional financial impacts associated with these deficiencies.

OPA and GDOE IAO recommended immediate corrective action necessary to determine responsibility for completing installation, protect public resources, and ensure that taxpayer-funded investments achieve their intended benefit.