CNMI Couldn't Account for $163 Million in One Year of Aid

Every government that spends federal grant money above a threshold submits to a Single Audit each year -- an independent check, required by federal law, of whether that money was spent under the rules attached to it.▸ For the fiscal year ended September 30, 2022, CNMI's Single Audit -- posted by the Commonwealth's own Office of the Public Auditor⧉ -- found $163,084,625 in questioned federal costs: spending the auditors could not confirm complied with federal grant rules, spread across 38 findings in 13 major programs.

The audit did not just flag a slice of CNMI's books.▸ It disclaimed an opinion⧉ outright -- refused to render any opinion at all, the most severe outcome an audit can produce -- on the Commonwealth's own financial statements and on five of its major federal programs, and issued an adverse opinion⧉ -- an active finding of noncompliance, not just missing paperwork -- on the largest COVID-relief program it ran that year.

The single largest finding in the audit concerns the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF), CNMI's share of the American Rescue Plan's flagship relief program.▸ Most of that money doesn't stay with the central government -- CNMI passes it on to "subrecipients," the villages, agencies, and outside organizations it relies on to actually deliver a program, while remaining responsible for checking that each one uses the money properly. Auditors tested 17 subrecipients that together received $61,003,095⧉ in CSLFRF pass-through money in FY2022 -- and questioned all of it. Not most of it: all of it. For every one of the 17 subrecipients tested, CNMI could not produce documentation that it had performed a risk assessment or verified the recipient wasn't suspended or debarred from receiving federal funds before sending the money -- the baseline check federal rules require before a government hands public money to an outside organization.

That accounts for $60,403,095 of the total.▸ A second, separate test of the monitoring paperwork behind $58.5 million in disbursements turned up documentation gaps on the remaining $600,000 -- bringing the finding to the full $61,003,095, the entire population tested, flagged in one way or another.

Two more findings hit the same CSLFRF program directly.▸ Auditors questioned $33,815,438 in nonpayroll and payroll costs⧉ -- $31.8 million of it transactions backed only by internal journal entries and manual spreadsheets rather than invoices or contracts, including a single $24,020,500 entry with no supporting documentation at all. On procurement, 36 of 60 transactions tested -- 60% -- had no purchase order, requisition, or contract on file⧉, and CNMI could not even hand auditors a complete list of what it had bought with the money that year; that finding alone questioned $12,244,415. Add the three CSLFRF findings together and CNMI cannot account for $107,062,948 of the $243,388,403⧉ it reported spending under the program in FY2022 -- about 44 cents of every dollar.

Outside COVID relief, the next-largest gaps sit in health coverage for the poor.▸ Medicaid drew a disclaimer of opinion⧉ built on $31.5 million in questioned costs across two findings -- $27.8 million in unsupported allowable-cost documentation and $3.6 million where provider-eligibility screening couldn't be verified -- and CHIP added another $7.9 million on the same provider-screening gap. On the Homeowner Assistance Fund, CNMI questioned the entire $4,157,924 its own subrecipient spent in FY2022, because the paperwork it issued that subrecipient was a memorandum of agreement missing most of the elements a federal subaward agreement is legally required to carry, and CNMI could produce no evidence it had monitored the money afterward. A fifth cluster of findings, covering the territorial development grants that fund CNMI's Capital Improvement Program, questioned $4,125,886 more across cost principles, cash management, timing, procurement, and subrecipient monitoring.

Nearly every major finding in this audit carries the same footnote: "Identification as a Repeat Finding."⧉ The $61 million subrecipient-monitoring gap repeats a finding from the FY2021 audit.▸ The $33.8 million allowable-costs finding repeats one from FY2020. The $12.2 million procurement finding repeats one from FY2021. On the procurement finding, CNMI's own Procurement Services Division disagreed that costs should be questioned at all, telling auditors the missing records came down to "internal scheduling constraints and the compressed timeline required to complete the FY2022 audit" and that the office "maintains all relevant supporting documentation and is prepared to provide it upon request." Nearly identical language recurs from CNMI's Office of Grant Management on other findings in this audit.

The auditor's written response to that objection is blunt: "CNMI states disagreement; however, CNMI also acknowledges that documentation supporting program costs were not provided."⧉ CNMI's Department of Finance told auditors it had finally adopted a written subrecipient-monitoring policy in August 2025 -- three years after the fiscal year this audit covers, and roughly the same month the underlying FY2022 report itself was finally signed.