Audit 317760

Finding No. 2021-012 Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award No.: 7NM4004NM Area: Allowable Costs/Cost Principles Questioned Costs: $1,620 Criteria: In accordance with 2 CFR Part 200, Subpart E, cost must be necessary and reasonable for the performance of the federal award and be allocable thereto. Further costs must conform to any limitations or exclusions and be adequately documented. Condition: Of twenty-nine payroll items tested, aggregating $46,339 of a total population of $1.7M in total Program payroll expenditures, the following were noted: 1. For one (or 3%), no Notice of Personal Action (NOPA) form was provided to substantiate payroll costs. 2. For three (or 10%), pay rates per approved NOPA forms do not agree to pay rates on the payroll registers for the following employees: 3. For three (or 10%), total hours worked per approved timesheets do not agree to total hours per payroll registers. In addition, the pay rate of $24.55 per the approved NOPA for Employee Number 246315 differs from the pay rate of $23.38 per the payroll register. Finding No. 2021-012, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award No.: 7NM4004NM Area: Allowable Costs/Cost Principles Questioned Costs: $1,620 Cause: CNMI did not effectively enforce recordkeeping controls and perform monitoring controls over compliance with applicable allowable costs/cost principles requirements. Effect: CNMI is in noncompliance with applicable allowable costs/cost principles requirements and questioned costs of $1,620 result as the projected questioned costs exceed the $25,000 threshold. Recommendation: CNMI management should establish a recordkeeping system whereby underlying support is filed accordingly to substantiate costs and management should also strengthen monitoring controls over transactions to substantiate program costs in accordance with applicable allowable costs/cost principles. Views of Responsible Officials: Condition 1 – CNMI NAP disagrees with the finding. The following employee is not a NAP employee. When work is performed for NAP, the hours spent will be compensated but in a Journal entry procedure. This is a fund transfer from one account to another under the MOA. Conditions 2 and 3 – CNMI NAP disagrees with the findings. The provided NOPAs and other payroll documents indicated the correct pay rate specified to the employees. Auditor Response: Condition 1 – Costs charged to the program should be adequately documented. Finding No. 2021-012, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award No.: 7NM4004NM Area: Allowable Costs/Cost Principles Questioned Costs: $1,620 Auditor Response, continued: Condition 2 – Pay rates on the approved NOPAs do not agree with the pay rates on the payroll registers. Condition 3 – Hours worked per approved timesheets do not agree with the total hours on the payroll registers.

Finding No. 2021-013 Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award No.: 7NM4004NM Area: Procurement and Suspension and Debarment Questioned Costs: $97,850 Criteria: Non-federal entities other than states, including those operating federal programs as subrecipients of states, must follow the procurement standards set out at 2 CFR sections 200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR Part 200. CNMI’s procurement regulations state the following: • All government procurement shall be awarded by competitive sealed bidding except under certain circumstances permitting other than full and open competition. • Bidding is not required but is encouraged for procurement of $2,500 and under $10,000. The individual with the expenditure authority must obtain price quotations from at least three vendors and should base the selection on competitive price and quality for procurement valued at $2,500 to $10,000. Any price quotations must be written, documented, and submitted to the Procurement and Supply (P&S) Director for approval. • For purchases that exceed $10,000 but which are less than or equal to $50,000, a minimum of three vendors shall be solicited to submit written or electronic quotations. If there are fewer than three vendors, the expenditure authority shall certify, in writing, to the P&S Director that fewer than three vendors responded and shall provide written proof of the request. • Based on Procurement Regulation 70-30.3-115(a), Contract Review, Processing, and Oversight, all contracts must first be prepared by the official with expenditure authority who shall certify that he has complied with the procurement regulations codified in this subchapter, and that the proposed contract is for a public purpose that does not constitute a waste or abuse of public funds. All contract documents are to be complete, including attachments and exhibits, if they are incorporated into the contract by reference. Condition: Of fifty nonpayroll expenditures tested, aggregating $401,852 of a total population of $756,436 in nonpayroll expenditures subject to procurement, the following were noted: 1. For one (or 2%), the bid summary was not on file (document no. 1624129, dated 02/24/21, amounting to $35,990). Therefore, the CNMI was not able to substantiate the number of bids received and whether the procurement process for competitive sealed bids were properly followed, for which the amount is questioned. Finding No. 2021-013, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award No.: 7NM4004NM Area: Procurement and Suspension and Debarment Questioned Costs: $97,850 Condition, continued: 2. For one (or 2%), the Bid Opening Summary report was not provided (document no. 1562306, dated 10/09/2020, amounting to $33,060) and no other documentations on file to substantiate that the selection was based on the lowest bidder. 3. For two (or 4%), expenditures were procured through sole source procurement methods. The written justification states that the CNMI NAP obtained quotations from two vendors. However, no documentation was provided to demonstrate efforts were made to contact and solicit from other vendors. Cause: CNMI did not enforce compliance with established regulations over procurement. Effect: CNMI is in noncompliance with applicable procurement regulations and questioned costs of $97,850 result. Identification as a Repeat Finding: Finding No. 2020-026   Finding No. 2021-013, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award No.: 7NM4004NM Area: Procurement and Suspension and Debarment Questioned Costs: $97,850 Recommendation: Responsible personnel should monitor and enforce compliance with applicable procurement requirements, including the review of procurement files for completeness as to written rationale for deviations from applicable procurement requirements. Further, responsible personnel should establish a recordkeeping system whereby underlying support is filed accordingly to substantiate compliance. Views of responsible officials: Condition 1 – The CNMI-NAP disagrees with the finding. This transaction was supposed to be processed in FY 2020 but because of the delay and completion date was done in FY 2021, a Change Order Contract No. 01 was processed, and the funds was carried over to FY 2021. The bid summary was not necessary because a change order was processed changing the account from A0551E to A1551L per NAP email dated 1/11/21 (Pending Change Order Contract) - CNC 01/13/21 Change Order #1 to charge $35,989.60 (Contract #707410-OC) to A1551L.64560 to extend the delivery period from thirty (30) days to ninety (90) days. Condition 2 – CNMI NAP disagrees with the finding. The Nutrition Assistance Program did follow the proper procurement method by processing Invitation to Bid and obtained the lowest bidder and processed the contract with a notice to proceed. Condition 3 – CNMI NAP disagrees with this finding. The CNMI NAP tried to obtain quotations to purchase perforator machines on island and there was none. However, the selected vendor submitted their price quotation stating that they are able to obtain the perforator machines from off-island and CNMI NAP can purchase from them. Finding No. 2021-013, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award No.: 7NM4004NM Area: Procurement and Suspension and Debarment Questioned Costs: $97,850 Auditor Response: Condition 1 – Although there was a change order from the original contract, all procurement records shall be retained for a period of five years after the completion of construction or full delivery of goods or services under a contract as per Section 70-30.3-285 of the Procurement Regulations. Condition 2 – Documentation substantiating that the selection was based on the lowest bidder was not provided. Condition 3 – Documentation demonstrating efforts were made to contact and solicit from other vendors was not provided.

Finding No. 2021-014 Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award Nos.: 7NM4004NM and 7NM400NM7 Area: Special Tests and Provisions – NAP Coupon Reconciliation Questioned Costs: $3,375,452 AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – EBT Reconciliation Questioned Costs: $442,933 Criteria: 1. Section 1.22 and 1.24 of the CNMI Nutrition Assistance Program’s (NAP) Memorandum of Understanding with the United States Department of Agriculture - Food and Nutrition Service specifies the following: • CNMI will perform a reconciliation of all transacted Authorization-to-Participate (ATP) at the end of each month. • CNMI shall perform reconciliation of all transacted NAP coupons and shall be responsible for the security, accountability and control prior to and during the issuance thereof. CNMI shall develop monthly reconciliation reports of transacted and unused ATP checks and NAP coupons each month. 2. In accordance with the July 2021 OMB Compliance Supplement for SNAP Cluster, States must have systems in place to reconcile all of the funds entering into, exiting from, and remaining in the system each day with the state’s benefit account with Treasury and EBT contractor records. This includes a reconciliation of the state’s issuance files of postings to recipient accounts with the EBT contractor. Condition: 1. CNMI did not reconcile differences between the submission of the monthly FNS-388, State Issuance and Participation Estimates report, and the monthly reconciliation provided by the authorized redemption agent. The redemption reports combine ALN 10.539 and ALN 10.551 Supplemental Nutrition Assistance Program food coupons, and the ratio of program benefits to total redemptions is 88.4% for ALN 10.539 and 11.6% for ALN 10.551. Finding No. 2021-014, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award Nos.: 7NM4004NM and 7NM400NM7 Area: Special Tests and Provisions – NAP Coupon Reconciliation Questioned Costs: $3,375,452 AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – EBT Reconciliation Questioned Costs: $442,933 Condition, continued: 2. Total redemption costs of $69,233 are not supported by the total of program benefits, as follows: Finding No. 2021-014, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award Nos.: 7NM4004NM and 7NM400NM7 Area: Special Tests and Provisions – NAP Coupon Reconciliation Questioned Costs: $3,375,452 AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – EBT Reconciliation Questioned Costs: $442,933 Cause: The CNMI did not periodically perform a reconciliation of its recorded program benefit costs to the total food coupons redeemed. Effect: The CNMI is in noncompliance with applicable special tests and provisions requirements for NAP coupon reconciliations and questioned costs of $3,375,452 and $442,933 results for ALN 10.539 and ALN 10.551, respectively. Recommendation: Responsible CNMI personnel should periodically perform reconciliations of recorded program benefit costs with total food coupons redeemed. Views of Responsible Officials: The CNMI-NAP disagrees with both findings. FNS-388 is only for regular NAP benefits and thus reports only on benefit distribution. CNMI-NAP realized that FNS-388 Reports for FY2021 records only Regular NAP Benefit (ALN 10.539). Auditors combined the Pandemic-Electronic Benefit (P-EBT) (ALN 10.542) and the SNAP Cluster (ALN 10.551/10.561) together with Regular NAP. Moreover, to derive from the Actual Redemption Report, Auditors need to recognize the old series. Finding No. 2021-014, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award Nos.: 7NM4004NM and 7NM400NM7 Area: Special Tests and Provisions – NAP Coupon Reconciliation Questioned Costs: $3,375,452 AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – EBT Reconciliation Questioned Costs: $442,933 Views of Responsible Officials, continued: These old series are usually received and verified in the following months. However, during the redemption process, one must abstract the old series and add to the previous month and vice versa deduct the amount from the current month received. Auditor Response: Conditions 1 and 2 – Reconciliations to substantiate that the variance between the FNS-388 reports and the monthly redemption reports pertain to old series and/or EBT benefits were not provided.

Finding No. 2021-012 Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award No.: 7NM4004NM Area: Allowable Costs/Cost Principles Questioned Costs: $1,620 Criteria: In accordance with 2 CFR Part 200, Subpart E, cost must be necessary and reasonable for the performance of the federal award and be allocable thereto. Further costs must conform to any limitations or exclusions and be adequately documented. Condition: Of twenty-nine payroll items tested, aggregating $46,339 of a total population of $1.7M in total Program payroll expenditures, the following were noted: 1. For one (or 3%), no Notice of Personal Action (NOPA) form was provided to substantiate payroll costs. 2. For three (or 10%), pay rates per approved NOPA forms do not agree to pay rates on the payroll registers for the following employees: 3. For three (or 10%), total hours worked per approved timesheets do not agree to total hours per payroll registers. In addition, the pay rate of $24.55 per the approved NOPA for Employee Number 246315 differs from the pay rate of $23.38 per the payroll register. Finding No. 2021-012, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award No.: 7NM4004NM Area: Allowable Costs/Cost Principles Questioned Costs: $1,620 Cause: CNMI did not effectively enforce recordkeeping controls and perform monitoring controls over compliance with applicable allowable costs/cost principles requirements. Effect: CNMI is in noncompliance with applicable allowable costs/cost principles requirements and questioned costs of $1,620 result as the projected questioned costs exceed the $25,000 threshold. Recommendation: CNMI management should establish a recordkeeping system whereby underlying support is filed accordingly to substantiate costs and management should also strengthen monitoring controls over transactions to substantiate program costs in accordance with applicable allowable costs/cost principles. Views of Responsible Officials: Condition 1 – CNMI NAP disagrees with the finding. The following employee is not a NAP employee. When work is performed for NAP, the hours spent will be compensated but in a Journal entry procedure. This is a fund transfer from one account to another under the MOA. Conditions 2 and 3 – CNMI NAP disagrees with the findings. The provided NOPAs and other payroll documents indicated the correct pay rate specified to the employees. Auditor Response: Condition 1 – Costs charged to the program should be adequately documented. Finding No. 2021-012, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award No.: 7NM4004NM Area: Allowable Costs/Cost Principles Questioned Costs: $1,620 Auditor Response, continued: Condition 2 – Pay rates on the approved NOPAs do not agree with the pay rates on the payroll registers. Condition 3 – Hours worked per approved timesheets do not agree with the total hours on the payroll registers.

Finding No. 2021-013 Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award No.: 7NM4004NM Area: Procurement and Suspension and Debarment Questioned Costs: $97,850 Criteria: Non-federal entities other than states, including those operating federal programs as subrecipients of states, must follow the procurement standards set out at 2 CFR sections 200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR Part 200. CNMI’s procurement regulations state the following: • All government procurement shall be awarded by competitive sealed bidding except under certain circumstances permitting other than full and open competition. • Bidding is not required but is encouraged for procurement of $2,500 and under $10,000. The individual with the expenditure authority must obtain price quotations from at least three vendors and should base the selection on competitive price and quality for procurement valued at $2,500 to $10,000. Any price quotations must be written, documented, and submitted to the Procurement and Supply (P&S) Director for approval. • For purchases that exceed $10,000 but which are less than or equal to $50,000, a minimum of three vendors shall be solicited to submit written or electronic quotations. If there are fewer than three vendors, the expenditure authority shall certify, in writing, to the P&S Director that fewer than three vendors responded and shall provide written proof of the request. • Based on Procurement Regulation 70-30.3-115(a), Contract Review, Processing, and Oversight, all contracts must first be prepared by the official with expenditure authority who shall certify that he has complied with the procurement regulations codified in this subchapter, and that the proposed contract is for a public purpose that does not constitute a waste or abuse of public funds. All contract documents are to be complete, including attachments and exhibits, if they are incorporated into the contract by reference. Condition: Of fifty nonpayroll expenditures tested, aggregating $401,852 of a total population of $756,436 in nonpayroll expenditures subject to procurement, the following were noted: 1. For one (or 2%), the bid summary was not on file (document no. 1624129, dated 02/24/21, amounting to $35,990). Therefore, the CNMI was not able to substantiate the number of bids received and whether the procurement process for competitive sealed bids were properly followed, for which the amount is questioned. Finding No. 2021-013, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award No.: 7NM4004NM Area: Procurement and Suspension and Debarment Questioned Costs: $97,850 Condition, continued: 2. For one (or 2%), the Bid Opening Summary report was not provided (document no. 1562306, dated 10/09/2020, amounting to $33,060) and no other documentations on file to substantiate that the selection was based on the lowest bidder. 3. For two (or 4%), expenditures were procured through sole source procurement methods. The written justification states that the CNMI NAP obtained quotations from two vendors. However, no documentation was provided to demonstrate efforts were made to contact and solicit from other vendors. Cause: CNMI did not enforce compliance with established regulations over procurement. Effect: CNMI is in noncompliance with applicable procurement regulations and questioned costs of $97,850 result. Identification as a Repeat Finding: Finding No. 2020-026   Finding No. 2021-013, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award No.: 7NM4004NM Area: Procurement and Suspension and Debarment Questioned Costs: $97,850 Recommendation: Responsible personnel should monitor and enforce compliance with applicable procurement requirements, including the review of procurement files for completeness as to written rationale for deviations from applicable procurement requirements. Further, responsible personnel should establish a recordkeeping system whereby underlying support is filed accordingly to substantiate compliance. Views of responsible officials: Condition 1 – The CNMI-NAP disagrees with the finding. This transaction was supposed to be processed in FY 2020 but because of the delay and completion date was done in FY 2021, a Change Order Contract No. 01 was processed, and the funds was carried over to FY 2021. The bid summary was not necessary because a change order was processed changing the account from A0551E to A1551L per NAP email dated 1/11/21 (Pending Change Order Contract) - CNC 01/13/21 Change Order #1 to charge $35,989.60 (Contract #707410-OC) to A1551L.64560 to extend the delivery period from thirty (30) days to ninety (90) days. Condition 2 – CNMI NAP disagrees with the finding. The Nutrition Assistance Program did follow the proper procurement method by processing Invitation to Bid and obtained the lowest bidder and processed the contract with a notice to proceed. Condition 3 – CNMI NAP disagrees with this finding. The CNMI NAP tried to obtain quotations to purchase perforator machines on island and there was none. However, the selected vendor submitted their price quotation stating that they are able to obtain the perforator machines from off-island and CNMI NAP can purchase from them. Finding No. 2021-013, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award No.: 7NM4004NM Area: Procurement and Suspension and Debarment Questioned Costs: $97,850 Auditor Response: Condition 1 – Although there was a change order from the original contract, all procurement records shall be retained for a period of five years after the completion of construction or full delivery of goods or services under a contract as per Section 70-30.3-285 of the Procurement Regulations. Condition 2 – Documentation substantiating that the selection was based on the lowest bidder was not provided. Condition 3 – Documentation demonstrating efforts were made to contact and solicit from other vendors was not provided.

Finding No. 2021-014 Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award Nos.: 7NM4004NM and 7NM400NM7 Area: Special Tests and Provisions – NAP Coupon Reconciliation Questioned Costs: $3,375,452 AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – EBT Reconciliation Questioned Costs: $442,933 Criteria: 1. Section 1.22 and 1.24 of the CNMI Nutrition Assistance Program’s (NAP) Memorandum of Understanding with the United States Department of Agriculture - Food and Nutrition Service specifies the following: • CNMI will perform a reconciliation of all transacted Authorization-to-Participate (ATP) at the end of each month. • CNMI shall perform reconciliation of all transacted NAP coupons and shall be responsible for the security, accountability and control prior to and during the issuance thereof. CNMI shall develop monthly reconciliation reports of transacted and unused ATP checks and NAP coupons each month. 2. In accordance with the July 2021 OMB Compliance Supplement for SNAP Cluster, States must have systems in place to reconcile all of the funds entering into, exiting from, and remaining in the system each day with the state’s benefit account with Treasury and EBT contractor records. This includes a reconciliation of the state’s issuance files of postings to recipient accounts with the EBT contractor. Condition: 1. CNMI did not reconcile differences between the submission of the monthly FNS-388, State Issuance and Participation Estimates report, and the monthly reconciliation provided by the authorized redemption agent. The redemption reports combine ALN 10.539 and ALN 10.551 Supplemental Nutrition Assistance Program food coupons, and the ratio of program benefits to total redemptions is 88.4% for ALN 10.539 and 11.6% for ALN 10.551. Finding No. 2021-014, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award Nos.: 7NM4004NM and 7NM400NM7 Area: Special Tests and Provisions – NAP Coupon Reconciliation Questioned Costs: $3,375,452 AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – EBT Reconciliation Questioned Costs: $442,933 Condition, continued: 2. Total redemption costs of $69,233 are not supported by the total of program benefits, as follows: Finding No. 2021-014, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award Nos.: 7NM4004NM and 7NM400NM7 Area: Special Tests and Provisions – NAP Coupon Reconciliation Questioned Costs: $3,375,452 AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – EBT Reconciliation Questioned Costs: $442,933 Cause: The CNMI did not periodically perform a reconciliation of its recorded program benefit costs to the total food coupons redeemed. Effect: The CNMI is in noncompliance with applicable special tests and provisions requirements for NAP coupon reconciliations and questioned costs of $3,375,452 and $442,933 results for ALN 10.539 and ALN 10.551, respectively. Recommendation: Responsible CNMI personnel should periodically perform reconciliations of recorded program benefit costs with total food coupons redeemed. Views of Responsible Officials: The CNMI-NAP disagrees with both findings. FNS-388 is only for regular NAP benefits and thus reports only on benefit distribution. CNMI-NAP realized that FNS-388 Reports for FY2021 records only Regular NAP Benefit (ALN 10.539). Auditors combined the Pandemic-Electronic Benefit (P-EBT) (ALN 10.542) and the SNAP Cluster (ALN 10.551/10.561) together with Regular NAP. Moreover, to derive from the Actual Redemption Report, Auditors need to recognize the old series. Finding No. 2021-014, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award Nos.: 7NM4004NM and 7NM400NM7 Area: Special Tests and Provisions – NAP Coupon Reconciliation Questioned Costs: $3,375,452 AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – EBT Reconciliation Questioned Costs: $442,933 Views of Responsible Officials, continued: These old series are usually received and verified in the following months. However, during the redemption process, one must abstract the old series and add to the previous month and vice versa deduct the amount from the current month received. Auditor Response: Conditions 1 and 2 – Reconciliations to substantiate that the variance between the FNS-388 reports and the monthly redemption reports pertain to old series and/or EBT benefits were not provided.

Finding No. 2021-015 Federal Agency: U.S. Department of Agriculture AL Program: 10.542 Pandemic EBT Food Benefits Federal Award No.: 7NM400NM2 Area: Eligibility Questioned Costs: $151,626 Criteria: Per Sections 3(a) and 4(a) of the CNMI State Plan for Pandemic EBT, a child is eligible for P-EBT benefits if two conditions are met: 1. The child would be eligible for free or reduced-price meals if the National School Lunch Program and School Breakfast Program were operating normally. This includes children who are: a. Directly certified or determined “other source categorically eligible” for SY 2020-2021, or b. Certified through submission of a household application processed by the child’s school district for SY 2020-2021, or c. Enrolled in a Community Eligibility Provision school or a school operating under Provisions 2 or 3, or d. Directly certified, determined other source categorically eligible, or certified by application in SY 2019-2020 and the school district has not made a new school meal eligibility determination for the child in SY 2020-2021. The date range covered by the State plan for children in school is from August 10, 2020 to June 11,2021 and from October 1, 2020 to June 11, 2021 for children in child care. 2. The child does not receive free or reduced-price meals at the school because the school is closed or has been operating with reduced attendance or hours for at least 5 consecutive days in the current school year. Once the minimum 5 consecutive day threshold is met, children are eligible to receive P-EBT benefits for closures or reductions in hours due to COVID-19. Condition: Of sixty (or 100%) eligibility files selected for testing, aggregating $151,626 in total benefits paid of a total population of $5.1M, documentations supporting eligibility determinations for the following P-EBT participants were not provided. Finding No. 2021-015, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.542 Pandemic EBT Food Benefits Federal Award No.: 7NM400NM2 Area: Eligibility Questioned Costs: $151,626 Condition, continued: Finding No. 2021-015, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.542 Pandemic EBT Food Benefits Federal Award No.: 7NM400NM2 Area: Eligibility Questioned Costs: $151,626 Condition, continued: Cause: The CNMI failed to provide the final eligibility listing and documentations supporting eligibility determinations within the deadline set by the CNMI Department of Finance. Effect: The CNMI is in noncompliance with applicable eligibility requirements and questioned costs of $151,626 result. Recommendation: The responsible CNMI personnel should maintain an accurate listing of P-EBT recipients and also coordinate audit requests directly with the CNP Office. Finding No. 2021-015, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.542 Pandemic EBT Food Benefits Federal Award No.: 7NM400NM2 Area: Eligibility Questioned Costs: $151,626 Views of Responsible Officials: CNMI-NAP disagrees with the finding. Under the Pandemic Electronic Benefit Transfer (P-EBT) Plan, CNMI NAP received the listing of the eligible children from CNMI Child Nutrition Program (CNP). CNMI-NAP only prepared and distributed the benefits. Applications and other requirements should be obtained from CNMI Public School System under CNP office. Due to the confidentiality and sensitivity of the records, the Auditor was informed to work with the CNP Director to review the documents. In addition, emails and correspondence with the Auditor were made to work with CNP regarding the records. NAP provided the auditor with the sample listings. NAP informed the audit team to contact PSS Child Nutrition Program (CNP) to review applications and documents pertaining to eligibility determination for P-EBT as it was PSS CNP that determined the eligibility. Contact information for PSS CNP was provided to the audit team by NAP staff. CNMI NAP wants to understand under the “Cause” of the finding. Auditor Response: The CNMI Department of Finance set an April 30, 2024 deadline for the CNMI to submit the required schedules and documents. The final eligibility listing was provided on May 16, 2024 while eligibility supporting documents were provided on May 30, 2024, which was past the April 30, 2024 deadline. Further, audit requests should be coordinated between the program office and the respective agency handling eligibility determinations.

Finding No. 2021-016 Federal Agency: U.S. Department of Agriculture AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – ADP System for SNAP Questioned Costs: $1,421 Criteria: In accordance with the July 2021 OMB Compliance Supplement, State agencies are required to automate their SNAP operations and computerize their systems for obtaining, maintaining, utilizing and transmitting information concerning SNAP. This includes (1) processing and storing all case file information necessary for eligibility determination and benefit calculation, identifying specific elements that affect eligibility, and notifying the certification unit of cases requiring notices of case disposition, adverse action and mass change, and expiration; (2) providing an automatic cutoff of participation of households that have not been recertified at the end of their certification period by reapplying and being determined eligible for a new period; and (3) generating data necessary to meet federal and reconciliation reporting requirements. Condition: Of forty case files tested, aggregating $23,692 of a total population of $3.08M, the following were noted: 1. For seven (or 18%), the estimated benefit amount per the Maven Automated Data Processing (ADP) system differed from the estimated benefits per audit expectation based on the applicable FY 2021 maximum monthly benefit schedule compared to the amount reflected in the Maven ADP system, which pertain to the maximum amount for Fiscal Year 2022. Finding No. 2021-016, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – ADP System for SNAP Questioned Costs: $1,421 Conditions, continued: 2. For one (or 3%), inconsistencies between the adjudicator’s maximum allotment per income threshold ($708 reflecting October 1, 2020 maximum) and the Maven ADP system ($1,002 reflecting February 1, 2021 maximum) were noted for Record ID B100081068, certified from 12/01/20 to 02/28/21, resulting in a variance of $294 between the estimated benefit amount per the Maven ADP system and per audit expectation, for which the amount is questioned. 3. For one (or 3%), inconsistencies between the adjudicator’s maximum allotment per income threshold ($389 reflecting October 1, 2020 maximum) and the Maven ADP system ($551 reflecting February 1, 2021 maximum) were noted for Record ID B100082118, certified from 01/01/21 to 03/31/21, resulting into a variance of $162 between the estimated benefit amount per Maven ADP system and per audit expectation, for which the amount is questioned. Cause: The applicable monthly income level schedule used covering FY 2021 was not on file. Effect: CNMI is in noncompliance with applicable Special Tests and Provisions - ADP System for SNAP requirements, and questioned costs of $1,421 result as the projected questioned costs exceed the $25,000 threshold. Recommendation: As the Maven ADP System automatically updates income guidelines and benefit levels, we recommend that the CNMI maintains on file the applicable income guidelines and benefit levels used for eligibility determinations and that the CNMI responsible personnel should thoroughly review eligibility determinations. Finding No. 2021-016, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – ADP System for SNAP Questioned Costs: $1,421 Views of Responsible Officials: Condition 1 - The CNMI-NAP disagrees with this finding. NAP staff has to guide the auditors during the time the audit is being performed to understand the history and process of files being audited. Case ID#B100092775 variance of $69 caused by change in income guideline and benefit level effective October 1st 2020 income level is 781 benefit for Saipan is $221. Corrective action taken by Eligibility worker processed income for household of 1 as SSI which gave household $41 benefit. Income should be counted as SSA which at the time the adjustment was made and increased the benefit amount for the household. Case ID#B100094249 variance of $180 a change in income and benefit level. Household income was $108 which changed to $120 for a household of 4. Adjustment was made to reflect changes including benefit level. From $708.00 to $1,231. Case ID #B100095019 variance of $69. Benefit level was $212, and household had $20 contribution as unearned income. Benefit issued was 295 new benefit level effective October 1st, 2021 adjusted benefit issuance at $364 (maximum benefit for household of one for zero income is $369). Case ID#B100095077 variance of $180. Benefit for household of 3 was issued for 2020 benefit and income level. November benefit effectuated new income and benefit level. Issued benefit is based by household and income of head of household. Case ID#B100094664 Variance of $69. Household is zero income maximum benefit level issued was $300 reflecting 2020 benefit level. On October 1st, 2021 eligibility system automatically adjust benefit to $369 as per new benefit level. Case ID#B10109695 variance of $126 household of 2 maximum benefit was $389 with ineligible household members earning SS benefits totaling at $167 (prorated income) benefit issued was $651. Increase in benefit and income level was automatically adjusted by the eligibility system. Finding No. 2021-016, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – ADP System for SNAP Questioned Costs: $1,421 Views of Responsible Officials, continued: Case ID#B100093732 Variance of 272 household of 5 maximum Benefit level for zero income Household is $1,462 deduction of 25 percent for over issuance ($272) increase of benefit level automatically adjusted by Eligibility system and still taking offset of 25% for over issued benefits. Over issuance claim is already paid off. Condition 2 - The CNMI-NAP disagrees with this finding. NAP staff has to guide the auditors during the time the audit is being performed to understand the history and process of files being audited. Case ID#B100081068 Questioned cost of $294. Head of household declared zero income. Benefit amount under issued in the amount of $229 by eligibility system for maximum level of benefits should be $1,231. Unable to do corrective action due to beyond 2 months from time the discrepancy was found: Corrective action for eligibility system to implement a system audit that will prevent future glitches that would create a loss for both the household and NAP program budget. Condition 3 - The CNMI-NAP disagrees with this finding. NAP staff has to guide the auditors during the time the audit is being performed to understand the history and process of files being audited. Case ID#B100082118 questioned cost is $162 household had income from ineligible parents which is prorated towards the two eligible household members. Total prorated unearned income is $843 which was counted towards the household’s benefits. Then household became zero income due to Furlough from COVID-19 pandemic. We disagree with the findings. When the auditor reviewed the case files, there was a misunderstanding of changes in household composition and income which is also affected by the increase in income guidelines and benefit levels between the certification period. This created the variances that the auditor noted in the findings. *CNMI NAP recommends having NAP staff guide the auditor during time the audit is being performed to understand history and process of files being audited. Finding No. 2021-016, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – ADP System for SNAP Questioned Costs: $1,421 Views of Responsible Officials, continued: CNMI-NAP recently hired a Certification Unit Supervisor who had been on board for close to three months. He had been actively working closely with the EWs and especially the Management Evaluation Unit (MEU) who oversees the program reviews and quality control. Mini Trainings and assessments of the Certification Unit are in the works. One training was done sometimes in April by the MEU to ensure compliance is met. More trainings and workshops are in being planned between the Certification Unit and Management Evaluation Unit for a better process and procedures. Auditor Response: Condition 1 – The applicable benefit level used for eligibility determination was not provided. Condition 2 – The CNMI acknowledges the discrepancy and planned on a corrective action to prevent future system glitches. Condition 3 – Documentation supporting the change in household composition and income were not provided.

Finding No. 2021-014 Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award Nos.: 7NM4004NM and 7NM400NM7 Area: Special Tests and Provisions – NAP Coupon Reconciliation Questioned Costs: $3,375,452 AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – EBT Reconciliation Questioned Costs: $442,933 Criteria: 1. Section 1.22 and 1.24 of the CNMI Nutrition Assistance Program’s (NAP) Memorandum of Understanding with the United States Department of Agriculture - Food and Nutrition Service specifies the following: • CNMI will perform a reconciliation of all transacted Authorization-to-Participate (ATP) at the end of each month. • CNMI shall perform reconciliation of all transacted NAP coupons and shall be responsible for the security, accountability and control prior to and during the issuance thereof. CNMI shall develop monthly reconciliation reports of transacted and unused ATP checks and NAP coupons each month. 2. In accordance with the July 2021 OMB Compliance Supplement for SNAP Cluster, States must have systems in place to reconcile all of the funds entering into, exiting from, and remaining in the system each day with the state’s benefit account with Treasury and EBT contractor records. This includes a reconciliation of the state’s issuance files of postings to recipient accounts with the EBT contractor. Condition: 1. CNMI did not reconcile differences between the submission of the monthly FNS-388, State Issuance and Participation Estimates report, and the monthly reconciliation provided by the authorized redemption agent. The redemption reports combine ALN 10.539 and ALN 10.551 Supplemental Nutrition Assistance Program food coupons, and the ratio of program benefits to total redemptions is 88.4% for ALN 10.539 and 11.6% for ALN 10.551. Finding No. 2021-014, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award Nos.: 7NM4004NM and 7NM400NM7 Area: Special Tests and Provisions – NAP Coupon Reconciliation Questioned Costs: $3,375,452 AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – EBT Reconciliation Questioned Costs: $442,933 Condition, continued: 2. Total redemption costs of $69,233 are not supported by the total of program benefits, as follows: Finding No. 2021-014, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award Nos.: 7NM4004NM and 7NM400NM7 Area: Special Tests and Provisions – NAP Coupon Reconciliation Questioned Costs: $3,375,452 AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – EBT Reconciliation Questioned Costs: $442,933 Cause: The CNMI did not periodically perform a reconciliation of its recorded program benefit costs to the total food coupons redeemed. Effect: The CNMI is in noncompliance with applicable special tests and provisions requirements for NAP coupon reconciliations and questioned costs of $3,375,452 and $442,933 results for ALN 10.539 and ALN 10.551, respectively. Recommendation: Responsible CNMI personnel should periodically perform reconciliations of recorded program benefit costs with total food coupons redeemed. Views of Responsible Officials: The CNMI-NAP disagrees with both findings. FNS-388 is only for regular NAP benefits and thus reports only on benefit distribution. CNMI-NAP realized that FNS-388 Reports for FY2021 records only Regular NAP Benefit (ALN 10.539). Auditors combined the Pandemic-Electronic Benefit (P-EBT) (ALN 10.542) and the SNAP Cluster (ALN 10.551/10.561) together with Regular NAP. Moreover, to derive from the Actual Redemption Report, Auditors need to recognize the old series. Finding No. 2021-014, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award Nos.: 7NM4004NM and 7NM400NM7 Area: Special Tests and Provisions – NAP Coupon Reconciliation Questioned Costs: $3,375,452 AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – EBT Reconciliation Questioned Costs: $442,933 Views of Responsible Officials, continued: These old series are usually received and verified in the following months. However, during the redemption process, one must abstract the old series and add to the previous month and vice versa deduct the amount from the current month received. Auditor Response: Conditions 1 and 2 – Reconciliations to substantiate that the variance between the FNS-388 reports and the monthly redemption reports pertain to old series and/or EBT benefits were not provided.

Finding No. 2021-016 Federal Agency: U.S. Department of Agriculture AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – ADP System for SNAP Questioned Costs: $1,421 Criteria: In accordance with the July 2021 OMB Compliance Supplement, State agencies are required to automate their SNAP operations and computerize their systems for obtaining, maintaining, utilizing and transmitting information concerning SNAP. This includes (1) processing and storing all case file information necessary for eligibility determination and benefit calculation, identifying specific elements that affect eligibility, and notifying the certification unit of cases requiring notices of case disposition, adverse action and mass change, and expiration; (2) providing an automatic cutoff of participation of households that have not been recertified at the end of their certification period by reapplying and being determined eligible for a new period; and (3) generating data necessary to meet federal and reconciliation reporting requirements. Condition: Of forty case files tested, aggregating $23,692 of a total population of $3.08M, the following were noted: 1. For seven (or 18%), the estimated benefit amount per the Maven Automated Data Processing (ADP) system differed from the estimated benefits per audit expectation based on the applicable FY 2021 maximum monthly benefit schedule compared to the amount reflected in the Maven ADP system, which pertain to the maximum amount for Fiscal Year 2022. Finding No. 2021-016, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – ADP System for SNAP Questioned Costs: $1,421 Conditions, continued: 2. For one (or 3%), inconsistencies between the adjudicator’s maximum allotment per income threshold ($708 reflecting October 1, 2020 maximum) and the Maven ADP system ($1,002 reflecting February 1, 2021 maximum) were noted for Record ID B100081068, certified from 12/01/20 to 02/28/21, resulting in a variance of $294 between the estimated benefit amount per the Maven ADP system and per audit expectation, for which the amount is questioned. 3. For one (or 3%), inconsistencies between the adjudicator’s maximum allotment per income threshold ($389 reflecting October 1, 2020 maximum) and the Maven ADP system ($551 reflecting February 1, 2021 maximum) were noted for Record ID B100082118, certified from 01/01/21 to 03/31/21, resulting into a variance of $162 between the estimated benefit amount per Maven ADP system and per audit expectation, for which the amount is questioned. Cause: The applicable monthly income level schedule used covering FY 2021 was not on file. Effect: CNMI is in noncompliance with applicable Special Tests and Provisions - ADP System for SNAP requirements, and questioned costs of $1,421 result as the projected questioned costs exceed the $25,000 threshold. Recommendation: As the Maven ADP System automatically updates income guidelines and benefit levels, we recommend that the CNMI maintains on file the applicable income guidelines and benefit levels used for eligibility determinations and that the CNMI responsible personnel should thoroughly review eligibility determinations. Finding No. 2021-016, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – ADP System for SNAP Questioned Costs: $1,421 Views of Responsible Officials: Condition 1 - The CNMI-NAP disagrees with this finding. NAP staff has to guide the auditors during the time the audit is being performed to understand the history and process of files being audited. Case ID#B100092775 variance of $69 caused by change in income guideline and benefit level effective October 1st 2020 income level is 781 benefit for Saipan is $221. Corrective action taken by Eligibility worker processed income for household of 1 as SSI which gave household $41 benefit. Income should be counted as SSA which at the time the adjustment was made and increased the benefit amount for the household. Case ID#B100094249 variance of $180 a change in income and benefit level. Household income was $108 which changed to $120 for a household of 4. Adjustment was made to reflect changes including benefit level. From $708.00 to $1,231. Case ID #B100095019 variance of $69. Benefit level was $212, and household had $20 contribution as unearned income. Benefit issued was 295 new benefit level effective October 1st, 2021 adjusted benefit issuance at $364 (maximum benefit for household of one for zero income is $369). Case ID#B100095077 variance of $180. Benefit for household of 3 was issued for 2020 benefit and income level. November benefit effectuated new income and benefit level. Issued benefit is based by household and income of head of household. Case ID#B100094664 Variance of $69. Household is zero income maximum benefit level issued was $300 reflecting 2020 benefit level. On October 1st, 2021 eligibility system automatically adjust benefit to $369 as per new benefit level. Case ID#B10109695 variance of $126 household of 2 maximum benefit was $389 with ineligible household members earning SS benefits totaling at $167 (prorated income) benefit issued was $651. Increase in benefit and income level was automatically adjusted by the eligibility system. Finding No. 2021-016, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – ADP System for SNAP Questioned Costs: $1,421 Views of Responsible Officials, continued: Case ID#B100093732 Variance of 272 household of 5 maximum Benefit level for zero income Household is $1,462 deduction of 25 percent for over issuance ($272) increase of benefit level automatically adjusted by Eligibility system and still taking offset of 25% for over issued benefits. Over issuance claim is already paid off. Condition 2 - The CNMI-NAP disagrees with this finding. NAP staff has to guide the auditors during the time the audit is being performed to understand the history and process of files being audited. Case ID#B100081068 Questioned cost of $294. Head of household declared zero income. Benefit amount under issued in the amount of $229 by eligibility system for maximum level of benefits should be $1,231. Unable to do corrective action due to beyond 2 months from time the discrepancy was found: Corrective action for eligibility system to implement a system audit that will prevent future glitches that would create a loss for both the household and NAP program budget. Condition 3 - The CNMI-NAP disagrees with this finding. NAP staff has to guide the auditors during the time the audit is being performed to understand the history and process of files being audited. Case ID#B100082118 questioned cost is $162 household had income from ineligible parents which is prorated towards the two eligible household members. Total prorated unearned income is $843 which was counted towards the household’s benefits. Then household became zero income due to Furlough from COVID-19 pandemic. We disagree with the findings. When the auditor reviewed the case files, there was a misunderstanding of changes in household composition and income which is also affected by the increase in income guidelines and benefit levels between the certification period. This created the variances that the auditor noted in the findings. *CNMI NAP recommends having NAP staff guide the auditor during time the audit is being performed to understand history and process of files being audited. Finding No. 2021-016, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – ADP System for SNAP Questioned Costs: $1,421 Views of Responsible Officials, continued: CNMI-NAP recently hired a Certification Unit Supervisor who had been on board for close to three months. He had been actively working closely with the EWs and especially the Management Evaluation Unit (MEU) who oversees the program reviews and quality control. Mini Trainings and assessments of the Certification Unit are in the works. One training was done sometimes in April by the MEU to ensure compliance is met. More trainings and workshops are in being planned between the Certification Unit and Management Evaluation Unit for a better process and procedures. Auditor Response: Condition 1 – The applicable benefit level used for eligibility determination was not provided. Condition 2 – The CNMI acknowledges the discrepancy and planned on a corrective action to prevent future system glitches. Condition 3 – Documentation supporting the change in household composition and income were not provided.

Finding No. 2021-014 Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award Nos.: 7NM4004NM and 7NM400NM7 Area: Special Tests and Provisions – NAP Coupon Reconciliation Questioned Costs: $3,375,452 AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – EBT Reconciliation Questioned Costs: $442,933 Criteria: 1. Section 1.22 and 1.24 of the CNMI Nutrition Assistance Program’s (NAP) Memorandum of Understanding with the United States Department of Agriculture - Food and Nutrition Service specifies the following: • CNMI will perform a reconciliation of all transacted Authorization-to-Participate (ATP) at the end of each month. • CNMI shall perform reconciliation of all transacted NAP coupons and shall be responsible for the security, accountability and control prior to and during the issuance thereof. CNMI shall develop monthly reconciliation reports of transacted and unused ATP checks and NAP coupons each month. 2. In accordance with the July 2021 OMB Compliance Supplement for SNAP Cluster, States must have systems in place to reconcile all of the funds entering into, exiting from, and remaining in the system each day with the state’s benefit account with Treasury and EBT contractor records. This includes a reconciliation of the state’s issuance files of postings to recipient accounts with the EBT contractor. Condition: 1. CNMI did not reconcile differences between the submission of the monthly FNS-388, State Issuance and Participation Estimates report, and the monthly reconciliation provided by the authorized redemption agent. The redemption reports combine ALN 10.539 and ALN 10.551 Supplemental Nutrition Assistance Program food coupons, and the ratio of program benefits to total redemptions is 88.4% for ALN 10.539 and 11.6% for ALN 10.551. Finding No. 2021-014, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award Nos.: 7NM4004NM and 7NM400NM7 Area: Special Tests and Provisions – NAP Coupon Reconciliation Questioned Costs: $3,375,452 AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – EBT Reconciliation Questioned Costs: $442,933 Condition, continued: 2. Total redemption costs of $69,233 are not supported by the total of program benefits, as follows: Finding No. 2021-014, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award Nos.: 7NM4004NM and 7NM400NM7 Area: Special Tests and Provisions – NAP Coupon Reconciliation Questioned Costs: $3,375,452 AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – EBT Reconciliation Questioned Costs: $442,933 Cause: The CNMI did not periodically perform a reconciliation of its recorded program benefit costs to the total food coupons redeemed. Effect: The CNMI is in noncompliance with applicable special tests and provisions requirements for NAP coupon reconciliations and questioned costs of $3,375,452 and $442,933 results for ALN 10.539 and ALN 10.551, respectively. Recommendation: Responsible CNMI personnel should periodically perform reconciliations of recorded program benefit costs with total food coupons redeemed. Views of Responsible Officials: The CNMI-NAP disagrees with both findings. FNS-388 is only for regular NAP benefits and thus reports only on benefit distribution. CNMI-NAP realized that FNS-388 Reports for FY2021 records only Regular NAP Benefit (ALN 10.539). Auditors combined the Pandemic-Electronic Benefit (P-EBT) (ALN 10.542) and the SNAP Cluster (ALN 10.551/10.561) together with Regular NAP. Moreover, to derive from the Actual Redemption Report, Auditors need to recognize the old series. Finding No. 2021-014, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award Nos.: 7NM4004NM and 7NM400NM7 Area: Special Tests and Provisions – NAP Coupon Reconciliation Questioned Costs: $3,375,452 AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – EBT Reconciliation Questioned Costs: $442,933 Views of Responsible Officials, continued: These old series are usually received and verified in the following months. However, during the redemption process, one must abstract the old series and add to the previous month and vice versa deduct the amount from the current month received. Auditor Response: Conditions 1 and 2 – Reconciliations to substantiate that the variance between the FNS-388 reports and the monthly redemption reports pertain to old series and/or EBT benefits were not provided.

Finding No. 2021-017 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00134, D19AP00142, D21AF10004, D21AF10052 Area: Allowable Costs/Cost Principles Questioned Costs: $402,941 Criteria: In accordance with 2 CFR Part 200, Subpart E, cost must be necessary and reasonable for the performance of the federal award and be allocable thereto. Further costs must conform to any limitations or exclusions and be adequately documented. Condition: Of thirty-four nonpayroll expenditures tested, aggregating $4.8M of a total population of $11.8M, the following were noted: 1. For one (or 3%), no purchase order or contract was provided. 2. For three (or 9%), no documents such as invoices or contracts were provided to substantiate costs. 3. Tests of the general ledger expenditure details noted that business unit 5122 amounting to $261,832 pertains to locally funded transactions and should not have been charged to the program. No questioned cost is presented as no reimbursements were made under this business unit. Finding No. 2021-017, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00134, D19AP00142, D21AF10004, D21AF10052 Area: Allowable Costs/Cost Principles Questioned Costs: $402,941 Cause: CNMI did not effectively enforce recordkeeping controls and perform monitoring controls over compliance with applicable allowable costs/cost principles requirements. Further, the CNMI did not effectively monitor cumulative expenditures and approved funding limits.Effect: CNMI is in noncompliance with applicable allowable costs/cost principles requirements and questioned costs of $402,941 result. Recommendation: CNMI management should establish a recordkeeping system whereby underlying support is filed accordingly to substantiate costs and management should also strengthen monitoring controls over transactions to substantiate program costs in accordance with applicable allowable costs/cost principles. Views of responsible officials: Condition 3 – The CNMI Corrective Action Plan states agreement. Conditions 1 & 2 - The OMB disagrees with this finding. Compact Impact grants often operate on a reimbursement basis.  This means that when the award is received, we request payment or a transfer of expenses to cover prior expenses that have already been incurred and paid.  Therefore, the memo that was processed for such request and other supporting documents can be provided.  Auditor Response: Conditions 1 & 2 - Documentation substantiating the costs charged to the program were not provided.

Finding No. 2021-018 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award Nos.: D14AP00037, D16AP00064 D16AP00065, D17AP00111, D18AP00031, D18AP00130, D18AP00146, D18AP00165, D20AP00099, D20AP00119, and D21AP10003 Area: Equipment and Real Property Management Questioned Costs: $-0- Criteria: In accordance with 2 CFR section 200.313(b)), a state must use, manage, and dispose of equipment acquired under a federal award in accordance with state laws and procedures. The CNMI Property Management Policies and Procedures requires the Division of Procurement & Supply (PS) to conduct an annual inventory of property held by a designated official who has administrative control over the use of personal property within his area of jurisdiction. Also, PS shall perform random audits of property held by each accountable person to validate the integrity of the property control process. Further, property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the Federal award identification number), who holds title, the acquisition date, cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Condition: 1. Tests of internal controls noted that a complete physical inventory of equipment and property was not performed by PS in FY 2021. 2. A property listing was provided by PS; however, information such as the federal award identification number, source of the property, who holds title, percentage of federal participation in the cost of the property, and use of the property, was not documented. 3. A variance of $415,046 was noted between the general ledger details of $665,165 of capital assets and $250,119 per the property listing provided by PS. Cause: The CNMI lacks the human resources and financial management system structure needed to effect compliance with applicable equipment and real property management requirements. Finding No. 2021-018, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award Nos.: D14AP00037, D16AP00064 D16AP00065, D17AP00111, D18AP00031, D18AP00130, D18AP00146, D18AP00165, D20AP00099, D20AP00119, and D21AP10003 Area: Equipment and Real Property Management Questioned Costs: $-0- Effect: The CNMI is in noncompliance with applicable equipment and real property management requirements. See below for the cumulative dollar amount of property and equipment acquired with program grant funds over the past five years. Identification as a Repeat Finding: Finding No. 2020-030 Recommendation: The CNMI should consider seeking technical and financial support from Federal agencies to develop human resources and a financial management system capable of effecting compliance with applicable property management policies and procedures. Views of responsible officials: Conditions 1 and 2 – The CNMI Corrective Action Plan states agreement. Condition 3 - The Division of Procurement Services disagrees with this finding. The Division of Procurement Services, Property Management wasn't informed of this audit parameter. For FY2021 number of Transactions/Units processed was 4970 units and the dollar value is $9,526,239. Auditor Response: Condition 3 - The request was for the inventory listing as of 09/30/21 fiscal year end. Further, the dollar amount of the equipment and property are all capital assets in excess of $5,000.

Finding No. 2021-019 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00082 Area: Matching, Level of Effort and Earmarking Questioned Costs: $7,488 Criteria: In accordance with the July 2021 Compliance Supplement, matching or cost sharing includes requirements to provide contributions (usually non-federal) of a specified amount or percentage to match federal awards. Condition: For one (or 50%) of two transactions tested, aggregating $7,559 of a total population of $35,910, the project worksheet and disaster number did not agree to the projects listed on file for the cost sharing. As a result, the cost share percentage of 25% was inappropriately applied. Cause: The cause of the above condition is the lack of internal controls and inadequate file maintenance. Effect: The CNMI is in noncompliance with applicable matching requirements and questioned costs of $7,488 result as the projected questioned costs exceed the $25,000 threshold. Recommendation: The CNMI should establish and implement controls over compliance with applicable matching requirements. Responsible personnel should review local and federal share files for accuracy of disbursements. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-020 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Criteria: Non-federal entities other than states, including those operating federal programs as subrecipients of states, must follow the procurement standards set out at 2 CFR sections 200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR Part 200. CNMI’s procurement regulations state the following: Retention of Procurement Records: (a) All procurement records shall be retained by the Procurement and Supply (P&S) Director for a period of 5 years after completion of construction, or full delivery of the goods or services under the contract. The official with expenditure authority shall also keep copies of all procurement records for their respective agencies. Requirements for Competition: Officials with expenditure authority shall provide for full and open competition through use of the competitive procedure that is best suited to the circumstances of the contract action. The competitive procedures available for use in fulfilling the requirement for full and open competition are as follows: (a) Competitive sealed bidding (§ 70-30.3-205) (b) Competitive sealed proposals (§ 70-30.3-210) (c) Architect-engineer services (§ 70-30.3-305); and (d) Competitive selection procedures for professional services (§ 70-30.3-310). § 70-30.3-201 Competitive sealed bidding: If there is no adequate local competition, the invitation for bids shall also be advertised in at least one regional newspaper or at least one national publication or on the internet; in such case, the P&S Director shall consider extending the bidding period. Small Purchases: Bidding is not required but is encouraged for procurement over $2,500 and under $10,000. The official with expenditure authority must obtain price quotations from at least three vendors and base the selection on competitive price and quality for procurement valued at $2,500 to $10,000. Any price quotations obtained must be written, documented, and submitted to the P&S Director for approval. Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Condition: Of forty-five expenditures tested, aggregating $4.5M of a total population of $6.4M in nonpayroll expenditures subject to procurement, the following were noted: 1. For two (or 4%), purchase order, purchase requisitions and contracts were not on file. 2. For five (or 11%), bid submissions and invitation-to-bid publications were not on file. No questioned costs are presented for Business Unit 5122 as no reimbursement were received in FY 2021. 3. For two (or 4%), no price quotations were written, documented, or submitted with the purchase order. Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Condition, continued: 4. For two or (4%), written justifications and the P&S Director’s written approvals of the emergency procurement method used were not provided. In addition, the contracts indicated the procurement used were for competitive sealed proposals; however, the procurement files support emergency procurement. Cause: CNMI did not enforce compliance with established procurement regulations over procurement. Effect: CNMI is in noncompliance with applicable procurement regulations and questioned costs of $1,240,465 result. Identification as a Repeat Finding: Finding No. 2020-032 Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Views of responsible officials: Condition 1 – CNMI Corrective Action Plan statements agreement. Condition 2 - The CIP Office disagrees with this finding. The Capital Improvement Program provided information regarding these questioned costs. For 703-OS/32200344 - RFQ20-GOV-084 was provided to the Auditor for their review. Three (3) proposers submitted a proposal. For 702-OS/32200912 - The procurement method for this was processed through a Sole Source. For CUC-WW-18-C032 - Lower Base Sewer Phase 1 - Lift Station and Focemain - This contract was executed by the Commonwealth Utilities Corporation on July 12, 2018. Procurement Services was able to obtain a copy of the contract from CUC to satisfy the audit testing. For 712727-OC (ITB20-DLNR/DOA-098) - Purchase of One (1) 13" Chipper Machine. Two bidders responded to this ITB; Boyer Trading Company & J. & J Company. Boyer Trading was selected as the lowest and responsive bidder. Condition 3 - The Office of Grants Management disagrees with these findings because these are Open Accounts, and this would mean that no price quotations were required during the purchase requisition process in order to obtain the purchase orders. As confirmed by Financial Services and Procurement Services, quotations were not required on an open account. Open accounts were allowed during the JD Edwards period and were discontinued after September 30, 2021. MUNIS was implemented in October 2021. Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Views of responsible officials, continued: Condition 4 - The Office of Grants Management (assisting DHSEM) disagrees with the finding because assigned personnel were not made aware of the documents needed; however, OGM is more than happy to provide the following documents to substantiate the purchase of a mobile Covid-19 Biological Safety Lab for the Commonwealth Healthcare Center and for the Alternate Care Site at Kanoa Resort. Per the documentation, the Public Assistance Office and DHSEM followed competitive procurement processing and invoked the Public Health Emergency Executive Order#2020-04 and to which the CNMI Attorney General’s Office approved the purchase. Purchase Order # 708019 was used by the Department of Homeland Security and Emergency Management and the Covid-19 Task Force. Contract number Covid19-0-0626 was provided. Expenses were later transferred to Department of the Interior CARES Act Funds under D20AP00049 per OGM Memo Number 2021-013. Auditor Response: Condition 2 – The bid documents, bid submissions and advertisements were not provided. Condition 3 – Per §70-30.3-220 of the CNMI Procurement Regulations that was in effect prior to May 28, 2021, the official with expenditure authority must obtain price quotations from at least three vendors and base the selection on competitive price and quality at $2,500 to $10,000. Any price quotations obtained must be written, documented, and submitted to the P&S Director for approval. Condition 4 – The supporting documents were requested on January 25, 2024 and were not provided.

Finding No. 2021-021 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D18AP00135 and D19AP00083 Area: Reporting Questioned Costs: $1,165 Criteria: In accordance with Section 8 of the Grant and Cooperative Agreement between the CNMI and the Office of Insular Affairs (OIA), a SF-425 Federal Financial Report will be submitted semi-annually for the period beginning January 1 and ending June 30 and beginning July 1 and ending December 31. Condition: The total federal share of expenditures reported on the SF-425 differ from the underlying accounting records. No questioned costs result for D19AP00083 as no reimbursement was received in FY2021. Cause: CNMI did not effectively monitor the accuracy and completeness of the SF-425 report based on underlying accounting records. Effect: CNMI is in noncompliance with SF-425 reporting requirements and questioned costs of $1,165 result for D18AP00135 as actual reimbursement exceeded recorded expenditures and the projected questioned costs exceed the $25,000 threshold. Recommendation: CNMI should implement monitoring control procedures to verify that amounts reported are supported by underlying accounting records derived from CNMI’s accounting system. Finding No. 2021-021, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D18AP00135 and D19AP00083 Area: Reporting Questioned Costs: $1,165 Views of Responsible Officials: The Office of Grants Management (assisting Financial Services – Federal Section) disagrees with the finding. Per the SF-425, the amount noted is $288,849 (rounded) and their records are accurate. Auditors did not inquire with the Federal Section about the variance they noted and are unsure of what accounting records they are referring to. Auditors would need to review this finding again and reach out to the Federal Section. Auditor Response: The underlying accounting records we are referring to are the accounting records that the CNMI utilizes to prepare the SF-245 reports which should include the reconciliation substantiating the variance between the SF-425 and the general ledger detail report.

Finding No. 2021-022 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00006 and D21AF10004 Area: Subrecipient Monitoring Questioned Costs: $ -0- Criteria: In accordance with 2 CFR § 200.332, pass-through entity (PTE) must establish and implement subrecipient monitoring policies and procedures, including the following: • At the time of the award, clearly identifying to the subrecipient all requirements imposed by the PTE on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations, and the terms and conditions of the award. • Evaluating the impact of subrecipient activities on the pass-through entity’s ability to comply with applicable federal regulations. Condition: 1. The subrecipients of the Capital Improvement Projects (CIP) and Compact Impact programs did not match the listing per the SEFA. 2. The program did not include the following required information in the subrecipient agreements: • Subrecipient’s Data Universal Numbering System (DUNS) number; • Federal Award Identification Number (FAIN); • Subaward Period of Performance Start and End Date; • Amount of Federal Funds Obligated by this action; • Total Amount of Federal Funds Obligated to the subrecipient; and • Indirect cost rate for the Federal award. Finding No. 2021-022, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00006 and D21AF10004 Area: Subrecipient Monitoring Questioned Costs: $ -0- Condition, continued: 3. There was no evidence of procedures used to monitor subrecipient compliance with applicable laws, regulations, and provisions of contracts and grant agreements. We are aware that the subrecipients, Public School System and Northern Marianas College, have been subjected to Single Audits; however, there is no evidence that the Single Audit reports were used as a monitoring tool. 4. Documentation was not provided to demonstrate monitoring procedures were performed on the subrecipients. Further, narrative reports on project status were not provided and made available. Cause: The CNMI failed to enforce compliance with subrecipient monitoring requirements. Effect: The CNMI is in noncompliance with applicable subrecipient monitoring requirements. No questioned costs are presented as the Single Audit reports of the subrecipients tested have been issued with no findings noted. Identification as a Repeat Finding: Finding No. 2020-033 Recommendation: The responsible personnel should consider obtaining training in the area of subrecipient monitoring and establishing and implementing policies and procedures over compliance with applicable subrecipient monitoring requirements. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-023 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016 Area: Special Tests and Provisions – Grant Terms and Conditions Questioned Costs: $-0- Criteria: In accordance with Section 5 of the Grant and Cooperative Agreement between the CNMI and the Office of Insular Affairs (OIA), for construction activities funded by grants, the Office of Insular Affairs (OIA) seal should be displayed on all construction signage that is intended to identify the project and funders, as appropriate. The seal must remain intact and unchanged and may only be displayed using either the standard color scheme or a single color that complements the background where it appears. The OIA grant manager should be contacted for an electronic version of the seal if needed. Condition: Of eight expenditures tested, aggregating $4.5M of a total population of $11.8M, for one (or 13%), documentation substantiating that the Office of Insular Affairs seal requirement was complied with was not provided: Cause: The CNMI did not effectively monitor compliance with applicable special tests and provisions requirements. Effect: The CNMI is in noncompliance with special tests and provisions requirements. No questioned costs are reported as we are unable to quantify the extent of noncompliance. Identification as a Repeat Finding: Finding No. 2020-034 Recommendation: The responsible personnel should monitor grant terms and conditions so that requirements are complied with. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-017 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00134, D19AP00142, D21AF10004, D21AF10052 Area: Allowable Costs/Cost Principles Questioned Costs: $402,941 Criteria: In accordance with 2 CFR Part 200, Subpart E, cost must be necessary and reasonable for the performance of the federal award and be allocable thereto. Further costs must conform to any limitations or exclusions and be adequately documented. Condition: Of thirty-four nonpayroll expenditures tested, aggregating $4.8M of a total population of $11.8M, the following were noted: 1. For one (or 3%), no purchase order or contract was provided. 2. For three (or 9%), no documents such as invoices or contracts were provided to substantiate costs. 3. Tests of the general ledger expenditure details noted that business unit 5122 amounting to $261,832 pertains to locally funded transactions and should not have been charged to the program. No questioned cost is presented as no reimbursements were made under this business unit. Finding No. 2021-017, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00134, D19AP00142, D21AF10004, D21AF10052 Area: Allowable Costs/Cost Principles Questioned Costs: $402,941 Cause: CNMI did not effectively enforce recordkeeping controls and perform monitoring controls over compliance with applicable allowable costs/cost principles requirements. Further, the CNMI did not effectively monitor cumulative expenditures and approved funding limits.Effect: CNMI is in noncompliance with applicable allowable costs/cost principles requirements and questioned costs of $402,941 result. Recommendation: CNMI management should establish a recordkeeping system whereby underlying support is filed accordingly to substantiate costs and management should also strengthen monitoring controls over transactions to substantiate program costs in accordance with applicable allowable costs/cost principles. Views of responsible officials: Condition 3 – The CNMI Corrective Action Plan states agreement. Conditions 1 & 2 - The OMB disagrees with this finding. Compact Impact grants often operate on a reimbursement basis.  This means that when the award is received, we request payment or a transfer of expenses to cover prior expenses that have already been incurred and paid.  Therefore, the memo that was processed for such request and other supporting documents can be provided.  Auditor Response: Conditions 1 & 2 - Documentation substantiating the costs charged to the program were not provided.

Finding No. 2021-018 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award Nos.: D14AP00037, D16AP00064 D16AP00065, D17AP00111, D18AP00031, D18AP00130, D18AP00146, D18AP00165, D20AP00099, D20AP00119, and D21AP10003 Area: Equipment and Real Property Management Questioned Costs: $-0- Criteria: In accordance with 2 CFR section 200.313(b)), a state must use, manage, and dispose of equipment acquired under a federal award in accordance with state laws and procedures. The CNMI Property Management Policies and Procedures requires the Division of Procurement & Supply (PS) to conduct an annual inventory of property held by a designated official who has administrative control over the use of personal property within his area of jurisdiction. Also, PS shall perform random audits of property held by each accountable person to validate the integrity of the property control process. Further, property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the Federal award identification number), who holds title, the acquisition date, cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Condition: 1. Tests of internal controls noted that a complete physical inventory of equipment and property was not performed by PS in FY 2021. 2. A property listing was provided by PS; however, information such as the federal award identification number, source of the property, who holds title, percentage of federal participation in the cost of the property, and use of the property, was not documented. 3. A variance of $415,046 was noted between the general ledger details of $665,165 of capital assets and $250,119 per the property listing provided by PS. Cause: The CNMI lacks the human resources and financial management system structure needed to effect compliance with applicable equipment and real property management requirements. Finding No. 2021-018, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award Nos.: D14AP00037, D16AP00064 D16AP00065, D17AP00111, D18AP00031, D18AP00130, D18AP00146, D18AP00165, D20AP00099, D20AP00119, and D21AP10003 Area: Equipment and Real Property Management Questioned Costs: $-0- Effect: The CNMI is in noncompliance with applicable equipment and real property management requirements. See below for the cumulative dollar amount of property and equipment acquired with program grant funds over the past five years. Identification as a Repeat Finding: Finding No. 2020-030 Recommendation: The CNMI should consider seeking technical and financial support from Federal agencies to develop human resources and a financial management system capable of effecting compliance with applicable property management policies and procedures. Views of responsible officials: Conditions 1 and 2 – The CNMI Corrective Action Plan states agreement. Condition 3 - The Division of Procurement Services disagrees with this finding. The Division of Procurement Services, Property Management wasn't informed of this audit parameter. For FY2021 number of Transactions/Units processed was 4970 units and the dollar value is $9,526,239. Auditor Response: Condition 3 - The request was for the inventory listing as of 09/30/21 fiscal year end. Further, the dollar amount of the equipment and property are all capital assets in excess of $5,000.

Finding No. 2021-019 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00082 Area: Matching, Level of Effort and Earmarking Questioned Costs: $7,488 Criteria: In accordance with the July 2021 Compliance Supplement, matching or cost sharing includes requirements to provide contributions (usually non-federal) of a specified amount or percentage to match federal awards. Condition: For one (or 50%) of two transactions tested, aggregating $7,559 of a total population of $35,910, the project worksheet and disaster number did not agree to the projects listed on file for the cost sharing. As a result, the cost share percentage of 25% was inappropriately applied. Cause: The cause of the above condition is the lack of internal controls and inadequate file maintenance. Effect: The CNMI is in noncompliance with applicable matching requirements and questioned costs of $7,488 result as the projected questioned costs exceed the $25,000 threshold. Recommendation: The CNMI should establish and implement controls over compliance with applicable matching requirements. Responsible personnel should review local and federal share files for accuracy of disbursements. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-020 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Criteria: Non-federal entities other than states, including those operating federal programs as subrecipients of states, must follow the procurement standards set out at 2 CFR sections 200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR Part 200. CNMI’s procurement regulations state the following: Retention of Procurement Records: (a) All procurement records shall be retained by the Procurement and Supply (P&S) Director for a period of 5 years after completion of construction, or full delivery of the goods or services under the contract. The official with expenditure authority shall also keep copies of all procurement records for their respective agencies. Requirements for Competition: Officials with expenditure authority shall provide for full and open competition through use of the competitive procedure that is best suited to the circumstances of the contract action. The competitive procedures available for use in fulfilling the requirement for full and open competition are as follows: (a) Competitive sealed bidding (§ 70-30.3-205) (b) Competitive sealed proposals (§ 70-30.3-210) (c) Architect-engineer services (§ 70-30.3-305); and (d) Competitive selection procedures for professional services (§ 70-30.3-310). § 70-30.3-201 Competitive sealed bidding: If there is no adequate local competition, the invitation for bids shall also be advertised in at least one regional newspaper or at least one national publication or on the internet; in such case, the P&S Director shall consider extending the bidding period. Small Purchases: Bidding is not required but is encouraged for procurement over $2,500 and under $10,000. The official with expenditure authority must obtain price quotations from at least three vendors and base the selection on competitive price and quality for procurement valued at $2,500 to $10,000. Any price quotations obtained must be written, documented, and submitted to the P&S Director for approval. Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Condition: Of forty-five expenditures tested, aggregating $4.5M of a total population of $6.4M in nonpayroll expenditures subject to procurement, the following were noted: 1. For two (or 4%), purchase order, purchase requisitions and contracts were not on file. 2. For five (or 11%), bid submissions and invitation-to-bid publications were not on file. No questioned costs are presented for Business Unit 5122 as no reimbursement were received in FY 2021. 3. For two (or 4%), no price quotations were written, documented, or submitted with the purchase order. Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Condition, continued: 4. For two or (4%), written justifications and the P&S Director’s written approvals of the emergency procurement method used were not provided. In addition, the contracts indicated the procurement used were for competitive sealed proposals; however, the procurement files support emergency procurement. Cause: CNMI did not enforce compliance with established procurement regulations over procurement. Effect: CNMI is in noncompliance with applicable procurement regulations and questioned costs of $1,240,465 result. Identification as a Repeat Finding: Finding No. 2020-032 Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Views of responsible officials: Condition 1 – CNMI Corrective Action Plan statements agreement. Condition 2 - The CIP Office disagrees with this finding. The Capital Improvement Program provided information regarding these questioned costs. For 703-OS/32200344 - RFQ20-GOV-084 was provided to the Auditor for their review. Three (3) proposers submitted a proposal. For 702-OS/32200912 - The procurement method for this was processed through a Sole Source. For CUC-WW-18-C032 - Lower Base Sewer Phase 1 - Lift Station and Focemain - This contract was executed by the Commonwealth Utilities Corporation on July 12, 2018. Procurement Services was able to obtain a copy of the contract from CUC to satisfy the audit testing. For 712727-OC (ITB20-DLNR/DOA-098) - Purchase of One (1) 13" Chipper Machine. Two bidders responded to this ITB; Boyer Trading Company & J. & J Company. Boyer Trading was selected as the lowest and responsive bidder. Condition 3 - The Office of Grants Management disagrees with these findings because these are Open Accounts, and this would mean that no price quotations were required during the purchase requisition process in order to obtain the purchase orders. As confirmed by Financial Services and Procurement Services, quotations were not required on an open account. Open accounts were allowed during the JD Edwards period and were discontinued after September 30, 2021. MUNIS was implemented in October 2021. Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Views of responsible officials, continued: Condition 4 - The Office of Grants Management (assisting DHSEM) disagrees with the finding because assigned personnel were not made aware of the documents needed; however, OGM is more than happy to provide the following documents to substantiate the purchase of a mobile Covid-19 Biological Safety Lab for the Commonwealth Healthcare Center and for the Alternate Care Site at Kanoa Resort. Per the documentation, the Public Assistance Office and DHSEM followed competitive procurement processing and invoked the Public Health Emergency Executive Order#2020-04 and to which the CNMI Attorney General’s Office approved the purchase. Purchase Order # 708019 was used by the Department of Homeland Security and Emergency Management and the Covid-19 Task Force. Contract number Covid19-0-0626 was provided. Expenses were later transferred to Department of the Interior CARES Act Funds under D20AP00049 per OGM Memo Number 2021-013. Auditor Response: Condition 2 – The bid documents, bid submissions and advertisements were not provided. Condition 3 – Per §70-30.3-220 of the CNMI Procurement Regulations that was in effect prior to May 28, 2021, the official with expenditure authority must obtain price quotations from at least three vendors and base the selection on competitive price and quality at $2,500 to $10,000. Any price quotations obtained must be written, documented, and submitted to the P&S Director for approval. Condition 4 – The supporting documents were requested on January 25, 2024 and were not provided.

Finding No. 2021-021 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D18AP00135 and D19AP00083 Area: Reporting Questioned Costs: $1,165 Criteria: In accordance with Section 8 of the Grant and Cooperative Agreement between the CNMI and the Office of Insular Affairs (OIA), a SF-425 Federal Financial Report will be submitted semi-annually for the period beginning January 1 and ending June 30 and beginning July 1 and ending December 31. Condition: The total federal share of expenditures reported on the SF-425 differ from the underlying accounting records. No questioned costs result for D19AP00083 as no reimbursement was received in FY2021. Cause: CNMI did not effectively monitor the accuracy and completeness of the SF-425 report based on underlying accounting records. Effect: CNMI is in noncompliance with SF-425 reporting requirements and questioned costs of $1,165 result for D18AP00135 as actual reimbursement exceeded recorded expenditures and the projected questioned costs exceed the $25,000 threshold. Recommendation: CNMI should implement monitoring control procedures to verify that amounts reported are supported by underlying accounting records derived from CNMI’s accounting system. Finding No. 2021-021, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D18AP00135 and D19AP00083 Area: Reporting Questioned Costs: $1,165 Views of Responsible Officials: The Office of Grants Management (assisting Financial Services – Federal Section) disagrees with the finding. Per the SF-425, the amount noted is $288,849 (rounded) and their records are accurate. Auditors did not inquire with the Federal Section about the variance they noted and are unsure of what accounting records they are referring to. Auditors would need to review this finding again and reach out to the Federal Section. Auditor Response: The underlying accounting records we are referring to are the accounting records that the CNMI utilizes to prepare the SF-245 reports which should include the reconciliation substantiating the variance between the SF-425 and the general ledger detail report.

Finding No. 2021-022 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00006 and D21AF10004 Area: Subrecipient Monitoring Questioned Costs: $ -0- Criteria: In accordance with 2 CFR § 200.332, pass-through entity (PTE) must establish and implement subrecipient monitoring policies and procedures, including the following: • At the time of the award, clearly identifying to the subrecipient all requirements imposed by the PTE on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations, and the terms and conditions of the award. • Evaluating the impact of subrecipient activities on the pass-through entity’s ability to comply with applicable federal regulations. Condition: 1. The subrecipients of the Capital Improvement Projects (CIP) and Compact Impact programs did not match the listing per the SEFA. 2. The program did not include the following required information in the subrecipient agreements: • Subrecipient’s Data Universal Numbering System (DUNS) number; • Federal Award Identification Number (FAIN); • Subaward Period of Performance Start and End Date; • Amount of Federal Funds Obligated by this action; • Total Amount of Federal Funds Obligated to the subrecipient; and • Indirect cost rate for the Federal award. Finding No. 2021-022, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00006 and D21AF10004 Area: Subrecipient Monitoring Questioned Costs: $ -0- Condition, continued: 3. There was no evidence of procedures used to monitor subrecipient compliance with applicable laws, regulations, and provisions of contracts and grant agreements. We are aware that the subrecipients, Public School System and Northern Marianas College, have been subjected to Single Audits; however, there is no evidence that the Single Audit reports were used as a monitoring tool. 4. Documentation was not provided to demonstrate monitoring procedures were performed on the subrecipients. Further, narrative reports on project status were not provided and made available. Cause: The CNMI failed to enforce compliance with subrecipient monitoring requirements. Effect: The CNMI is in noncompliance with applicable subrecipient monitoring requirements. No questioned costs are presented as the Single Audit reports of the subrecipients tested have been issued with no findings noted. Identification as a Repeat Finding: Finding No. 2020-033 Recommendation: The responsible personnel should consider obtaining training in the area of subrecipient monitoring and establishing and implementing policies and procedures over compliance with applicable subrecipient monitoring requirements. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-023 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016 Area: Special Tests and Provisions – Grant Terms and Conditions Questioned Costs: $-0- Criteria: In accordance with Section 5 of the Grant and Cooperative Agreement between the CNMI and the Office of Insular Affairs (OIA), for construction activities funded by grants, the Office of Insular Affairs (OIA) seal should be displayed on all construction signage that is intended to identify the project and funders, as appropriate. The seal must remain intact and unchanged and may only be displayed using either the standard color scheme or a single color that complements the background where it appears. The OIA grant manager should be contacted for an electronic version of the seal if needed. Condition: Of eight expenditures tested, aggregating $4.5M of a total population of $11.8M, for one (or 13%), documentation substantiating that the Office of Insular Affairs seal requirement was complied with was not provided: Cause: The CNMI did not effectively monitor compliance with applicable special tests and provisions requirements. Effect: The CNMI is in noncompliance with special tests and provisions requirements. No questioned costs are reported as we are unable to quantify the extent of noncompliance. Identification as a Repeat Finding: Finding No. 2020-034 Recommendation: The responsible personnel should monitor grant terms and conditions so that requirements are complied with. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-017 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00134, D19AP00142, D21AF10004, D21AF10052 Area: Allowable Costs/Cost Principles Questioned Costs: $402,941 Criteria: In accordance with 2 CFR Part 200, Subpart E, cost must be necessary and reasonable for the performance of the federal award and be allocable thereto. Further costs must conform to any limitations or exclusions and be adequately documented. Condition: Of thirty-four nonpayroll expenditures tested, aggregating $4.8M of a total population of $11.8M, the following were noted: 1. For one (or 3%), no purchase order or contract was provided. 2. For three (or 9%), no documents such as invoices or contracts were provided to substantiate costs. 3. Tests of the general ledger expenditure details noted that business unit 5122 amounting to $261,832 pertains to locally funded transactions and should not have been charged to the program. No questioned cost is presented as no reimbursements were made under this business unit. Finding No. 2021-017, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00134, D19AP00142, D21AF10004, D21AF10052 Area: Allowable Costs/Cost Principles Questioned Costs: $402,941 Cause: CNMI did not effectively enforce recordkeeping controls and perform monitoring controls over compliance with applicable allowable costs/cost principles requirements. Further, the CNMI did not effectively monitor cumulative expenditures and approved funding limits.Effect: CNMI is in noncompliance with applicable allowable costs/cost principles requirements and questioned costs of $402,941 result. Recommendation: CNMI management should establish a recordkeeping system whereby underlying support is filed accordingly to substantiate costs and management should also strengthen monitoring controls over transactions to substantiate program costs in accordance with applicable allowable costs/cost principles. Views of responsible officials: Condition 3 – The CNMI Corrective Action Plan states agreement. Conditions 1 & 2 - The OMB disagrees with this finding. Compact Impact grants often operate on a reimbursement basis.  This means that when the award is received, we request payment or a transfer of expenses to cover prior expenses that have already been incurred and paid.  Therefore, the memo that was processed for such request and other supporting documents can be provided.  Auditor Response: Conditions 1 & 2 - Documentation substantiating the costs charged to the program were not provided.

Finding No. 2021-018 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award Nos.: D14AP00037, D16AP00064 D16AP00065, D17AP00111, D18AP00031, D18AP00130, D18AP00146, D18AP00165, D20AP00099, D20AP00119, and D21AP10003 Area: Equipment and Real Property Management Questioned Costs: $-0- Criteria: In accordance with 2 CFR section 200.313(b)), a state must use, manage, and dispose of equipment acquired under a federal award in accordance with state laws and procedures. The CNMI Property Management Policies and Procedures requires the Division of Procurement & Supply (PS) to conduct an annual inventory of property held by a designated official who has administrative control over the use of personal property within his area of jurisdiction. Also, PS shall perform random audits of property held by each accountable person to validate the integrity of the property control process. Further, property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the Federal award identification number), who holds title, the acquisition date, cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Condition: 1. Tests of internal controls noted that a complete physical inventory of equipment and property was not performed by PS in FY 2021. 2. A property listing was provided by PS; however, information such as the federal award identification number, source of the property, who holds title, percentage of federal participation in the cost of the property, and use of the property, was not documented. 3. A variance of $415,046 was noted between the general ledger details of $665,165 of capital assets and $250,119 per the property listing provided by PS. Cause: The CNMI lacks the human resources and financial management system structure needed to effect compliance with applicable equipment and real property management requirements. Finding No. 2021-018, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award Nos.: D14AP00037, D16AP00064 D16AP00065, D17AP00111, D18AP00031, D18AP00130, D18AP00146, D18AP00165, D20AP00099, D20AP00119, and D21AP10003 Area: Equipment and Real Property Management Questioned Costs: $-0- Effect: The CNMI is in noncompliance with applicable equipment and real property management requirements. See below for the cumulative dollar amount of property and equipment acquired with program grant funds over the past five years. Identification as a Repeat Finding: Finding No. 2020-030 Recommendation: The CNMI should consider seeking technical and financial support from Federal agencies to develop human resources and a financial management system capable of effecting compliance with applicable property management policies and procedures. Views of responsible officials: Conditions 1 and 2 – The CNMI Corrective Action Plan states agreement. Condition 3 - The Division of Procurement Services disagrees with this finding. The Division of Procurement Services, Property Management wasn't informed of this audit parameter. For FY2021 number of Transactions/Units processed was 4970 units and the dollar value is $9,526,239. Auditor Response: Condition 3 - The request was for the inventory listing as of 09/30/21 fiscal year end. Further, the dollar amount of the equipment and property are all capital assets in excess of $5,000.

Finding No. 2021-019 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00082 Area: Matching, Level of Effort and Earmarking Questioned Costs: $7,488 Criteria: In accordance with the July 2021 Compliance Supplement, matching or cost sharing includes requirements to provide contributions (usually non-federal) of a specified amount or percentage to match federal awards. Condition: For one (or 50%) of two transactions tested, aggregating $7,559 of a total population of $35,910, the project worksheet and disaster number did not agree to the projects listed on file for the cost sharing. As a result, the cost share percentage of 25% was inappropriately applied. Cause: The cause of the above condition is the lack of internal controls and inadequate file maintenance. Effect: The CNMI is in noncompliance with applicable matching requirements and questioned costs of $7,488 result as the projected questioned costs exceed the $25,000 threshold. Recommendation: The CNMI should establish and implement controls over compliance with applicable matching requirements. Responsible personnel should review local and federal share files for accuracy of disbursements. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-020 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Criteria: Non-federal entities other than states, including those operating federal programs as subrecipients of states, must follow the procurement standards set out at 2 CFR sections 200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR Part 200. CNMI’s procurement regulations state the following: Retention of Procurement Records: (a) All procurement records shall be retained by the Procurement and Supply (P&S) Director for a period of 5 years after completion of construction, or full delivery of the goods or services under the contract. The official with expenditure authority shall also keep copies of all procurement records for their respective agencies. Requirements for Competition: Officials with expenditure authority shall provide for full and open competition through use of the competitive procedure that is best suited to the circumstances of the contract action. The competitive procedures available for use in fulfilling the requirement for full and open competition are as follows: (a) Competitive sealed bidding (§ 70-30.3-205) (b) Competitive sealed proposals (§ 70-30.3-210) (c) Architect-engineer services (§ 70-30.3-305); and (d) Competitive selection procedures for professional services (§ 70-30.3-310). § 70-30.3-201 Competitive sealed bidding: If there is no adequate local competition, the invitation for bids shall also be advertised in at least one regional newspaper or at least one national publication or on the internet; in such case, the P&S Director shall consider extending the bidding period. Small Purchases: Bidding is not required but is encouraged for procurement over $2,500 and under $10,000. The official with expenditure authority must obtain price quotations from at least three vendors and base the selection on competitive price and quality for procurement valued at $2,500 to $10,000. Any price quotations obtained must be written, documented, and submitted to the P&S Director for approval. Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Condition: Of forty-five expenditures tested, aggregating $4.5M of a total population of $6.4M in nonpayroll expenditures subject to procurement, the following were noted: 1. For two (or 4%), purchase order, purchase requisitions and contracts were not on file. 2. For five (or 11%), bid submissions and invitation-to-bid publications were not on file. No questioned costs are presented for Business Unit 5122 as no reimbursement were received in FY 2021. 3. For two (or 4%), no price quotations were written, documented, or submitted with the purchase order. Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Condition, continued: 4. For two or (4%), written justifications and the P&S Director’s written approvals of the emergency procurement method used were not provided. In addition, the contracts indicated the procurement used were for competitive sealed proposals; however, the procurement files support emergency procurement. Cause: CNMI did not enforce compliance with established procurement regulations over procurement. Effect: CNMI is in noncompliance with applicable procurement regulations and questioned costs of $1,240,465 result. Identification as a Repeat Finding: Finding No. 2020-032 Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Views of responsible officials: Condition 1 – CNMI Corrective Action Plan statements agreement. Condition 2 - The CIP Office disagrees with this finding. The Capital Improvement Program provided information regarding these questioned costs. For 703-OS/32200344 - RFQ20-GOV-084 was provided to the Auditor for their review. Three (3) proposers submitted a proposal. For 702-OS/32200912 - The procurement method for this was processed through a Sole Source. For CUC-WW-18-C032 - Lower Base Sewer Phase 1 - Lift Station and Focemain - This contract was executed by the Commonwealth Utilities Corporation on July 12, 2018. Procurement Services was able to obtain a copy of the contract from CUC to satisfy the audit testing. For 712727-OC (ITB20-DLNR/DOA-098) - Purchase of One (1) 13" Chipper Machine. Two bidders responded to this ITB; Boyer Trading Company & J. & J Company. Boyer Trading was selected as the lowest and responsive bidder. Condition 3 - The Office of Grants Management disagrees with these findings because these are Open Accounts, and this would mean that no price quotations were required during the purchase requisition process in order to obtain the purchase orders. As confirmed by Financial Services and Procurement Services, quotations were not required on an open account. Open accounts were allowed during the JD Edwards period and were discontinued after September 30, 2021. MUNIS was implemented in October 2021. Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Views of responsible officials, continued: Condition 4 - The Office of Grants Management (assisting DHSEM) disagrees with the finding because assigned personnel were not made aware of the documents needed; however, OGM is more than happy to provide the following documents to substantiate the purchase of a mobile Covid-19 Biological Safety Lab for the Commonwealth Healthcare Center and for the Alternate Care Site at Kanoa Resort. Per the documentation, the Public Assistance Office and DHSEM followed competitive procurement processing and invoked the Public Health Emergency Executive Order#2020-04 and to which the CNMI Attorney General’s Office approved the purchase. Purchase Order # 708019 was used by the Department of Homeland Security and Emergency Management and the Covid-19 Task Force. Contract number Covid19-0-0626 was provided. Expenses were later transferred to Department of the Interior CARES Act Funds under D20AP00049 per OGM Memo Number 2021-013. Auditor Response: Condition 2 – The bid documents, bid submissions and advertisements were not provided. Condition 3 – Per §70-30.3-220 of the CNMI Procurement Regulations that was in effect prior to May 28, 2021, the official with expenditure authority must obtain price quotations from at least three vendors and base the selection on competitive price and quality at $2,500 to $10,000. Any price quotations obtained must be written, documented, and submitted to the P&S Director for approval. Condition 4 – The supporting documents were requested on January 25, 2024 and were not provided.

Finding No. 2021-021 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D18AP00135 and D19AP00083 Area: Reporting Questioned Costs: $1,165 Criteria: In accordance with Section 8 of the Grant and Cooperative Agreement between the CNMI and the Office of Insular Affairs (OIA), a SF-425 Federal Financial Report will be submitted semi-annually for the period beginning January 1 and ending June 30 and beginning July 1 and ending December 31. Condition: The total federal share of expenditures reported on the SF-425 differ from the underlying accounting records. No questioned costs result for D19AP00083 as no reimbursement was received in FY2021. Cause: CNMI did not effectively monitor the accuracy and completeness of the SF-425 report based on underlying accounting records. Effect: CNMI is in noncompliance with SF-425 reporting requirements and questioned costs of $1,165 result for D18AP00135 as actual reimbursement exceeded recorded expenditures and the projected questioned costs exceed the $25,000 threshold. Recommendation: CNMI should implement monitoring control procedures to verify that amounts reported are supported by underlying accounting records derived from CNMI’s accounting system. Finding No. 2021-021, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D18AP00135 and D19AP00083 Area: Reporting Questioned Costs: $1,165 Views of Responsible Officials: The Office of Grants Management (assisting Financial Services – Federal Section) disagrees with the finding. Per the SF-425, the amount noted is $288,849 (rounded) and their records are accurate. Auditors did not inquire with the Federal Section about the variance they noted and are unsure of what accounting records they are referring to. Auditors would need to review this finding again and reach out to the Federal Section. Auditor Response: The underlying accounting records we are referring to are the accounting records that the CNMI utilizes to prepare the SF-245 reports which should include the reconciliation substantiating the variance between the SF-425 and the general ledger detail report.

Finding No. 2021-022 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00006 and D21AF10004 Area: Subrecipient Monitoring Questioned Costs: $ -0- Criteria: In accordance with 2 CFR § 200.332, pass-through entity (PTE) must establish and implement subrecipient monitoring policies and procedures, including the following: • At the time of the award, clearly identifying to the subrecipient all requirements imposed by the PTE on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations, and the terms and conditions of the award. • Evaluating the impact of subrecipient activities on the pass-through entity’s ability to comply with applicable federal regulations. Condition: 1. The subrecipients of the Capital Improvement Projects (CIP) and Compact Impact programs did not match the listing per the SEFA. 2. The program did not include the following required information in the subrecipient agreements: • Subrecipient’s Data Universal Numbering System (DUNS) number; • Federal Award Identification Number (FAIN); • Subaward Period of Performance Start and End Date; • Amount of Federal Funds Obligated by this action; • Total Amount of Federal Funds Obligated to the subrecipient; and • Indirect cost rate for the Federal award. Finding No. 2021-022, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00006 and D21AF10004 Area: Subrecipient Monitoring Questioned Costs: $ -0- Condition, continued: 3. There was no evidence of procedures used to monitor subrecipient compliance with applicable laws, regulations, and provisions of contracts and grant agreements. We are aware that the subrecipients, Public School System and Northern Marianas College, have been subjected to Single Audits; however, there is no evidence that the Single Audit reports were used as a monitoring tool. 4. Documentation was not provided to demonstrate monitoring procedures were performed on the subrecipients. Further, narrative reports on project status were not provided and made available. Cause: The CNMI failed to enforce compliance with subrecipient monitoring requirements. Effect: The CNMI is in noncompliance with applicable subrecipient monitoring requirements. No questioned costs are presented as the Single Audit reports of the subrecipients tested have been issued with no findings noted. Identification as a Repeat Finding: Finding No. 2020-033 Recommendation: The responsible personnel should consider obtaining training in the area of subrecipient monitoring and establishing and implementing policies and procedures over compliance with applicable subrecipient monitoring requirements. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-023 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016 Area: Special Tests and Provisions – Grant Terms and Conditions Questioned Costs: $-0- Criteria: In accordance with Section 5 of the Grant and Cooperative Agreement between the CNMI and the Office of Insular Affairs (OIA), for construction activities funded by grants, the Office of Insular Affairs (OIA) seal should be displayed on all construction signage that is intended to identify the project and funders, as appropriate. The seal must remain intact and unchanged and may only be displayed using either the standard color scheme or a single color that complements the background where it appears. The OIA grant manager should be contacted for an electronic version of the seal if needed. Condition: Of eight expenditures tested, aggregating $4.5M of a total population of $11.8M, for one (or 13%), documentation substantiating that the Office of Insular Affairs seal requirement was complied with was not provided: Cause: The CNMI did not effectively monitor compliance with applicable special tests and provisions requirements. Effect: The CNMI is in noncompliance with special tests and provisions requirements. No questioned costs are reported as we are unable to quantify the extent of noncompliance. Identification as a Repeat Finding: Finding No. 2020-034 Recommendation: The responsible personnel should monitor grant terms and conditions so that requirements are complied with. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-017 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00134, D19AP00142, D21AF10004, D21AF10052 Area: Allowable Costs/Cost Principles Questioned Costs: $402,941 Criteria: In accordance with 2 CFR Part 200, Subpart E, cost must be necessary and reasonable for the performance of the federal award and be allocable thereto. Further costs must conform to any limitations or exclusions and be adequately documented. Condition: Of thirty-four nonpayroll expenditures tested, aggregating $4.8M of a total population of $11.8M, the following were noted: 1. For one (or 3%), no purchase order or contract was provided. 2. For three (or 9%), no documents such as invoices or contracts were provided to substantiate costs. 3. Tests of the general ledger expenditure details noted that business unit 5122 amounting to $261,832 pertains to locally funded transactions and should not have been charged to the program. No questioned cost is presented as no reimbursements were made under this business unit. Finding No. 2021-017, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00134, D19AP00142, D21AF10004, D21AF10052 Area: Allowable Costs/Cost Principles Questioned Costs: $402,941 Cause: CNMI did not effectively enforce recordkeeping controls and perform monitoring controls over compliance with applicable allowable costs/cost principles requirements. Further, the CNMI did not effectively monitor cumulative expenditures and approved funding limits.Effect: CNMI is in noncompliance with applicable allowable costs/cost principles requirements and questioned costs of $402,941 result. Recommendation: CNMI management should establish a recordkeeping system whereby underlying support is filed accordingly to substantiate costs and management should also strengthen monitoring controls over transactions to substantiate program costs in accordance with applicable allowable costs/cost principles. Views of responsible officials: Condition 3 – The CNMI Corrective Action Plan states agreement. Conditions 1 & 2 - The OMB disagrees with this finding. Compact Impact grants often operate on a reimbursement basis.  This means that when the award is received, we request payment or a transfer of expenses to cover prior expenses that have already been incurred and paid.  Therefore, the memo that was processed for such request and other supporting documents can be provided.  Auditor Response: Conditions 1 & 2 - Documentation substantiating the costs charged to the program were not provided.

Finding No. 2021-018 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award Nos.: D14AP00037, D16AP00064 D16AP00065, D17AP00111, D18AP00031, D18AP00130, D18AP00146, D18AP00165, D20AP00099, D20AP00119, and D21AP10003 Area: Equipment and Real Property Management Questioned Costs: $-0- Criteria: In accordance with 2 CFR section 200.313(b)), a state must use, manage, and dispose of equipment acquired under a federal award in accordance with state laws and procedures. The CNMI Property Management Policies and Procedures requires the Division of Procurement & Supply (PS) to conduct an annual inventory of property held by a designated official who has administrative control over the use of personal property within his area of jurisdiction. Also, PS shall perform random audits of property held by each accountable person to validate the integrity of the property control process. Further, property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the Federal award identification number), who holds title, the acquisition date, cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Condition: 1. Tests of internal controls noted that a complete physical inventory of equipment and property was not performed by PS in FY 2021. 2. A property listing was provided by PS; however, information such as the federal award identification number, source of the property, who holds title, percentage of federal participation in the cost of the property, and use of the property, was not documented. 3. A variance of $415,046 was noted between the general ledger details of $665,165 of capital assets and $250,119 per the property listing provided by PS. Cause: The CNMI lacks the human resources and financial management system structure needed to effect compliance with applicable equipment and real property management requirements. Finding No. 2021-018, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award Nos.: D14AP00037, D16AP00064 D16AP00065, D17AP00111, D18AP00031, D18AP00130, D18AP00146, D18AP00165, D20AP00099, D20AP00119, and D21AP10003 Area: Equipment and Real Property Management Questioned Costs: $-0- Effect: The CNMI is in noncompliance with applicable equipment and real property management requirements. See below for the cumulative dollar amount of property and equipment acquired with program grant funds over the past five years. Identification as a Repeat Finding: Finding No. 2020-030 Recommendation: The CNMI should consider seeking technical and financial support from Federal agencies to develop human resources and a financial management system capable of effecting compliance with applicable property management policies and procedures. Views of responsible officials: Conditions 1 and 2 – The CNMI Corrective Action Plan states agreement. Condition 3 - The Division of Procurement Services disagrees with this finding. The Division of Procurement Services, Property Management wasn't informed of this audit parameter. For FY2021 number of Transactions/Units processed was 4970 units and the dollar value is $9,526,239. Auditor Response: Condition 3 - The request was for the inventory listing as of 09/30/21 fiscal year end. Further, the dollar amount of the equipment and property are all capital assets in excess of $5,000.

Finding No. 2021-019 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00082 Area: Matching, Level of Effort and Earmarking Questioned Costs: $7,488 Criteria: In accordance with the July 2021 Compliance Supplement, matching or cost sharing includes requirements to provide contributions (usually non-federal) of a specified amount or percentage to match federal awards. Condition: For one (or 50%) of two transactions tested, aggregating $7,559 of a total population of $35,910, the project worksheet and disaster number did not agree to the projects listed on file for the cost sharing. As a result, the cost share percentage of 25% was inappropriately applied. Cause: The cause of the above condition is the lack of internal controls and inadequate file maintenance. Effect: The CNMI is in noncompliance with applicable matching requirements and questioned costs of $7,488 result as the projected questioned costs exceed the $25,000 threshold. Recommendation: The CNMI should establish and implement controls over compliance with applicable matching requirements. Responsible personnel should review local and federal share files for accuracy of disbursements. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-020 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Criteria: Non-federal entities other than states, including those operating federal programs as subrecipients of states, must follow the procurement standards set out at 2 CFR sections 200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR Part 200. CNMI’s procurement regulations state the following: Retention of Procurement Records: (a) All procurement records shall be retained by the Procurement and Supply (P&S) Director for a period of 5 years after completion of construction, or full delivery of the goods or services under the contract. The official with expenditure authority shall also keep copies of all procurement records for their respective agencies. Requirements for Competition: Officials with expenditure authority shall provide for full and open competition through use of the competitive procedure that is best suited to the circumstances of the contract action. The competitive procedures available for use in fulfilling the requirement for full and open competition are as follows: (a) Competitive sealed bidding (§ 70-30.3-205) (b) Competitive sealed proposals (§ 70-30.3-210) (c) Architect-engineer services (§ 70-30.3-305); and (d) Competitive selection procedures for professional services (§ 70-30.3-310). § 70-30.3-201 Competitive sealed bidding: If there is no adequate local competition, the invitation for bids shall also be advertised in at least one regional newspaper or at least one national publication or on the internet; in such case, the P&S Director shall consider extending the bidding period. Small Purchases: Bidding is not required but is encouraged for procurement over $2,500 and under $10,000. The official with expenditure authority must obtain price quotations from at least three vendors and base the selection on competitive price and quality for procurement valued at $2,500 to $10,000. Any price quotations obtained must be written, documented, and submitted to the P&S Director for approval. Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Condition: Of forty-five expenditures tested, aggregating $4.5M of a total population of $6.4M in nonpayroll expenditures subject to procurement, the following were noted: 1. For two (or 4%), purchase order, purchase requisitions and contracts were not on file. 2. For five (or 11%), bid submissions and invitation-to-bid publications were not on file. No questioned costs are presented for Business Unit 5122 as no reimbursement were received in FY 2021. 3. For two (or 4%), no price quotations were written, documented, or submitted with the purchase order. Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Condition, continued: 4. For two or (4%), written justifications and the P&S Director’s written approvals of the emergency procurement method used were not provided. In addition, the contracts indicated the procurement used were for competitive sealed proposals; however, the procurement files support emergency procurement. Cause: CNMI did not enforce compliance with established procurement regulations over procurement. Effect: CNMI is in noncompliance with applicable procurement regulations and questioned costs of $1,240,465 result. Identification as a Repeat Finding: Finding No. 2020-032 Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Views of responsible officials: Condition 1 – CNMI Corrective Action Plan statements agreement. Condition 2 - The CIP Office disagrees with this finding. The Capital Improvement Program provided information regarding these questioned costs. For 703-OS/32200344 - RFQ20-GOV-084 was provided to the Auditor for their review. Three (3) proposers submitted a proposal. For 702-OS/32200912 - The procurement method for this was processed through a Sole Source. For CUC-WW-18-C032 - Lower Base Sewer Phase 1 - Lift Station and Focemain - This contract was executed by the Commonwealth Utilities Corporation on July 12, 2018. Procurement Services was able to obtain a copy of the contract from CUC to satisfy the audit testing. For 712727-OC (ITB20-DLNR/DOA-098) - Purchase of One (1) 13" Chipper Machine. Two bidders responded to this ITB; Boyer Trading Company & J. & J Company. Boyer Trading was selected as the lowest and responsive bidder. Condition 3 - The Office of Grants Management disagrees with these findings because these are Open Accounts, and this would mean that no price quotations were required during the purchase requisition process in order to obtain the purchase orders. As confirmed by Financial Services and Procurement Services, quotations were not required on an open account. Open accounts were allowed during the JD Edwards period and were discontinued after September 30, 2021. MUNIS was implemented in October 2021. Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Views of responsible officials, continued: Condition 4 - The Office of Grants Management (assisting DHSEM) disagrees with the finding because assigned personnel were not made aware of the documents needed; however, OGM is more than happy to provide the following documents to substantiate the purchase of a mobile Covid-19 Biological Safety Lab for the Commonwealth Healthcare Center and for the Alternate Care Site at Kanoa Resort. Per the documentation, the Public Assistance Office and DHSEM followed competitive procurement processing and invoked the Public Health Emergency Executive Order#2020-04 and to which the CNMI Attorney General’s Office approved the purchase. Purchase Order # 708019 was used by the Department of Homeland Security and Emergency Management and the Covid-19 Task Force. Contract number Covid19-0-0626 was provided. Expenses were later transferred to Department of the Interior CARES Act Funds under D20AP00049 per OGM Memo Number 2021-013. Auditor Response: Condition 2 – The bid documents, bid submissions and advertisements were not provided. Condition 3 – Per §70-30.3-220 of the CNMI Procurement Regulations that was in effect prior to May 28, 2021, the official with expenditure authority must obtain price quotations from at least three vendors and base the selection on competitive price and quality at $2,500 to $10,000. Any price quotations obtained must be written, documented, and submitted to the P&S Director for approval. Condition 4 – The supporting documents were requested on January 25, 2024 and were not provided.

Finding No. 2021-021 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D18AP00135 and D19AP00083 Area: Reporting Questioned Costs: $1,165 Criteria: In accordance with Section 8 of the Grant and Cooperative Agreement between the CNMI and the Office of Insular Affairs (OIA), a SF-425 Federal Financial Report will be submitted semi-annually for the period beginning January 1 and ending June 30 and beginning July 1 and ending December 31. Condition: The total federal share of expenditures reported on the SF-425 differ from the underlying accounting records. No questioned costs result for D19AP00083 as no reimbursement was received in FY2021. Cause: CNMI did not effectively monitor the accuracy and completeness of the SF-425 report based on underlying accounting records. Effect: CNMI is in noncompliance with SF-425 reporting requirements and questioned costs of $1,165 result for D18AP00135 as actual reimbursement exceeded recorded expenditures and the projected questioned costs exceed the $25,000 threshold. Recommendation: CNMI should implement monitoring control procedures to verify that amounts reported are supported by underlying accounting records derived from CNMI’s accounting system. Finding No. 2021-021, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D18AP00135 and D19AP00083 Area: Reporting Questioned Costs: $1,165 Views of Responsible Officials: The Office of Grants Management (assisting Financial Services – Federal Section) disagrees with the finding. Per the SF-425, the amount noted is $288,849 (rounded) and their records are accurate. Auditors did not inquire with the Federal Section about the variance they noted and are unsure of what accounting records they are referring to. Auditors would need to review this finding again and reach out to the Federal Section. Auditor Response: The underlying accounting records we are referring to are the accounting records that the CNMI utilizes to prepare the SF-245 reports which should include the reconciliation substantiating the variance between the SF-425 and the general ledger detail report.

Finding No. 2021-022 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00006 and D21AF10004 Area: Subrecipient Monitoring Questioned Costs: $ -0- Criteria: In accordance with 2 CFR § 200.332, pass-through entity (PTE) must establish and implement subrecipient monitoring policies and procedures, including the following: • At the time of the award, clearly identifying to the subrecipient all requirements imposed by the PTE on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations, and the terms and conditions of the award. • Evaluating the impact of subrecipient activities on the pass-through entity’s ability to comply with applicable federal regulations. Condition: 1. The subrecipients of the Capital Improvement Projects (CIP) and Compact Impact programs did not match the listing per the SEFA. 2. The program did not include the following required information in the subrecipient agreements: • Subrecipient’s Data Universal Numbering System (DUNS) number; • Federal Award Identification Number (FAIN); • Subaward Period of Performance Start and End Date; • Amount of Federal Funds Obligated by this action; • Total Amount of Federal Funds Obligated to the subrecipient; and • Indirect cost rate for the Federal award. Finding No. 2021-022, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00006 and D21AF10004 Area: Subrecipient Monitoring Questioned Costs: $ -0- Condition, continued: 3. There was no evidence of procedures used to monitor subrecipient compliance with applicable laws, regulations, and provisions of contracts and grant agreements. We are aware that the subrecipients, Public School System and Northern Marianas College, have been subjected to Single Audits; however, there is no evidence that the Single Audit reports were used as a monitoring tool. 4. Documentation was not provided to demonstrate monitoring procedures were performed on the subrecipients. Further, narrative reports on project status were not provided and made available. Cause: The CNMI failed to enforce compliance with subrecipient monitoring requirements. Effect: The CNMI is in noncompliance with applicable subrecipient monitoring requirements. No questioned costs are presented as the Single Audit reports of the subrecipients tested have been issued with no findings noted. Identification as a Repeat Finding: Finding No. 2020-033 Recommendation: The responsible personnel should consider obtaining training in the area of subrecipient monitoring and establishing and implementing policies and procedures over compliance with applicable subrecipient monitoring requirements. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-023 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016 Area: Special Tests and Provisions – Grant Terms and Conditions Questioned Costs: $-0- Criteria: In accordance with Section 5 of the Grant and Cooperative Agreement between the CNMI and the Office of Insular Affairs (OIA), for construction activities funded by grants, the Office of Insular Affairs (OIA) seal should be displayed on all construction signage that is intended to identify the project and funders, as appropriate. The seal must remain intact and unchanged and may only be displayed using either the standard color scheme or a single color that complements the background where it appears. The OIA grant manager should be contacted for an electronic version of the seal if needed. Condition: Of eight expenditures tested, aggregating $4.5M of a total population of $11.8M, for one (or 13%), documentation substantiating that the Office of Insular Affairs seal requirement was complied with was not provided: Cause: The CNMI did not effectively monitor compliance with applicable special tests and provisions requirements. Effect: The CNMI is in noncompliance with special tests and provisions requirements. No questioned costs are reported as we are unable to quantify the extent of noncompliance. Identification as a Repeat Finding: Finding No. 2020-034 Recommendation: The responsible personnel should monitor grant terms and conditions so that requirements are complied with. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-017 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00134, D19AP00142, D21AF10004, D21AF10052 Area: Allowable Costs/Cost Principles Questioned Costs: $402,941 Criteria: In accordance with 2 CFR Part 200, Subpart E, cost must be necessary and reasonable for the performance of the federal award and be allocable thereto. Further costs must conform to any limitations or exclusions and be adequately documented. Condition: Of thirty-four nonpayroll expenditures tested, aggregating $4.8M of a total population of $11.8M, the following were noted: 1. For one (or 3%), no purchase order or contract was provided. 2. For three (or 9%), no documents such as invoices or contracts were provided to substantiate costs. 3. Tests of the general ledger expenditure details noted that business unit 5122 amounting to $261,832 pertains to locally funded transactions and should not have been charged to the program. No questioned cost is presented as no reimbursements were made under this business unit. Finding No. 2021-017, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00134, D19AP00142, D21AF10004, D21AF10052 Area: Allowable Costs/Cost Principles Questioned Costs: $402,941 Cause: CNMI did not effectively enforce recordkeeping controls and perform monitoring controls over compliance with applicable allowable costs/cost principles requirements. Further, the CNMI did not effectively monitor cumulative expenditures and approved funding limits.Effect: CNMI is in noncompliance with applicable allowable costs/cost principles requirements and questioned costs of $402,941 result. Recommendation: CNMI management should establish a recordkeeping system whereby underlying support is filed accordingly to substantiate costs and management should also strengthen monitoring controls over transactions to substantiate program costs in accordance with applicable allowable costs/cost principles. Views of responsible officials: Condition 3 – The CNMI Corrective Action Plan states agreement. Conditions 1 & 2 - The OMB disagrees with this finding. Compact Impact grants often operate on a reimbursement basis.  This means that when the award is received, we request payment or a transfer of expenses to cover prior expenses that have already been incurred and paid.  Therefore, the memo that was processed for such request and other supporting documents can be provided.  Auditor Response: Conditions 1 & 2 - Documentation substantiating the costs charged to the program were not provided.

Finding No. 2021-018 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award Nos.: D14AP00037, D16AP00064 D16AP00065, D17AP00111, D18AP00031, D18AP00130, D18AP00146, D18AP00165, D20AP00099, D20AP00119, and D21AP10003 Area: Equipment and Real Property Management Questioned Costs: $-0- Criteria: In accordance with 2 CFR section 200.313(b)), a state must use, manage, and dispose of equipment acquired under a federal award in accordance with state laws and procedures. The CNMI Property Management Policies and Procedures requires the Division of Procurement & Supply (PS) to conduct an annual inventory of property held by a designated official who has administrative control over the use of personal property within his area of jurisdiction. Also, PS shall perform random audits of property held by each accountable person to validate the integrity of the property control process. Further, property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the Federal award identification number), who holds title, the acquisition date, cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Condition: 1. Tests of internal controls noted that a complete physical inventory of equipment and property was not performed by PS in FY 2021. 2. A property listing was provided by PS; however, information such as the federal award identification number, source of the property, who holds title, percentage of federal participation in the cost of the property, and use of the property, was not documented. 3. A variance of $415,046 was noted between the general ledger details of $665,165 of capital assets and $250,119 per the property listing provided by PS. Cause: The CNMI lacks the human resources and financial management system structure needed to effect compliance with applicable equipment and real property management requirements. Finding No. 2021-018, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award Nos.: D14AP00037, D16AP00064 D16AP00065, D17AP00111, D18AP00031, D18AP00130, D18AP00146, D18AP00165, D20AP00099, D20AP00119, and D21AP10003 Area: Equipment and Real Property Management Questioned Costs: $-0- Effect: The CNMI is in noncompliance with applicable equipment and real property management requirements. See below for the cumulative dollar amount of property and equipment acquired with program grant funds over the past five years. Identification as a Repeat Finding: Finding No. 2020-030 Recommendation: The CNMI should consider seeking technical and financial support from Federal agencies to develop human resources and a financial management system capable of effecting compliance with applicable property management policies and procedures. Views of responsible officials: Conditions 1 and 2 – The CNMI Corrective Action Plan states agreement. Condition 3 - The Division of Procurement Services disagrees with this finding. The Division of Procurement Services, Property Management wasn't informed of this audit parameter. For FY2021 number of Transactions/Units processed was 4970 units and the dollar value is $9,526,239. Auditor Response: Condition 3 - The request was for the inventory listing as of 09/30/21 fiscal year end. Further, the dollar amount of the equipment and property are all capital assets in excess of $5,000.

Finding No. 2021-019 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00082 Area: Matching, Level of Effort and Earmarking Questioned Costs: $7,488 Criteria: In accordance with the July 2021 Compliance Supplement, matching or cost sharing includes requirements to provide contributions (usually non-federal) of a specified amount or percentage to match federal awards. Condition: For one (or 50%) of two transactions tested, aggregating $7,559 of a total population of $35,910, the project worksheet and disaster number did not agree to the projects listed on file for the cost sharing. As a result, the cost share percentage of 25% was inappropriately applied. Cause: The cause of the above condition is the lack of internal controls and inadequate file maintenance. Effect: The CNMI is in noncompliance with applicable matching requirements and questioned costs of $7,488 result as the projected questioned costs exceed the $25,000 threshold. Recommendation: The CNMI should establish and implement controls over compliance with applicable matching requirements. Responsible personnel should review local and federal share files for accuracy of disbursements. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-020 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Criteria: Non-federal entities other than states, including those operating federal programs as subrecipients of states, must follow the procurement standards set out at 2 CFR sections 200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR Part 200. CNMI’s procurement regulations state the following: Retention of Procurement Records: (a) All procurement records shall be retained by the Procurement and Supply (P&S) Director for a period of 5 years after completion of construction, or full delivery of the goods or services under the contract. The official with expenditure authority shall also keep copies of all procurement records for their respective agencies. Requirements for Competition: Officials with expenditure authority shall provide for full and open competition through use of the competitive procedure that is best suited to the circumstances of the contract action. The competitive procedures available for use in fulfilling the requirement for full and open competition are as follows: (a) Competitive sealed bidding (§ 70-30.3-205) (b) Competitive sealed proposals (§ 70-30.3-210) (c) Architect-engineer services (§ 70-30.3-305); and (d) Competitive selection procedures for professional services (§ 70-30.3-310). § 70-30.3-201 Competitive sealed bidding: If there is no adequate local competition, the invitation for bids shall also be advertised in at least one regional newspaper or at least one national publication or on the internet; in such case, the P&S Director shall consider extending the bidding period. Small Purchases: Bidding is not required but is encouraged for procurement over $2,500 and under $10,000. The official with expenditure authority must obtain price quotations from at least three vendors and base the selection on competitive price and quality for procurement valued at $2,500 to $10,000. Any price quotations obtained must be written, documented, and submitted to the P&S Director for approval. Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Condition: Of forty-five expenditures tested, aggregating $4.5M of a total population of $6.4M in nonpayroll expenditures subject to procurement, the following were noted: 1. For two (or 4%), purchase order, purchase requisitions and contracts were not on file. 2. For five (or 11%), bid submissions and invitation-to-bid publications were not on file. No questioned costs are presented for Business Unit 5122 as no reimbursement were received in FY 2021. 3. For two (or 4%), no price quotations were written, documented, or submitted with the purchase order. Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Condition, continued: 4. For two or (4%), written justifications and the P&S Director’s written approvals of the emergency procurement method used were not provided. In addition, the contracts indicated the procurement used were for competitive sealed proposals; however, the procurement files support emergency procurement. Cause: CNMI did not enforce compliance with established procurement regulations over procurement. Effect: CNMI is in noncompliance with applicable procurement regulations and questioned costs of $1,240,465 result. Identification as a Repeat Finding: Finding No. 2020-032 Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Views of responsible officials: Condition 1 – CNMI Corrective Action Plan statements agreement. Condition 2 - The CIP Office disagrees with this finding. The Capital Improvement Program provided information regarding these questioned costs. For 703-OS/32200344 - RFQ20-GOV-084 was provided to the Auditor for their review. Three (3) proposers submitted a proposal. For 702-OS/32200912 - The procurement method for this was processed through a Sole Source. For CUC-WW-18-C032 - Lower Base Sewer Phase 1 - Lift Station and Focemain - This contract was executed by the Commonwealth Utilities Corporation on July 12, 2018. Procurement Services was able to obtain a copy of the contract from CUC to satisfy the audit testing. For 712727-OC (ITB20-DLNR/DOA-098) - Purchase of One (1) 13" Chipper Machine. Two bidders responded to this ITB; Boyer Trading Company & J. & J Company. Boyer Trading was selected as the lowest and responsive bidder. Condition 3 - The Office of Grants Management disagrees with these findings because these are Open Accounts, and this would mean that no price quotations were required during the purchase requisition process in order to obtain the purchase orders. As confirmed by Financial Services and Procurement Services, quotations were not required on an open account. Open accounts were allowed during the JD Edwards period and were discontinued after September 30, 2021. MUNIS was implemented in October 2021. Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Views of responsible officials, continued: Condition 4 - The Office of Grants Management (assisting DHSEM) disagrees with the finding because assigned personnel were not made aware of the documents needed; however, OGM is more than happy to provide the following documents to substantiate the purchase of a mobile Covid-19 Biological Safety Lab for the Commonwealth Healthcare Center and for the Alternate Care Site at Kanoa Resort. Per the documentation, the Public Assistance Office and DHSEM followed competitive procurement processing and invoked the Public Health Emergency Executive Order#2020-04 and to which the CNMI Attorney General’s Office approved the purchase. Purchase Order # 708019 was used by the Department of Homeland Security and Emergency Management and the Covid-19 Task Force. Contract number Covid19-0-0626 was provided. Expenses were later transferred to Department of the Interior CARES Act Funds under D20AP00049 per OGM Memo Number 2021-013. Auditor Response: Condition 2 – The bid documents, bid submissions and advertisements were not provided. Condition 3 – Per §70-30.3-220 of the CNMI Procurement Regulations that was in effect prior to May 28, 2021, the official with expenditure authority must obtain price quotations from at least three vendors and base the selection on competitive price and quality at $2,500 to $10,000. Any price quotations obtained must be written, documented, and submitted to the P&S Director for approval. Condition 4 – The supporting documents were requested on January 25, 2024 and were not provided.

Finding No. 2021-021 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D18AP00135 and D19AP00083 Area: Reporting Questioned Costs: $1,165 Criteria: In accordance with Section 8 of the Grant and Cooperative Agreement between the CNMI and the Office of Insular Affairs (OIA), a SF-425 Federal Financial Report will be submitted semi-annually for the period beginning January 1 and ending June 30 and beginning July 1 and ending December 31. Condition: The total federal share of expenditures reported on the SF-425 differ from the underlying accounting records. No questioned costs result for D19AP00083 as no reimbursement was received in FY2021. Cause: CNMI did not effectively monitor the accuracy and completeness of the SF-425 report based on underlying accounting records. Effect: CNMI is in noncompliance with SF-425 reporting requirements and questioned costs of $1,165 result for D18AP00135 as actual reimbursement exceeded recorded expenditures and the projected questioned costs exceed the $25,000 threshold. Recommendation: CNMI should implement monitoring control procedures to verify that amounts reported are supported by underlying accounting records derived from CNMI’s accounting system. Finding No. 2021-021, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D18AP00135 and D19AP00083 Area: Reporting Questioned Costs: $1,165 Views of Responsible Officials: The Office of Grants Management (assisting Financial Services – Federal Section) disagrees with the finding. Per the SF-425, the amount noted is $288,849 (rounded) and their records are accurate. Auditors did not inquire with the Federal Section about the variance they noted and are unsure of what accounting records they are referring to. Auditors would need to review this finding again and reach out to the Federal Section. Auditor Response: The underlying accounting records we are referring to are the accounting records that the CNMI utilizes to prepare the SF-245 reports which should include the reconciliation substantiating the variance between the SF-425 and the general ledger detail report.

Finding No. 2021-022 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00006 and D21AF10004 Area: Subrecipient Monitoring Questioned Costs: $ -0- Criteria: In accordance with 2 CFR § 200.332, pass-through entity (PTE) must establish and implement subrecipient monitoring policies and procedures, including the following: • At the time of the award, clearly identifying to the subrecipient all requirements imposed by the PTE on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations, and the terms and conditions of the award. • Evaluating the impact of subrecipient activities on the pass-through entity’s ability to comply with applicable federal regulations. Condition: 1. The subrecipients of the Capital Improvement Projects (CIP) and Compact Impact programs did not match the listing per the SEFA. 2. The program did not include the following required information in the subrecipient agreements: • Subrecipient’s Data Universal Numbering System (DUNS) number; • Federal Award Identification Number (FAIN); • Subaward Period of Performance Start and End Date; • Amount of Federal Funds Obligated by this action; • Total Amount of Federal Funds Obligated to the subrecipient; and • Indirect cost rate for the Federal award. Finding No. 2021-022, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00006 and D21AF10004 Area: Subrecipient Monitoring Questioned Costs: $ -0- Condition, continued: 3. There was no evidence of procedures used to monitor subrecipient compliance with applicable laws, regulations, and provisions of contracts and grant agreements. We are aware that the subrecipients, Public School System and Northern Marianas College, have been subjected to Single Audits; however, there is no evidence that the Single Audit reports were used as a monitoring tool. 4. Documentation was not provided to demonstrate monitoring procedures were performed on the subrecipients. Further, narrative reports on project status were not provided and made available. Cause: The CNMI failed to enforce compliance with subrecipient monitoring requirements. Effect: The CNMI is in noncompliance with applicable subrecipient monitoring requirements. No questioned costs are presented as the Single Audit reports of the subrecipients tested have been issued with no findings noted. Identification as a Repeat Finding: Finding No. 2020-033 Recommendation: The responsible personnel should consider obtaining training in the area of subrecipient monitoring and establishing and implementing policies and procedures over compliance with applicable subrecipient monitoring requirements. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-023 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016 Area: Special Tests and Provisions – Grant Terms and Conditions Questioned Costs: $-0- Criteria: In accordance with Section 5 of the Grant and Cooperative Agreement between the CNMI and the Office of Insular Affairs (OIA), for construction activities funded by grants, the Office of Insular Affairs (OIA) seal should be displayed on all construction signage that is intended to identify the project and funders, as appropriate. The seal must remain intact and unchanged and may only be displayed using either the standard color scheme or a single color that complements the background where it appears. The OIA grant manager should be contacted for an electronic version of the seal if needed. Condition: Of eight expenditures tested, aggregating $4.5M of a total population of $11.8M, for one (or 13%), documentation substantiating that the Office of Insular Affairs seal requirement was complied with was not provided: Cause: The CNMI did not effectively monitor compliance with applicable special tests and provisions requirements. Effect: The CNMI is in noncompliance with special tests and provisions requirements. No questioned costs are reported as we are unable to quantify the extent of noncompliance. Identification as a Repeat Finding: Finding No. 2020-034 Recommendation: The responsible personnel should monitor grant terms and conditions so that requirements are complied with. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-024 Federal Agency: U.S. Department of Labor AL Program: 17.225 Unemployment Insurance Federal Award No.: UI-34837-20-55-A-69 Area: Eligibility Questioned Costs: $1,131,117 Criteria: In accordance with the July 2021 OMB Compliance Supplement, applicants are determined to be eligible based on the criteria set forth in the Standard Operating Policies and Procedures for Pandemic Unemployment Assistance (PUA) and Federal Pandemic Unemployment Compensation (FPUC) Programs. To qualify, applicants must be a U.S. citizen, U.S. national, or qualified alien who reside in the CNMI and unable to work as a direct result of COVID-19. In addition, supporting documentation, when applicable, are required to be submitted to confirm residency, employment, and claims. Condition: Of sixty claimants tested, aggregating $35,970 in total benefits paid of a total population of $125.9M, deficiencies were noted as follows: 1. For four (or 7%), no copy of the social security card was provided. No questioned costs result as the claimants provided their social security numbers. 2. For forty-one (or 68%), the Pandemic Unemployment Qualification Determination letter sent to the claimant did not state the weeks of unemployment assistance the claimant requested. No questioned costs are presented as weeks claimed were within the period of performance date. 3. For four (or 7%), no evidence of verification through the United States Citizenship and Immigration Services’ (USCIS) Systematic Alien Verification for Entitlement (SAVE) program was on file to determine the eligibility of qualified aliens. Finding No. 2021-024, continued Federal Agency: U.S. Department of Labor AL Program: 17.225 Unemployment Insurance Federal Award No.: UI-34837-20-55-A-69 Area: Eligibility Questioned Costs: $1,131,117 Conditions, continued: Condition 3, continued: 4. Of the $24,919,128 in PUA/FPUC overpayments reported during FY2021, the CNMI subsequently recovered $23,790,333. Therefore, the remaining overpayment of $1,128,615 (consisting of $487,578 under PUA and $641,037 under FPUC) is assessed as questioned costs. Cause: The CNMI Department of Labor (DOL) did not effectively monitor compliance with applicable eligibility requirements and its Standard Operating Policies and Procedures for PUA and FPUC Programs. Effect: The CNMI is in noncompliance with applicable eligibility requirements and questioned costs of $1,131,117 result. Identification as a Repeat Finding: Finding No. 2020-037 Finding No. 2021-024, continued Federal Agency: U.S. Department of Labor AL Program: 17.225 Unemployment Insurance Federal Award No.: UI-34837-20-55-A-69 Area: Eligibility Questioned Costs: $1,131,117 Recommendation: The CNMI should strengthen monitoring controls over compliance with applicable eligibility requirements. Responsible personnel should timely perform quality control reviews and maintain relevant documentation in accordance with the applicable eligibility requirements. Further, the responsible CNMI personnel should enforce recovery of overpayments. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-025 Federal Agency: U.S. Department of Labor AL Program: 17.225 Unemployment Insurance Federal Award No.: UI-34837-20-55-A-69 Area: Special Tests and Provisions – UI Program Integrity - Overpayments Questioned Costs: $ -0- Criteria: In accordance with the July 2021 OMB Compliance Supplement, states must properly identify and handle overpayments including (a) detecting benefits paid in error, (b) deterring claimants from obtaining benefits through willful misrepresentation/fraud, (c) investigating and reporting fraudulent claims, and (d) recovering benefits overpaid. Condition: Of sixty claimant files tested, aggregating $903,883 of a total population of $24.9M in overpayments, we noted the following deficiencies: 1. For fifty-five (or 92%), none was reported to the Office of the Inspector General for suspected fraudulent activity. The claimant’s location was identified as out of state. No questioned costs are presented as amounts are questioned at Finding No. 2021-024, Condition 4. Finding No. 2021-025, continued Federal Agency: U.S. Department of Labor AL Program: 17.225 Unemployment Insurance Federal Award No.: UI-34837-20-55-A-69 Area: Special Tests and Provisions – UI Program Integrity - Overpayments Questioned Costs: $ -0- Condition, continued: 2. For one (or 2%) (OP Case No. PUAOP000181, amounting to $14,840, which consists of $6,200 under PUA and $8,640 under FPUC), a repayment plan has not been established for the recovery of overpayments. No questioned costs are presented as the amount is questioned at Finding No. 2021-024, Condition 4. 3. For one (or 2%) (OP Case No. PUAOP000437, amounting to $5,099, which consists of $1,859 under PUA and $3,240 under FPUC), the CNMI was not able to substantiate whether a debit or credit card was used for the repayment of benefits received. No questioned costs are presented as the amount is questioned at Finding No. 2021-024, Condition 4. 4. For one (or 2%) (OP Case No. PUAOP001010, amounting to $4,340 in PUA benefits), the written decision letter for appeal of overpayments was issued more than 30 days of the appeal filing. No questioned costs are presented as the amount is questioned at Finding No. 2021-024, Condition 4. 5. For sixteen (or 27%), documents were not made available for examination to determine whether funds from voided checks and/or cancelled ACH payments were returned to the respective program accounts for Business Units L0225A, L0225B, L0225F, L0225G, L0225I and L0225K. No questioned costs are presented as amounts are questioned at Finding No. 2021-024, Condition 4. Finding No. 2021-025, continued Federal Agency: U.S. Department of Labor AL Program: 17.225 Unemployment Insurance Federal Award No.: UI-34837-20-55-A-69 Area: Special Tests and Provisions – UI Program Integrity - Overpayments Questioned Costs: $ -0- Condition, continued: Condition 5, continued: Cause: The CNMI did not enforce compliance with applicable special tests and provisions requirements for overpayments. Effect: The CNMI is in noncompliance with applicable Special Tests and Provisions – UI Program Integrity- Overpayments Program requirements. Identification as a Repeat Finding: Finding No. 2020-039 Recommendation: Responsible CNMI personnel should enforce controls over compliance with applicable special tests and provision requirements for overpayments and should enforce recovery of overpayments. Views of Responsible Officials: Conditions 1, 2, 4 and 5 – The CNMI Corrective Plan states agreement. Finding No. 2021-025, continued Federal Agency: U.S. Department of Labor AL Program: 17.225 Unemployment Insurance Federal Award No.: UI-34837-20-55-A-69 Area: Special Tests and Provisions – UI Program Integrity - Overpayments Questioned Costs: $ -0- Views of Responsible Officials, Continued: Condition 3 - CNMI DOL does not agree with this finding. With respect to OP Case No. PUAOP000437, repayment was not necessary as the payment in this overpayment case was processed as a paper check. The paper check was noted as “Intercepted” due to having an out-of-state mailing address. Therefore, the initial benefit disbursement was not received by the claimant. No official overpayment determination was issued as payment was intercepted. Auditor Response: Condition 3 - Documentations supporting the “interception” of overpayments were not provided.

Finding No. 2021-024 Federal Agency: U.S. Department of Labor AL Program: 17.225 Unemployment Insurance Federal Award No.: UI-34837-20-55-A-69 Area: Eligibility Questioned Costs: $1,131,117 Criteria: In accordance with the July 2021 OMB Compliance Supplement, applicants are determined to be eligible based on the criteria set forth in the Standard Operating Policies and Procedures for Pandemic Unemployment Assistance (PUA) and Federal Pandemic Unemployment Compensation (FPUC) Programs. To qualify, applicants must be a U.S. citizen, U.S. national, or qualified alien who reside in the CNMI and unable to work as a direct result of COVID-19. In addition, supporting documentation, when applicable, are required to be submitted to confirm residency, employment, and claims. Condition: Of sixty claimants tested, aggregating $35,970 in total benefits paid of a total population of $125.9M, deficiencies were noted as follows: 1. For four (or 7%), no copy of the social security card was provided. No questioned costs result as the claimants provided their social security numbers. 2. For forty-one (or 68%), the Pandemic Unemployment Qualification Determination letter sent to the claimant did not state the weeks of unemployment assistance the claimant requested. No questioned costs are presented as weeks claimed were within the period of performance date. 3. For four (or 7%), no evidence of verification through the United States Citizenship and Immigration Services’ (USCIS) Systematic Alien Verification for Entitlement (SAVE) program was on file to determine the eligibility of qualified aliens. Finding No. 2021-024, continued Federal Agency: U.S. Department of Labor AL Program: 17.225 Unemployment Insurance Federal Award No.: UI-34837-20-55-A-69 Area: Eligibility Questioned Costs: $1,131,117 Conditions, continued: Condition 3, continued: 4. Of the $24,919,128 in PUA/FPUC overpayments reported during FY2021, the CNMI subsequently recovered $23,790,333. Therefore, the remaining overpayment of $1,128,615 (consisting of $487,578 under PUA and $641,037 under FPUC) is assessed as questioned costs. Cause: The CNMI Department of Labor (DOL) did not effectively monitor compliance with applicable eligibility requirements and its Standard Operating Policies and Procedures for PUA and FPUC Programs. Effect: The CNMI is in noncompliance with applicable eligibility requirements and questioned costs of $1,131,117 result. Identification as a Repeat Finding: Finding No. 2020-037 Finding No. 2021-024, continued Federal Agency: U.S. Department of Labor AL Program: 17.225 Unemployment Insurance Federal Award No.: UI-34837-20-55-A-69 Area: Eligibility Questioned Costs: $1,131,117 Recommendation: The CNMI should strengthen monitoring controls over compliance with applicable eligibility requirements. Responsible personnel should timely perform quality control reviews and maintain relevant documentation in accordance with the applicable eligibility requirements. Further, the responsible CNMI personnel should enforce recovery of overpayments. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-025 Federal Agency: U.S. Department of Labor AL Program: 17.225 Unemployment Insurance Federal Award No.: UI-34837-20-55-A-69 Area: Special Tests and Provisions – UI Program Integrity - Overpayments Questioned Costs: $ -0- Criteria: In accordance with the July 2021 OMB Compliance Supplement, states must properly identify and handle overpayments including (a) detecting benefits paid in error, (b) deterring claimants from obtaining benefits through willful misrepresentation/fraud, (c) investigating and reporting fraudulent claims, and (d) recovering benefits overpaid. Condition: Of sixty claimant files tested, aggregating $903,883 of a total population of $24.9M in overpayments, we noted the following deficiencies: 1. For fifty-five (or 92%), none was reported to the Office of the Inspector General for suspected fraudulent activity. The claimant’s location was identified as out of state. No questioned costs are presented as amounts are questioned at Finding No. 2021-024, Condition 4. Finding No. 2021-025, continued Federal Agency: U.S. Department of Labor AL Program: 17.225 Unemployment Insurance Federal Award No.: UI-34837-20-55-A-69 Area: Special Tests and Provisions – UI Program Integrity - Overpayments Questioned Costs: $ -0- Condition, continued: 2. For one (or 2%) (OP Case No. PUAOP000181, amounting to $14,840, which consists of $6,200 under PUA and $8,640 under FPUC), a repayment plan has not been established for the recovery of overpayments. No questioned costs are presented as the amount is questioned at Finding No. 2021-024, Condition 4. 3. For one (or 2%) (OP Case No. PUAOP000437, amounting to $5,099, which consists of $1,859 under PUA and $3,240 under FPUC), the CNMI was not able to substantiate whether a debit or credit card was used for the repayment of benefits received. No questioned costs are presented as the amount is questioned at Finding No. 2021-024, Condition 4. 4. For one (or 2%) (OP Case No. PUAOP001010, amounting to $4,340 in PUA benefits), the written decision letter for appeal of overpayments was issued more than 30 days of the appeal filing. No questioned costs are presented as the amount is questioned at Finding No. 2021-024, Condition 4. 5. For sixteen (or 27%), documents were not made available for examination to determine whether funds from voided checks and/or cancelled ACH payments were returned to the respective program accounts for Business Units L0225A, L0225B, L0225F, L0225G, L0225I and L0225K. No questioned costs are presented as amounts are questioned at Finding No. 2021-024, Condition 4. Finding No. 2021-025, continued Federal Agency: U.S. Department of Labor AL Program: 17.225 Unemployment Insurance Federal Award No.: UI-34837-20-55-A-69 Area: Special Tests and Provisions – UI Program Integrity - Overpayments Questioned Costs: $ -0- Condition, continued: Condition 5, continued: Cause: The CNMI did not enforce compliance with applicable special tests and provisions requirements for overpayments. Effect: The CNMI is in noncompliance with applicable Special Tests and Provisions – UI Program Integrity- Overpayments Program requirements. Identification as a Repeat Finding: Finding No. 2020-039 Recommendation: Responsible CNMI personnel should enforce controls over compliance with applicable special tests and provision requirements for overpayments and should enforce recovery of overpayments. Views of Responsible Officials: Conditions 1, 2, 4 and 5 – The CNMI Corrective Plan states agreement. Finding No. 2021-025, continued Federal Agency: U.S. Department of Labor AL Program: 17.225 Unemployment Insurance Federal Award No.: UI-34837-20-55-A-69 Area: Special Tests and Provisions – UI Program Integrity - Overpayments Questioned Costs: $ -0- Views of Responsible Officials, Continued: Condition 3 - CNMI DOL does not agree with this finding. With respect to OP Case No. PUAOP000437, repayment was not necessary as the payment in this overpayment case was processed as a paper check. The paper check was noted as “Intercepted” due to having an out-of-state mailing address. Therefore, the initial benefit disbursement was not received by the claimant. No official overpayment determination was issued as payment was intercepted. Auditor Response: Condition 3 - Documentations supporting the “interception” of overpayments were not provided.

Finding No. 2021-026 Federal Agency: U.S. Department of the Treasury AL Program: 21.019 Coronavirus Relief Fund Federal Award No.: COVID-19 Area: Allowable Costs/Cost Principles Questioned Costs: $20,341,913 Criteria: In accordance with 2 CFR Part 200, Subpart E, cost must be necessary and reasonable for the performance of the federal award and be allocable thereto. Further costs must conform to any limitations or exclusions and be adequately documented. Condition: Of nine expenditures tested, aggregating $20.8M of a total population of $25M, for two (or 22%), either the check payments and/or invoices were not provided. Cause: CNMI did not enforce monitoring controls over compliance with applicable allowable costs/cost principles requirements. Effect: CNMI is in noncompliance with applicable allowable costs/cost principles requirements and questioned costs of $20,341,913 result. Identification as a Repeat Finding: Finding No. 2020-041 Recommendation: CNMI should strengthen monitoring controls over compliance with applicable allowable costs/cost principles requirements. Views of responsible officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-027 Federal Agency: U.S. Department of the Treasury AL Program: 21.019 Coronavirus Relief Fund Federal Award No.: COVID-19 Area: Reporting Questioned Costs: $-0- Criteria: In accordance with the July 2021 OMB Compliance Supplement, each prime recipient of the Coronavirus Relief Fund (CRF) shall provide a quarterly Financial Progress Report that contains COVID-19 related costs incurred during the covered period (the period beginning on March 1, 2020 and ending on December 30, 2021) to Treasury’s Office of Inspector General. For quarterly reporting, each prime recipient shall report this quarterly information into the Grant Solutions portal. The Prime recipient’s quarterly Financial Progress Report submissions is only for the reporting of costs incurred related to CRF proceeds received from Treasury and should be supported by the data in the prime recipient’s accounting system. Quarterly reporting will be due no later than ten days after each calendar quarter. If the 10th calendar day falls on a weekend or a federal holiday, the due date will be the next working day. Condition: Tests of the quarterly Financial Progress reports for the quarters ended 03/31/2021 and 09/30/2021 noted the following: 1. The underlying accounting records supporting amounts reported were not provided. Quarter Ended 03/31/21 Quarter Ended 09/30/21 Finding No. 2021-027, continued Federal Agency: U.S. Department of the Treasury AL Program: 21.019 Coronavirus Relief Fund Federal Award No.: COVID-19 Area: Reporting Questioned Costs: $-0- Condition, continued: 2. The 12/31/20 and 6/30/21 reporting periods were not submitted in the Grant Solutions portal. No questioned costs are presented as we are not able to quantify the extent of noncompliance. Cause: The CNMI lacks monitoring control procedures to verify that amounts reported are supported by underlying accounting records derived from the CNMI's accounting system and that the required financial progress reports are submitted in the Grant Solutions portal by applicable due dates. Effect: The CNMI is in noncompliance with Financial Progress reporting requirements. Identification as a Repeat Finding: Finding No. 2020-043 Recommendation: CNMI should implement monitoring control procedures to verify that amounts reported are supported by underlying accounting records derived from CNMI's accounting system and that required financial progress reports are submitted in the Grant Solutions portal by applicable due dates. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-028 Federal Agency: U.S. Department of the Treasury AL Program: 21.019 Coronavirus Relief Fund Federal Award No.: COVID-19 Area: Subrecipient Monitoring Questioned Costs: $59,158 Criteria: In accordance with 2 CFR § 200.332, the pass-through entity (PTE) must establish and implement subrecipient monitoring policies and procedures, including the following: • At the time of the award, clearly identifying to the subrecipient all requirements imposed by the PTE on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations, and the terms and conditions of the award. • Evaluating the impact of subrecipient activities on the pass-through entity’s ability to comply with applicable federal regulations. Condition: 1. Subrecipient monitoring policies and procedures was not provided; as such, we did not obtain an understanding of CNMI’s process to identify subawards, evaluate risk of noncompliance, and perform monitoring procedures based upon identified risks. 2. Of one (or 100%) subrecipient tested, aggregating $59,158 of a total population of $5.097M, the subrecipient agreement was not provided and there was no evidence of monitoring procedures performed to determine whether the subrecipient is in compliance with applicable laws, regulations, and provisions of contracts and grant agreements, for which amount is questioned. Cause: The CNMI failed to enforce compliance with subrecipient monitoring requirements. Effect: The CNMI is in noncompliance with applicable subrecipient monitoring requirements and questioned costs of $59,158 result. Finding No. 2021-028, continued Federal Agency: U.S. Department of the Treasury AL Program: 21.019 Coronavirus Relief Fund Federal Award No.: COVID-19 Area: Subrecipient Monitoring Questioned Costs: $59,158 Recommendation: The responsible personnel should consider obtaining training in the area of subrecipient monitoring and establishing and implementing policies and procedures over compliance with applicable subrecipient monitoring requirements. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-029 Federal Agency: U.S. Department of the Treasury AL Program: 21.023 Emergency Rental Assistance Program Federal Award No.: COVID-19 Area: Eligibility Questioned Costs: $4,252 Criteria: In accordance with Section 501 of Division N of the Consolidated Act, 2021, Publication L No. 116-260 (Dec. 27, 2020), grantee may only use funds provided in the Emergency Rental Assistance (ERA) program to provide financial assistance and housing stability services to eligible households. Eligibility is limited to households with income that does not exceed 80 percent of the median income for the area in which the household is located. Condition: Of sixty case files tested, aggregating $196,992 of a total population of $3,680,786, for two (or 3%), the housing instability and financial hardship attestations, check stubs, lease, and other supporting documents to verify applicant’s eligibility were not provided. Cause: The CNMI did not effectively monitor compliance with applicable eligibility requirements. Effect: The CNMI is in noncompliance with applicable eligibility requirements and questioned costs of $4,252 result as the total projected questioned costs exceed the $25,000 threshold. Recommendation: The CNMI should strengthen monitoring controls over compliance with applicable eligibility requirements. Prior to approving applications, responsible personnel should verify that the applicable documentations are on file to substantiate eligibility determinations. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-030 Federal Agency: U.S. Department of the Treasury AL Program: 21.023 Emergency Rental Assistance Program Federal Award No.: COVID-19 Area: Reporting Questioned Costs: $-0- Criteria: The Emergency Rental Assistance Program Reporting Guidance states that ERA1 and ERA2 recipients are required to submit partial Quarterly Compliance Q2 reports and must provide brief monthly reports for the months of July and August 2021. Condition: Partial quarterly compliance Q2 reports and brief monthly reports for July and August 2021 were not submitted for ERA1 and ERA2. No questioned cost is presented as we are not able to quantify the extent of noncompliance. Cause: CNMI did not submit the required ERA1 and ERA2 Q2 compliance reports and brief monthly reports. Effect: CNMI is in noncompliance with the Q2 compliance reports and the brief monthly reports reporting requirements. Recommendation: CNMI should implement monitoring control procedures to verify that required compliance and brief monthly reports are submitted by the applicable due dates. Views of Responsible Officials: The Office of Grants Management disagrees with the finding because OGM was not in charge of reporting in the beginning; we had no access to upload the reports nor knew exactly what to load. The Secretary of Finance Office personnel at that time had all the controls and knowledge of what was needed. Auditor Response: The CNMI did not comply with the quarterly progress and brief monthly reporting requirements.

Finding No. 2021-031 Federal Agency: U.S. Department of the Treasury AL Program: 21.027 Coronavirus State And Local Fiscal Recovery Funds Federal Award No.: COVID-19 Area: Allowable Costs/Cost Principles Questioned Costs: $1,035,442 Criteria: In accordance with 2 CFR Part 200, Subpart E, cost must be necessary and reasonable for the performance of the federal award and be allocable thereto. Further costs must conform to any limitations or exclusions and be adequately documented. Condition: Of thirty-seven nonpayroll expenditures tested, aggregating $11.9M of a total population of $49.3M, for three (or 8%), journal vouchers, invoices and contracts were not provided. Cause: CNMI did not enforce monitoring controls over compliance with applicable allowable costs/cost principles requirements. Effect: CNMI is in noncompliance with applicable allowable costs/cost principles requirements and questioned costs of $1,035,442 result. Recommendation: CNMI should strengthen monitoring controls over compliance with applicable allowable costs/cost principles requirements. Views of responsible officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-032 Federal Agency: U.S. Department of the Treasury AL Program: 21.027 Coronavirus State and Local Fiscal Recovery Funds Federal Award No.: COVID-19 Area: Procurement and Suspension and Debarment Questioned Costs: $2,775,965 Criteria: Non-federal entities other than states, including those operating federal programs as subrecipients of states, must follow the procurement standards set out at 2 CFR sections 200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR Part 200. CNMI’s procurement regulations state the following: • All government procurement shall be awarded by competitive sealed bidding except under certain circumstances permitting other than full and open competition. • Bidding is not required but is encouraged for procurement of $2,500 and under $10,000. The individual with the expenditure authority must obtain price quotations from at least three vendors and should base the selection on competitive price and quality for procurement valued at $2,500 to $10,000. Any price quotations must be written, documented, and submitted to the Procurement and Supply (P&S) Director for approval. • For purchases that exceed $10,000 but which are less than or equal to $50,000, a minimum of three vendors shall be solicited to submit written or electronic quotations. If there are fewer than three vendors, the expenditure authority shall certify, in writing, to the P&S Director that fewer than three vendors responded and shall provide written proof of the request. Condition: Of fifty-one nonpayroll expenditures tested, aggregating $3.1M of a total population of $6.7M expenditures subject to procurement, the following were noted: 1. For thirty-four (or 67%), no procurement documents were provided. Finding No. 2021-032, continued Federal Agency: U.S. Department of the Treasury AL Program: 21.027 Coronavirus State and Local Fiscal Recovery Funds Federal Award No.: COVID-19 Area: Procurement and Suspension and Debarment Questioned Costs: $2,775,965 Condition, continued: Condition 1, continued: 2. For one (or 2%) (document no. 1718052 dated 08/10/21 amounting to $26,100), the contract and underlying procurement files were not provided, for which the amount is questioned. 3. For four (or 8%), vendor quotations were not provided. Finding No. 2021-032, continued Federal Agency: U.S. Department of the Treasury AL Program: 21.027 Coronavirus State and Local Fiscal Recovery Funds Federal Award No.: COVID-19 Area: Procurement and Suspension and Debarment Questioned Costs: $2,775,965 Condition, continued: 4. For one (or 2%) (document no. 1719396 dated 08/17/21 amounting $764,345), the procurement method used was not specified and the P&S Director’s written determination were not provided, for which the amount is questioned. Cause: CNMI did not enforce compliance with established procurement regulations. Effect: CNMI is in noncompliance with established procurement regulations and questioned costs of $2,775,965 result. Recommendation: Responsible personnel should monitor and enforce compliance with applicable procurement regulations, including the review of procurement files for completeness as to written rationale for deviations from applicable procurement requirements. Further, responsible personnel should maintain procurement documents to substantiate compliance. Views of Responsible Officials: Condition 2, 3 for Doc No. 263066 and 4 – The CNMI Corrective Action Plan states agreement. Condition 1 – The Department of Finance – Procurement Services disagrees with this finding. No procurement documents were provided because these thirty-four transactions were for payments made out for Travel, Medical Referral Patients, etc. Finding No. 2021-032, continued Federal Agency: U.S. Department of the Treasury AL Program: 21.027 Coronavirus State and Local Fiscal Recovery Funds Federal Award No.: COVID-19 Area: Procurement and Suspension and Debarment Questioned Costs: $2,775,965 Views of responsible officials: Condition 3 - The Department of Finance – Procurement Services disagrees with these findings. For 732176-000 OP $13,440 - No other quotes provided as it was the PS Acting Director's (FC Aguon) discretion, and the purchase requisition was approved by the former SOF (D. Atalig). For 724870-000 OP $8,789 - No other quotes provided as it was the PS Acting Director's (FC Aguon) discretion, and the purchase requisition was approved by the former SOF (D. Atalig). The Emergency Declaration suspended the procurement regulations and authorized the Expenditure Authority to procure any items/procure services exceeding the threshold without obtaining any price quotes. For PO #732176 & 728470, these are not part of the Gov’s Executive Order #2022-04. The Division of Procurement Services will accept the findings as noncompliance with the CNMI Procurement Regulations. Auditor Response: Condition 1 – No supporting documentation were provided to substantiate that the transactions pertain to travel and medical referral patients. In addition, based on the general ledger descriptions, Document Nos. 921922, 1727770, 1727772, 1735047, 1721009, 1717349, 261094, 1722328, 1722338, 261528, 1666323, 1665777 and 1732183 pertain to legal professional fees, Tourism Resumption Investment Plan (TRIP) program, professional services, postage meter, lease rental, air condition service, fuel, office supplies, Pelican LED rechargeable, project improvements, tents and picnic tables rental and vacuum purchases. Further, we were not able to determine the type of expenditure for document no. 1674103 as the only description stated was "JUN 2021". Condition 3 – Pursuant to § 70-30.3-220, if fewer than three vendors submit quotations, the expenditure authority shall certify, in writing, to the Director that fewer than three vendors responded and shall provide written proof of the request. If fewer than three of the solicited vendors submit quotes, the Director may either approve the request or instruct the expenditure authority to solicit additional quotes.

Finding No. 2021-033 Federal Agency: U.S. Department of the Treasury AL Program: 21.027 Coronavirus State and Local Fiscal Recovery Funds Federal Award No.: COVID-19 Area: Subrecipient Monitoring Questioned Costs: $0 Criteria: In accordance with 2 CFR § 200.332, pass-through entity (PTE) must establish and implement subrecipient monitoring policies and procedures, including the following: • At the time of the award, clearly identifying to the subrecipient all requirements imposed by the PTE on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations, and the terms and conditions of the award. • Evaluating the impact of subrecipient activities on the pass-through entity’s ability to comply with applicable federal regulations. Condition: 1. The CNMI has no existing written subrecipient monitoring policies and procedures. 2. Of one (or 100%) subrecipient tested, aggregating $541,495 of a total population of $11.4M, the subaward agreement was only executed on August 5, 2022, which was subsequent to when funds were disbursed to vendors. 3. Subsequent to FY 2021 and during our audit fieldwork was when the CNMI identified certain transactions to be beneficiaries in nature rather than as subrecipients. Accordingly, the CNMI revised its subrecipients listing from eleven to six amounting from $12,671,495 to $11,421,495. Cause: The CNMI lacks written subrecipient monitoring policies and procedures and lacks monitoring control procedures over distinctions between a beneficiary and a subrecipient. Effect: The CNMI is in noncompliance with applicable subrecipient monitoring requirements. No questioned costs are presented as all transactions were processed and paid out through the central government. Finding No. 2021-033, continued Federal Agency: U.S. Department of the Treasury AL Program: 21.027 Coronavirus State and Local Fiscal Recovery Funds Federal Award No.: COVID-19 Area: Subrecipient Monitoring Questioned Costs: $0 Recommendation: The responsible CNMI personnel should consider obtaining training in the area of subrecipient distinction and establish written policies and procedures over compliance with applicable subrecipient monitoring requirements. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-034 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: 2001MPCCC3, 2101MPCCDF, 2101MPCCC5 Area: Eligibility Questioned Costs: $39,200 Criteria: In accordance with CCDF State Plan, an applicant's eligibility for child care service shall be made within fifteen calendar days after submission of a complete application. The date of application shall be the date the signed form and all supporting documents are received by the Child Care Program. Further, to be eligible for child care services, applicants must meet the following requirements, among others: • If the parent qualifies for work, required documents include the most recent 1040 tax form and a current and valid CW work permit; • If claiming to be a single parent, the program requires an Affidavit to be completed. Affidavit must be signed by the applicant; • Applicant's identity (parent or guardian) should be verified using valid identification such as a current and valid photo ID (CNMI Driver's License; Mayor's ID; Passport); • If the parent qualifies under work, verify income to three (3) most recent pay stubs, employment verification (prescribed), and most recent 1040 tax form. Condition: Of forty eligibility case files tested, aggregating $17,750 in total benefits paid of a total population of $2.8M, the following were noted: 1. For three (or 8%), documentation of the valid work permits for the following applicants who are non-U.S. citizens before eligibility period would begin were not on file. Finding No. 2021-034, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: 2001MPCCC3, 2101MPCCDF, 2101MPCCC5 Area: Eligibility Questioned Costs: $39,200 Condition, continued: 2. For three (or 8%), the single parent affidavits were not dated. No questioned cost is presented for Case ID 3170B as amount is questioned at Condition 1. 3. For three (or 8%), recent 1040 tax forms were not on file. 4. For one (or 3%), the applicant was ineligible to work in the CNMI. No questioned cost is presented as the amount is questioned at Condition 3. Cause: The CNMI did not effectively perform controls over compliance with applicable eligibility requirements. Finding No. 2021-034, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: 2001MPCCC3, 2101MPCCDF, 2101MPCCC5 Area: Eligibility Questioned Costs: $39,200 Effect: The CNMI is in noncompliance with applicable eligibility requirements and questioned costs of $39,200 result. Identification as a Repeat Finding: 2020-049 Recommendation: The CNMI should strengthen controls over compliance with applicable eligibility requirements. Responsible personnel should utilize the application checklist and review it against the applicant's files to verify that all required forms and information are completed and filed accordingly. Views of Responsible Officials: Condition 2 – The CNMI Corrective Action Plan states agreement. Condition 1 – CCDF disagrees with this finding. Case ID 3170B: CW1-upon submission of the CCDF Waitlist application the CW1 was valid. Case ID 3242B: CW1-upon submission of the CCDF Waitlist application the CW1 was valid. Case ID 3097A: CW1-upon submission of the CCDF Waitlist application the CW1 was valid. Condition 3 – CCDF disagrees with this finding. 1040 tax forms are not required for the CCDF Renewal application, and it is only required for self-employed applicants. Please see the application checklist on the questioned cases. Finding No. 2021-034, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: 2001MPCCC3, 2101MPCCDF, 2101MPCCC5 Area: Eligibility Questioned Costs: $39,200 Views of Responsible Officials, continued: Condition 4 - CCDF disagrees with this finding. At the time of the submission of the renewal application, the applicant had a valid CW1. The application was submitted on June 15, 2020, the CW1 that was submitted did not expire until September 9, 2020. All documents for verification are on file. Applicant was off island for medical purposes at the time of Certificate of Confirmation (renewal certificate) routing, upon her return she submitted a copy of her passport that indicated that she became a CW2 holder, CCDF then proceeded with termination because of her CW2 status. Auditor Response: Condition 1 – Verification of work authorizations for waitlisted applicants before the eligibility period would begin were not performed. Condition 3 – Per the 2019 - 2021 CCDF State Plan, the 1040 tax forms are required for eligibility determination. Condition 4 – Date of application was on 09/11/20 and eligibility determination was performed on 09/18/20, for which those dates were after the CW-1 visa expiration date of 09/09/20.

Finding No. 2021-035 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: G-1802MPCCDF and G-1901MPCCDD Area: Special Tests and Provisions – Health and Safety Requirements Questioned Costs: $1,303,790 Criteria: In accordance with the July 2021 OMB Compliance Supplement, lead agencies must have procedures in effect to ensure that providers serving children who receive subsidies comply with all applicable health and safety requirements. This includes verifying and documenting that child care providers serving children who receive subsidies meet requirements pertaining to health and safety in eleven specific areas, including first aid and CPR, safe sleeping practices, and administration of medication, and child care workers must be trained in these areas. In addition, per FY2021 State Plan, two (2) unannounced inspections of licensed childcare center providers will be conducted to monitor compliance relative to the health, safety, and well-being of the children in care. Health and Safety inspections are performed by the Child Care Licensing Program (CCLP). Further, providers must annually complete a minimum of 30 hours of training and technical assistance. Condition: 1. For one (or 50%) of two child care providers tested, aggregating $951,410 of a total population of $2.6M, health and safety inspections were not performed during the fiscal year. However, only one unannounced inspection was scheduled on August 3, 2021 for this provider to validate compliance with monitoring and enforcement. No questioned costs result as the amount is questioned at Condition 3. 2. The number of providers receiving subsidies from the program did not agree to the number obtained from CCLP. The matter was resolved during field work. 3. For nine (or 43%) of twenty-one provider staff tested, aggregating $2.4M of a total population of $2.6M, one or more required training in the following areas was deficient: 1) First aid and CPR; 2) Safe sleeping practices; and 3) Administration of Medication. Finding No. 2021-035, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: G-1802MPCCDF and G-1901MPCCDD Area: Special Tests and Provisions – Health and Safety Requirements Questioned Costs: $1,303,790 Condition, continued: Condition 3, continued: Cause: The CNMI did not enforce compliance with applicable special tests and provisions for health and safety requirements including training requirements. Effect: The CNMI is in noncompliance with applicable special tests and provision for health and safety requirements and questioned costs of $1,303,790 result for Condition 3. Identification as a Repeat Finding: 2020-051 Recommendation: The CNMI should establish and implement procedures to ensure that providers serving children who receive subsidies comply with all applicable health and safety requirements including training requirements. In addition, responsible personnel should maintain documentation to substantiate compliance. Finding No. 2021-035, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: G-1802MPCCDF and G-1901MPCCDD Area: Special Tests and Provisions – Health and Safety Requirements Questioned Costs: $1,303,790 Views of Responsible Officials: Condition 2 – The CNMI Corrective Action Plan states agreement. Condition 1 – CCLP disagrees with this finding. Because CCLP does not administer any amount of federal monies, CCLP does not comprehend the rationale behind these monetary figures. However, because it mentions that documentation was not provided for the unannounced inspections, evidence was provided to the auditors. Therefore, as a matter of record, CCLP hereby disagrees with this section in its entirety. Relative to the provider selected for testing, on January 22, 2021, the provider closed its doors and stopped providing childcare services. The announced inspection was scheduled for April 6, 2021 while the unannounced inspection was scheduled for August 3, 2021. In light of that information, an inspection report was never generated because the provider ceased its operation before the scheduled CCLP inspection. However, the provider was included in the listing of 21 providers due to the fact that it fell within the fiscal year (FY21) that was requested from CCLP. Condition 2 – A response from CCLP is not necessary for this section as it states that the matter has been resolved. Condition 3 – CCLP disagrees with these findings. The topics listed above are topics under the pre-service training requirements under the Child Care and Development Fund program, not under the Child Care Licensing Program. Auditor Response: Condition 1 – The program’s state plan, effective FY2021, indicated two unannounced inspections will be conducted. Only one unannounced inspection was scheduled in FY2021. Condition 3 – The training requirement is applicable to the program as per 42 USC 9858C(c)(2)(I). Further, federal requirements must be followed.

Finding No. 2021-034 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: 2001MPCCC3, 2101MPCCDF, 2101MPCCC5 Area: Eligibility Questioned Costs: $39,200 Criteria: In accordance with CCDF State Plan, an applicant's eligibility for child care service shall be made within fifteen calendar days after submission of a complete application. The date of application shall be the date the signed form and all supporting documents are received by the Child Care Program. Further, to be eligible for child care services, applicants must meet the following requirements, among others: • If the parent qualifies for work, required documents include the most recent 1040 tax form and a current and valid CW work permit; • If claiming to be a single parent, the program requires an Affidavit to be completed. Affidavit must be signed by the applicant; • Applicant's identity (parent or guardian) should be verified using valid identification such as a current and valid photo ID (CNMI Driver's License; Mayor's ID; Passport); • If the parent qualifies under work, verify income to three (3) most recent pay stubs, employment verification (prescribed), and most recent 1040 tax form. Condition: Of forty eligibility case files tested, aggregating $17,750 in total benefits paid of a total population of $2.8M, the following were noted: 1. For three (or 8%), documentation of the valid work permits for the following applicants who are non-U.S. citizens before eligibility period would begin were not on file. Finding No. 2021-034, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: 2001MPCCC3, 2101MPCCDF, 2101MPCCC5 Area: Eligibility Questioned Costs: $39,200 Condition, continued: 2. For three (or 8%), the single parent affidavits were not dated. No questioned cost is presented for Case ID 3170B as amount is questioned at Condition 1. 3. For three (or 8%), recent 1040 tax forms were not on file. 4. For one (or 3%), the applicant was ineligible to work in the CNMI. No questioned cost is presented as the amount is questioned at Condition 3. Cause: The CNMI did not effectively perform controls over compliance with applicable eligibility requirements. Finding No. 2021-034, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: 2001MPCCC3, 2101MPCCDF, 2101MPCCC5 Area: Eligibility Questioned Costs: $39,200 Effect: The CNMI is in noncompliance with applicable eligibility requirements and questioned costs of $39,200 result. Identification as a Repeat Finding: 2020-049 Recommendation: The CNMI should strengthen controls over compliance with applicable eligibility requirements. Responsible personnel should utilize the application checklist and review it against the applicant's files to verify that all required forms and information are completed and filed accordingly. Views of Responsible Officials: Condition 2 – The CNMI Corrective Action Plan states agreement. Condition 1 – CCDF disagrees with this finding. Case ID 3170B: CW1-upon submission of the CCDF Waitlist application the CW1 was valid. Case ID 3242B: CW1-upon submission of the CCDF Waitlist application the CW1 was valid. Case ID 3097A: CW1-upon submission of the CCDF Waitlist application the CW1 was valid. Condition 3 – CCDF disagrees with this finding. 1040 tax forms are not required for the CCDF Renewal application, and it is only required for self-employed applicants. Please see the application checklist on the questioned cases. Finding No. 2021-034, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: 2001MPCCC3, 2101MPCCDF, 2101MPCCC5 Area: Eligibility Questioned Costs: $39,200 Views of Responsible Officials, continued: Condition 4 - CCDF disagrees with this finding. At the time of the submission of the renewal application, the applicant had a valid CW1. The application was submitted on June 15, 2020, the CW1 that was submitted did not expire until September 9, 2020. All documents for verification are on file. Applicant was off island for medical purposes at the time of Certificate of Confirmation (renewal certificate) routing, upon her return she submitted a copy of her passport that indicated that she became a CW2 holder, CCDF then proceeded with termination because of her CW2 status. Auditor Response: Condition 1 – Verification of work authorizations for waitlisted applicants before the eligibility period would begin were not performed. Condition 3 – Per the 2019 - 2021 CCDF State Plan, the 1040 tax forms are required for eligibility determination. Condition 4 – Date of application was on 09/11/20 and eligibility determination was performed on 09/18/20, for which those dates were after the CW-1 visa expiration date of 09/09/20.

Finding No. 2021-035 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: G-1802MPCCDF and G-1901MPCCDD Area: Special Tests and Provisions – Health and Safety Requirements Questioned Costs: $1,303,790 Criteria: In accordance with the July 2021 OMB Compliance Supplement, lead agencies must have procedures in effect to ensure that providers serving children who receive subsidies comply with all applicable health and safety requirements. This includes verifying and documenting that child care providers serving children who receive subsidies meet requirements pertaining to health and safety in eleven specific areas, including first aid and CPR, safe sleeping practices, and administration of medication, and child care workers must be trained in these areas. In addition, per FY2021 State Plan, two (2) unannounced inspections of licensed childcare center providers will be conducted to monitor compliance relative to the health, safety, and well-being of the children in care. Health and Safety inspections are performed by the Child Care Licensing Program (CCLP). Further, providers must annually complete a minimum of 30 hours of training and technical assistance. Condition: 1. For one (or 50%) of two child care providers tested, aggregating $951,410 of a total population of $2.6M, health and safety inspections were not performed during the fiscal year. However, only one unannounced inspection was scheduled on August 3, 2021 for this provider to validate compliance with monitoring and enforcement. No questioned costs result as the amount is questioned at Condition 3. 2. The number of providers receiving subsidies from the program did not agree to the number obtained from CCLP. The matter was resolved during field work. 3. For nine (or 43%) of twenty-one provider staff tested, aggregating $2.4M of a total population of $2.6M, one or more required training in the following areas was deficient: 1) First aid and CPR; 2) Safe sleeping practices; and 3) Administration of Medication. Finding No. 2021-035, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: G-1802MPCCDF and G-1901MPCCDD Area: Special Tests and Provisions – Health and Safety Requirements Questioned Costs: $1,303,790 Condition, continued: Condition 3, continued: Cause: The CNMI did not enforce compliance with applicable special tests and provisions for health and safety requirements including training requirements. Effect: The CNMI is in noncompliance with applicable special tests and provision for health and safety requirements and questioned costs of $1,303,790 result for Condition 3. Identification as a Repeat Finding: 2020-051 Recommendation: The CNMI should establish and implement procedures to ensure that providers serving children who receive subsidies comply with all applicable health and safety requirements including training requirements. In addition, responsible personnel should maintain documentation to substantiate compliance. Finding No. 2021-035, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: G-1802MPCCDF and G-1901MPCCDD Area: Special Tests and Provisions – Health and Safety Requirements Questioned Costs: $1,303,790 Views of Responsible Officials: Condition 2 – The CNMI Corrective Action Plan states agreement. Condition 1 – CCLP disagrees with this finding. Because CCLP does not administer any amount of federal monies, CCLP does not comprehend the rationale behind these monetary figures. However, because it mentions that documentation was not provided for the unannounced inspections, evidence was provided to the auditors. Therefore, as a matter of record, CCLP hereby disagrees with this section in its entirety. Relative to the provider selected for testing, on January 22, 2021, the provider closed its doors and stopped providing childcare services. The announced inspection was scheduled for April 6, 2021 while the unannounced inspection was scheduled for August 3, 2021. In light of that information, an inspection report was never generated because the provider ceased its operation before the scheduled CCLP inspection. However, the provider was included in the listing of 21 providers due to the fact that it fell within the fiscal year (FY21) that was requested from CCLP. Condition 2 – A response from CCLP is not necessary for this section as it states that the matter has been resolved. Condition 3 – CCLP disagrees with these findings. The topics listed above are topics under the pre-service training requirements under the Child Care and Development Fund program, not under the Child Care Licensing Program. Auditor Response: Condition 1 – The program’s state plan, effective FY2021, indicated two unannounced inspections will be conducted. Only one unannounced inspection was scheduled in FY2021. Condition 3 – The training requirement is applicable to the program as per 42 USC 9858C(c)(2)(I). Further, federal requirements must be followed.

Finding No. 2021-034 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: 2001MPCCC3, 2101MPCCDF, 2101MPCCC5 Area: Eligibility Questioned Costs: $39,200 Criteria: In accordance with CCDF State Plan, an applicant's eligibility for child care service shall be made within fifteen calendar days after submission of a complete application. The date of application shall be the date the signed form and all supporting documents are received by the Child Care Program. Further, to be eligible for child care services, applicants must meet the following requirements, among others: • If the parent qualifies for work, required documents include the most recent 1040 tax form and a current and valid CW work permit; • If claiming to be a single parent, the program requires an Affidavit to be completed. Affidavit must be signed by the applicant; • Applicant's identity (parent or guardian) should be verified using valid identification such as a current and valid photo ID (CNMI Driver's License; Mayor's ID; Passport); • If the parent qualifies under work, verify income to three (3) most recent pay stubs, employment verification (prescribed), and most recent 1040 tax form. Condition: Of forty eligibility case files tested, aggregating $17,750 in total benefits paid of a total population of $2.8M, the following were noted: 1. For three (or 8%), documentation of the valid work permits for the following applicants who are non-U.S. citizens before eligibility period would begin were not on file. Finding No. 2021-034, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: 2001MPCCC3, 2101MPCCDF, 2101MPCCC5 Area: Eligibility Questioned Costs: $39,200 Condition, continued: 2. For three (or 8%), the single parent affidavits were not dated. No questioned cost is presented for Case ID 3170B as amount is questioned at Condition 1. 3. For three (or 8%), recent 1040 tax forms were not on file. 4. For one (or 3%), the applicant was ineligible to work in the CNMI. No questioned cost is presented as the amount is questioned at Condition 3. Cause: The CNMI did not effectively perform controls over compliance with applicable eligibility requirements. Finding No. 2021-034, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: 2001MPCCC3, 2101MPCCDF, 2101MPCCC5 Area: Eligibility Questioned Costs: $39,200 Effect: The CNMI is in noncompliance with applicable eligibility requirements and questioned costs of $39,200 result. Identification as a Repeat Finding: 2020-049 Recommendation: The CNMI should strengthen controls over compliance with applicable eligibility requirements. Responsible personnel should utilize the application checklist and review it against the applicant's files to verify that all required forms and information are completed and filed accordingly. Views of Responsible Officials: Condition 2 – The CNMI Corrective Action Plan states agreement. Condition 1 – CCDF disagrees with this finding. Case ID 3170B: CW1-upon submission of the CCDF Waitlist application the CW1 was valid. Case ID 3242B: CW1-upon submission of the CCDF Waitlist application the CW1 was valid. Case ID 3097A: CW1-upon submission of the CCDF Waitlist application the CW1 was valid. Condition 3 – CCDF disagrees with this finding. 1040 tax forms are not required for the CCDF Renewal application, and it is only required for self-employed applicants. Please see the application checklist on the questioned cases. Finding No. 2021-034, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: 2001MPCCC3, 2101MPCCDF, 2101MPCCC5 Area: Eligibility Questioned Costs: $39,200 Views of Responsible Officials, continued: Condition 4 - CCDF disagrees with this finding. At the time of the submission of the renewal application, the applicant had a valid CW1. The application was submitted on June 15, 2020, the CW1 that was submitted did not expire until September 9, 2020. All documents for verification are on file. Applicant was off island for medical purposes at the time of Certificate of Confirmation (renewal certificate) routing, upon her return she submitted a copy of her passport that indicated that she became a CW2 holder, CCDF then proceeded with termination because of her CW2 status. Auditor Response: Condition 1 – Verification of work authorizations for waitlisted applicants before the eligibility period would begin were not performed. Condition 3 – Per the 2019 - 2021 CCDF State Plan, the 1040 tax forms are required for eligibility determination. Condition 4 – Date of application was on 09/11/20 and eligibility determination was performed on 09/18/20, for which those dates were after the CW-1 visa expiration date of 09/09/20.

Finding No. 2021-035 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: G-1802MPCCDF and G-1901MPCCDD Area: Special Tests and Provisions – Health and Safety Requirements Questioned Costs: $1,303,790 Criteria: In accordance with the July 2021 OMB Compliance Supplement, lead agencies must have procedures in effect to ensure that providers serving children who receive subsidies comply with all applicable health and safety requirements. This includes verifying and documenting that child care providers serving children who receive subsidies meet requirements pertaining to health and safety in eleven specific areas, including first aid and CPR, safe sleeping practices, and administration of medication, and child care workers must be trained in these areas. In addition, per FY2021 State Plan, two (2) unannounced inspections of licensed childcare center providers will be conducted to monitor compliance relative to the health, safety, and well-being of the children in care. Health and Safety inspections are performed by the Child Care Licensing Program (CCLP). Further, providers must annually complete a minimum of 30 hours of training and technical assistance. Condition: 1. For one (or 50%) of two child care providers tested, aggregating $951,410 of a total population of $2.6M, health and safety inspections were not performed during the fiscal year. However, only one unannounced inspection was scheduled on August 3, 2021 for this provider to validate compliance with monitoring and enforcement. No questioned costs result as the amount is questioned at Condition 3. 2. The number of providers receiving subsidies from the program did not agree to the number obtained from CCLP. The matter was resolved during field work. 3. For nine (or 43%) of twenty-one provider staff tested, aggregating $2.4M of a total population of $2.6M, one or more required training in the following areas was deficient: 1) First aid and CPR; 2) Safe sleeping practices; and 3) Administration of Medication. Finding No. 2021-035, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: G-1802MPCCDF and G-1901MPCCDD Area: Special Tests and Provisions – Health and Safety Requirements Questioned Costs: $1,303,790 Condition, continued: Condition 3, continued: Cause: The CNMI did not enforce compliance with applicable special tests and provisions for health and safety requirements including training requirements. Effect: The CNMI is in noncompliance with applicable special tests and provision for health and safety requirements and questioned costs of $1,303,790 result for Condition 3. Identification as a Repeat Finding: 2020-051 Recommendation: The CNMI should establish and implement procedures to ensure that providers serving children who receive subsidies comply with all applicable health and safety requirements including training requirements. In addition, responsible personnel should maintain documentation to substantiate compliance. Finding No. 2021-035, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: G-1802MPCCDF and G-1901MPCCDD Area: Special Tests and Provisions – Health and Safety Requirements Questioned Costs: $1,303,790 Views of Responsible Officials: Condition 2 – The CNMI Corrective Action Plan states agreement. Condition 1 – CCLP disagrees with this finding. Because CCLP does not administer any amount of federal monies, CCLP does not comprehend the rationale behind these monetary figures. However, because it mentions that documentation was not provided for the unannounced inspections, evidence was provided to the auditors. Therefore, as a matter of record, CCLP hereby disagrees with this section in its entirety. Relative to the provider selected for testing, on January 22, 2021, the provider closed its doors and stopped providing childcare services. The announced inspection was scheduled for April 6, 2021 while the unannounced inspection was scheduled for August 3, 2021. In light of that information, an inspection report was never generated because the provider ceased its operation before the scheduled CCLP inspection. However, the provider was included in the listing of 21 providers due to the fact that it fell within the fiscal year (FY21) that was requested from CCLP. Condition 2 – A response from CCLP is not necessary for this section as it states that the matter has been resolved. Condition 3 – CCLP disagrees with these findings. The topics listed above are topics under the pre-service training requirements under the Child Care and Development Fund program, not under the Child Care Licensing Program. Auditor Response: Condition 1 – The program’s state plan, effective FY2021, indicated two unannounced inspections will be conducted. Only one unannounced inspection was scheduled in FY2021. Condition 3 – The training requirement is applicable to the program as per 42 USC 9858C(c)(2)(I). Further, federal requirements must be followed.

Finding No. 2021-036 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.778 Medical Assistance Program Federal Award No.: 2105CQTMAP Area: Special Tests and Provisions – ADP Risk Analysis and System Security Review Questioned Costs: $0 Criteria: In accordance with the July 2021 OMB Compliance Supplement, State agencies must establish and maintain a program for conducting periodic risk analysis to ensure appropriate, cost effective safeguards are incorporated into new and existing systems. State agencies must perform risk analysis whenever significant system changes occur. On a biennial basis, State agencies shall review the ADP system security installations involved in the administration of HHS programs. At a minimum, the reviews shall include an evaluation of physical and data security operating procedures, and personnel practices. The State agencies shall maintain reports on its biennial ADP system security reviews, together with pertinent supporting documentation, for HHS on-site reviews (45 CFR section 95.621). Condition: The biennial review of the Program’s ADP system security was not performed. Cause: The CNMI lacked monitoring procedures in place to determine that the biennial review of the Program’s ADP system security is being performed. Effect: The CNMI is in noncompliance with special tests and provisions requirements for the biennial ADP system security review. No questioned costs are presented as this finding does not pertain to federal expenditures. Identification as a Repeat Finding: Finding No. 2020-056 Recommendation: The responsible CNMI personnel should enforce policies and procedures over the biennial review of the Program’s ADP system security in accordance with applicable special tests and provisions requirements for the ADP system security. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-037 Federal Agency: U.S. Department of Homeland Security AL Program: 97.030 Community Disaster Loans Federal Award No.: EMO-2020-LF-4404MP01 Area: Procurement and Suspension and Debarment Questioned Costs: $18,353,963 Criteria: Non-federal entities other than states, including those operating federal programs as subrecipients of states, must follow the procurement standards set out at 2 CFR sections 200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR Part 200. CNMI’s procurement regulations state the following: • Officials with expenditure authority shall provide for full and open competition through use of the competitive procedure that is best suited to the circumstances of the contract action. The competitive procedures available for use in fulfilling the requirement for full and open competition are as follows: (a) Competitive sealed bidding; (b) Competitive sealed proposals; (c) Architect-engineer services; and (d) Competitive selection procedures for professional services. • Emergency Procurement. o Notwithstanding any other provision of the regulations in this subchapter, the government may make emergency procurement when there exists a threat to public health, safety or welfare under emergency conditions. An emergency procurement must be as competitive as practicable under the circumstances. o A written justification of the basis for the emergency and for the selection of the particular contractor must be made by the official with expenditure authority. o If the Procurement and Supply (P&S) Director is satisfied, he shall state his approval in writing. Condition: Of fourteen expenditures tested, aggregating $18.4M of a total population of $20.2M in nonpayroll expenditures subject to procurement, the following were noted: 1. For eleven (or 79%, either the procurement files, written justifications, and the P&S Director’s written approvals of the Emergency Procurement method used were not provided. In addition, the contracts for Document Nos. 904160, 912446, 922508 and 907725 indicated procurement methods used were for competitive sealed proposals; however, the procurement files support emergency procurement. Further, the procurement information page that specifies the procurement method used for Document Nos. 912931 and 913016 were left blank but were initialed by the Legal reviewer. Finding No. 2021-037, continued Federal Agency: U.S. Department of Homeland Security AL Program: 97.030 Community Disaster Loans Federal Award No.: EMO-2020-LF-4404MP01 Area: Procurement and Suspension and Debarment Questioned Costs: $18,353,963 Condition, continued: Condition 1, continued: 2. For three (or 21%), purchase orders do not specify the procurement methods used. Finding No. 2021-037, continued Federal Agency: U.S. Department of Homeland Security AL Program: 97.030 Community Disaster Loans Federal Award No.: EMO-2020-LF-4404MP01 Area: Procurement and Suspension and Debarment Questioned Costs: $18,353,963 Cause: CNMI did not enforce compliance with applicable procurement requirements. Effect: CNMI is in noncompliance with applicable procurement requirements and questioned costs of $18,353,963 result. Recommendation: Responsible personnel should monitor and enforce compliance with applicable procurement requirements, including the review of procurement files for completeness as to written rationale for deviations from applicable procurement requirements. Further, responsible personnel should maintain procurement documents to substantiate compliance. Views of Responsible Officials: Condition 1 – The CNMI Corrective Action Plan states agreement. Condition 2 - The Department of Finance – Procurement Services disagrees with this finding. For 715112-000 OP / 727492-000 OP / 730942-000 OP. These three purchase orders were provided in the list for ALN 97.030 and were available for testing during auditor’s fieldwork. Auditors failed to perform the required testing. Auditor Response: Condition 2 – Purchase orders do not demonstrate compliance with procurement regulations.

Finding No. 2021-038 Federal Agency: U.S. Department of Homeland Security AL Program: 97.036 Disaster Grants - Public Assistance (Presidentially Declared Disasters) Federal Award No.: FEMA-4404-DR Area: Matching, Level of Effort, Earmarking Questioned Costs: $944,661 Criteria: In accordance with the July 2021 OMB Compliance Supplement, costs must be on a shared basis, as specified in the FEMA-State Agreement. In addition, the CNMI is required to match a 10% local share based on its agreement with FEMA. Condition: Of thirty-two expenditures tested, aggregating $31.9M of a total population of $48.7M, documentations of local share payments for four (or 13%) were not provided to substantiate the accuracy of computed local share costs. Cause: The CNMI did not enforce compliance with applicable matching requirements. Effect: The CNMI is in noncompliance with applicable matching requirements and questioned costs of $944,661 result. Finding No. 2021-038, continued Federal Agency: U.S. Department of Homeland Security AL Program: 97.036 Disaster Grants - Public Assistance (Presidentially Declared Disasters) Federal Award No.: FEMA-4404-DR Area: Matching, Level of Effort, Earmarking Questioned Costs: $944,661 Recommendation: The CNMI should establish and implement controls over compliance with applicable matching requirements. Responsible personnel should review local and federal share files for accuracy of check disbursements. Further, responsible personnel should maintain documents to substantiate the accuracy and completeness of expenditures. Views of responsible officials: The CNMI PAO disagrees with this finding. For that specific transaction, the CNMI Government paid the vendor 100% of the invoice(s), which the CNMI PAO later reimbursed the Government for 90%. As for the following line items we acknowledge that this may be a finding. As we were looking through our documents and through the PW history, we had previously been awarded hazard mitigation to replace wooden poles with concrete poles. Approved hazard mitigation work would be covered at 100%. In the latest version, concrete poles are still written in the scope of work, but the cost of hazard mitigation was removed. We believe this to be an error which we will discuss and work out with our grantor. Auditor Response: We noted inconsistencies for Document No. 904239 under PW 9, wherein the cost share was noted to be 90% Federal and 10% local. However, the documents provided indicates costs for PW 9 were recorded as 100% Federal share. Accordingly, the finding stands.

Finding No. 2021-039 Federal Agency: U.S. Department of Homeland Security AL Program: 97.036 Disaster Grants - Public Assistance (Presidentially Declared Disasters) Federal Award No.: FEMA-4235-DR, FEMA-4396-DR, FEMA-4404-DR, FEMA-4511-DR Area: Reporting Questioned Costs: $-0- Criteria: In accordance with the Federal Funding Accountability and Transparency Act (FFATA), an FFATA report that pertains to the appropriate award period is required for submission. Condition: The relevant Federal awards for Disasters 4511, 4235, 4396 and 4404 were unable to be identified in the FFATA Subaward Reporting System. Based on the screenshots provided, a service ticket was opened due to the Public Accountability Office’s inability in submitting Federal award information to the awardee worklist. No other documents relating to FFATA were provided. Cause: CNMI did not effectively monitor compliance with applicable reporting requirements. Effect: CNMI is in noncompliance with reporting requirements. No questioned costs are presented as we are unable to quantify the extent of noncompliance. Recommendation: The CNMI should strengthen monitoring controls over compliance with applicable reporting requirements. Views of responsible officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-038 Federal Agency: U.S. Department of Homeland Security AL Program: 97.036 Disaster Grants - Public Assistance (Presidentially Declared Disasters) Federal Award No.: FEMA-4404-DR Area: Matching, Level of Effort, Earmarking Questioned Costs: $944,661 Criteria: In accordance with the July 2021 OMB Compliance Supplement, costs must be on a shared basis, as specified in the FEMA-State Agreement. In addition, the CNMI is required to match a 10% local share based on its agreement with FEMA. Condition: Of thirty-two expenditures tested, aggregating $31.9M of a total population of $48.7M, documentations of local share payments for four (or 13%) were not provided to substantiate the accuracy of computed local share costs. Cause: The CNMI did not enforce compliance with applicable matching requirements. Effect: The CNMI is in noncompliance with applicable matching requirements and questioned costs of $944,661 result. Finding No. 2021-038, continued Federal Agency: U.S. Department of Homeland Security AL Program: 97.036 Disaster Grants - Public Assistance (Presidentially Declared Disasters) Federal Award No.: FEMA-4404-DR Area: Matching, Level of Effort, Earmarking Questioned Costs: $944,661 Recommendation: The CNMI should establish and implement controls over compliance with applicable matching requirements. Responsible personnel should review local and federal share files for accuracy of check disbursements. Further, responsible personnel should maintain documents to substantiate the accuracy and completeness of expenditures. Views of responsible officials: The CNMI PAO disagrees with this finding. For that specific transaction, the CNMI Government paid the vendor 100% of the invoice(s), which the CNMI PAO later reimbursed the Government for 90%. As for the following line items we acknowledge that this may be a finding. As we were looking through our documents and through the PW history, we had previously been awarded hazard mitigation to replace wooden poles with concrete poles. Approved hazard mitigation work would be covered at 100%. In the latest version, concrete poles are still written in the scope of work, but the cost of hazard mitigation was removed. We believe this to be an error which we will discuss and work out with our grantor. Auditor Response: We noted inconsistencies for Document No. 904239 under PW 9, wherein the cost share was noted to be 90% Federal and 10% local. However, the documents provided indicates costs for PW 9 were recorded as 100% Federal share. Accordingly, the finding stands.

Finding No. 2021-039 Federal Agency: U.S. Department of Homeland Security AL Program: 97.036 Disaster Grants - Public Assistance (Presidentially Declared Disasters) Federal Award No.: FEMA-4235-DR, FEMA-4396-DR, FEMA-4404-DR, FEMA-4511-DR Area: Reporting Questioned Costs: $-0- Criteria: In accordance with the Federal Funding Accountability and Transparency Act (FFATA), an FFATA report that pertains to the appropriate award period is required for submission. Condition: The relevant Federal awards for Disasters 4511, 4235, 4396 and 4404 were unable to be identified in the FFATA Subaward Reporting System. Based on the screenshots provided, a service ticket was opened due to the Public Accountability Office’s inability in submitting Federal award information to the awardee worklist. No other documents relating to FFATA were provided. Cause: CNMI did not effectively monitor compliance with applicable reporting requirements. Effect: CNMI is in noncompliance with reporting requirements. No questioned costs are presented as we are unable to quantify the extent of noncompliance. Recommendation: The CNMI should strengthen monitoring controls over compliance with applicable reporting requirements. Views of responsible officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-040 Federal Agency: U.S. Department of Homeland Security AL Program: 97.050 Presidential Declared Disaster Assistance to Individuals and Households - Other Needs Federal Award No.: 4511DRMPSPLW Area: Allowable Costs/Cost Principles Questioned Costs: $247,774 Criteria: In accordance with 2 CFR Part 200, Subpart E, cost must be necessary and reasonable for the performance of the federal award and be allocable thereto. Further costs must conform to any limitations or exclusions and be adequately documented. Condition: The CNMI had overdrawn $247,774 from the Lost Wages Assistance (LWA) program, which exceeded the funding limit, thus amount is questioned. Cause: CNMI did not enforce monitoring controls over compliance with applicable allowable costs/cost principles requirements. Effect: CNMI is in noncompliance with applicable allowable costs/cost principles requirements and questioned costs of $247,774 result. Recommendation: CNMI should strengthen monitoring controls over compliance with applicable allowable costs/cost principles requirements. Views of responsible officials: The CNMI disagrees with this finding. The Lost Wages Assistance Program is not a reimbursement program. A drawdown of funds obligated was needed prior to services being rendered. After all payments were made, eligible expenses were calculated and submitted in the Lost Wages Assistance Program Final Closeout that was submitted to FEMA. After the closeout, the CNMI understands that the remaining funds will need to return the overdrawn amount. The final closeout document was received from FEMA on June 13, 2024. Auditor Response: The CNMI acknowledges the overdrawn amount of $247,774 and its obligation to reimburse FEMA.

Finding No. 2021-041 Federal Agency: U.S. Department of Homeland Security AL Program: 97.050 Presidential Declared Disaster Assistance to Individuals and Households - Other Needs Federal Award No.: 4511DRMPSPLW Area: Eligibility Questioned Costs: $2,430 Criteria: In accordance with the July 2021 OMB Compliance Supplement, recipients of the Other Needs Assistance (ONA) – Supplemental Payments for Lost Wages Assistance (LWA) must demonstrate the following: 1. The individual was a recipient of at least $100 per week for any of the following benefits, beginning back to August 1, 2020: a. Unemployment compensation, including Unemployment Compensation for Federal Employees (UCFE) and Unemployment Compensation for Ex-Service members (UCX); b. Pandemic Emergency Unemployment Compensation (PEUC); c. Pandemic Unemployment Assistance (PUA); d. Extended Benefits (EB); e. Short-Time Compensation (STC); and 2. The individual must submit a self-certification that the individual is unemployed, partially unemployed, or unable or unavailable to work due to disruptions caused by COVID-19. Condition: Of sixty eligibility claims tested, aggregating $16,710 in total benefits paid of a total population of $5.4M, for three (or 5%), LWA payments were made to claimants who were deemed as ineligible to receive PUA and FPUC benefits. Finding No. 2021-041, continued Federal Agency: U.S. Department of Homeland Security AL Program: 97.050 Presidential Declared Disaster Assistance to Individuals and Households - Other Needs Federal Award No.: 4511DRMPSPLW Area: Eligibility Questioned Costs: $2,430 Cause: The CNMI did not enforce compliance with applicable eligibility requirements. Effect: The CNMI is in noncompliance with applicable eligibility requirements and questioned costs of $2,430 result as the projected questioned costs exceed the $25,000 threshold. Recommendation: The CNMI should establish and implement controls over compliance with applicable eligibility requirements. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-042 Federal Agency: U.S. Department of Homeland Security AL Program: 97.050 Presidential Declared Disaster Assistance to Individuals and Households - Other Needs Federal Award No.: 4511DRMPSPLW Area: Reporting Questioned Costs: $-0- Criteria: In accordance with the “Federal Financial Reporting Requirements” section of the LWA Grant Award Notification, the grantee shall submit an accurate SF 425 Federal Financial Report on a quarterly basis, which should be supported with underlying accounting records. Condition: The total federal share of expenditures reported on the SF 425 differs from the underlying accounting records for which no reconciliation was provided for the variance. No questioned costs are presented as the amount is questioned at Finding 2021-043. Cause: CNMI did not effectively monitor the accuracy and completeness of the SF 425 reports based on underlying accounting records. Effect: CNMI is in noncompliance with SF 425 reporting requirements and the SEFA could potentially be understated. Recommendation: The CNMI should strengthen monitoring controls over compliance with applicable reporting requirements. Responsible personnel should maintain underlying accounting records to substantiate reported amounts. Finding No. 2021-042, continued Federal Agency: U.S. Department of Homeland Security AL Program: 97.050 Presidential Declared Disaster Assistance to Individuals and Households - Other Needs Federal Award No.: 4511DRMPSPLW Area: Reporting Questioned Costs: $-0- Views of responsible officials: The CNMI disagrees with this finding. The SF-425 is prepared by Financial Services and reflects the total amount that has been drawn down for the Lost Wages Assistance Program. The Lost Wages Assistance Program is not a reimbursement program and a drawdown of funds obligated was needed prior to services being rendered. After the overdraft amount is returned to FEMA, there will be a SF-425 that reflects the actual amount expensed. Auditor’s Response: Reconciliation for the variance was not provided.

Finding No. 2021-012 Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award No.: 7NM4004NM Area: Allowable Costs/Cost Principles Questioned Costs: $1,620 Criteria: In accordance with 2 CFR Part 200, Subpart E, cost must be necessary and reasonable for the performance of the federal award and be allocable thereto. Further costs must conform to any limitations or exclusions and be adequately documented. Condition: Of twenty-nine payroll items tested, aggregating $46,339 of a total population of $1.7M in total Program payroll expenditures, the following were noted: 1. For one (or 3%), no Notice of Personal Action (NOPA) form was provided to substantiate payroll costs. 2. For three (or 10%), pay rates per approved NOPA forms do not agree to pay rates on the payroll registers for the following employees: 3. For three (or 10%), total hours worked per approved timesheets do not agree to total hours per payroll registers. In addition, the pay rate of $24.55 per the approved NOPA for Employee Number 246315 differs from the pay rate of $23.38 per the payroll register. Finding No. 2021-012, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award No.: 7NM4004NM Area: Allowable Costs/Cost Principles Questioned Costs: $1,620 Cause: CNMI did not effectively enforce recordkeeping controls and perform monitoring controls over compliance with applicable allowable costs/cost principles requirements. Effect: CNMI is in noncompliance with applicable allowable costs/cost principles requirements and questioned costs of $1,620 result as the projected questioned costs exceed the $25,000 threshold. Recommendation: CNMI management should establish a recordkeeping system whereby underlying support is filed accordingly to substantiate costs and management should also strengthen monitoring controls over transactions to substantiate program costs in accordance with applicable allowable costs/cost principles. Views of Responsible Officials: Condition 1 – CNMI NAP disagrees with the finding. The following employee is not a NAP employee. When work is performed for NAP, the hours spent will be compensated but in a Journal entry procedure. This is a fund transfer from one account to another under the MOA. Conditions 2 and 3 – CNMI NAP disagrees with the findings. The provided NOPAs and other payroll documents indicated the correct pay rate specified to the employees. Auditor Response: Condition 1 – Costs charged to the program should be adequately documented. Finding No. 2021-012, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award No.: 7NM4004NM Area: Allowable Costs/Cost Principles Questioned Costs: $1,620 Auditor Response, continued: Condition 2 – Pay rates on the approved NOPAs do not agree with the pay rates on the payroll registers. Condition 3 – Hours worked per approved timesheets do not agree with the total hours on the payroll registers.

Finding No. 2021-013 Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award No.: 7NM4004NM Area: Procurement and Suspension and Debarment Questioned Costs: $97,850 Criteria: Non-federal entities other than states, including those operating federal programs as subrecipients of states, must follow the procurement standards set out at 2 CFR sections 200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR Part 200. CNMI’s procurement regulations state the following: • All government procurement shall be awarded by competitive sealed bidding except under certain circumstances permitting other than full and open competition. • Bidding is not required but is encouraged for procurement of $2,500 and under $10,000. The individual with the expenditure authority must obtain price quotations from at least three vendors and should base the selection on competitive price and quality for procurement valued at $2,500 to $10,000. Any price quotations must be written, documented, and submitted to the Procurement and Supply (P&S) Director for approval. • For purchases that exceed $10,000 but which are less than or equal to $50,000, a minimum of three vendors shall be solicited to submit written or electronic quotations. If there are fewer than three vendors, the expenditure authority shall certify, in writing, to the P&S Director that fewer than three vendors responded and shall provide written proof of the request. • Based on Procurement Regulation 70-30.3-115(a), Contract Review, Processing, and Oversight, all contracts must first be prepared by the official with expenditure authority who shall certify that he has complied with the procurement regulations codified in this subchapter, and that the proposed contract is for a public purpose that does not constitute a waste or abuse of public funds. All contract documents are to be complete, including attachments and exhibits, if they are incorporated into the contract by reference. Condition: Of fifty nonpayroll expenditures tested, aggregating $401,852 of a total population of $756,436 in nonpayroll expenditures subject to procurement, the following were noted: 1. For one (or 2%), the bid summary was not on file (document no. 1624129, dated 02/24/21, amounting to $35,990). Therefore, the CNMI was not able to substantiate the number of bids received and whether the procurement process for competitive sealed bids were properly followed, for which the amount is questioned. Finding No. 2021-013, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award No.: 7NM4004NM Area: Procurement and Suspension and Debarment Questioned Costs: $97,850 Condition, continued: 2. For one (or 2%), the Bid Opening Summary report was not provided (document no. 1562306, dated 10/09/2020, amounting to $33,060) and no other documentations on file to substantiate that the selection was based on the lowest bidder. 3. For two (or 4%), expenditures were procured through sole source procurement methods. The written justification states that the CNMI NAP obtained quotations from two vendors. However, no documentation was provided to demonstrate efforts were made to contact and solicit from other vendors. Cause: CNMI did not enforce compliance with established regulations over procurement. Effect: CNMI is in noncompliance with applicable procurement regulations and questioned costs of $97,850 result. Identification as a Repeat Finding: Finding No. 2020-026   Finding No. 2021-013, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award No.: 7NM4004NM Area: Procurement and Suspension and Debarment Questioned Costs: $97,850 Recommendation: Responsible personnel should monitor and enforce compliance with applicable procurement requirements, including the review of procurement files for completeness as to written rationale for deviations from applicable procurement requirements. Further, responsible personnel should establish a recordkeeping system whereby underlying support is filed accordingly to substantiate compliance. Views of responsible officials: Condition 1 – The CNMI-NAP disagrees with the finding. This transaction was supposed to be processed in FY 2020 but because of the delay and completion date was done in FY 2021, a Change Order Contract No. 01 was processed, and the funds was carried over to FY 2021. The bid summary was not necessary because a change order was processed changing the account from A0551E to A1551L per NAP email dated 1/11/21 (Pending Change Order Contract) - CNC 01/13/21 Change Order #1 to charge $35,989.60 (Contract #707410-OC) to A1551L.64560 to extend the delivery period from thirty (30) days to ninety (90) days. Condition 2 – CNMI NAP disagrees with the finding. The Nutrition Assistance Program did follow the proper procurement method by processing Invitation to Bid and obtained the lowest bidder and processed the contract with a notice to proceed. Condition 3 – CNMI NAP disagrees with this finding. The CNMI NAP tried to obtain quotations to purchase perforator machines on island and there was none. However, the selected vendor submitted their price quotation stating that they are able to obtain the perforator machines from off-island and CNMI NAP can purchase from them. Finding No. 2021-013, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award No.: 7NM4004NM Area: Procurement and Suspension and Debarment Questioned Costs: $97,850 Auditor Response: Condition 1 – Although there was a change order from the original contract, all procurement records shall be retained for a period of five years after the completion of construction or full delivery of goods or services under a contract as per Section 70-30.3-285 of the Procurement Regulations. Condition 2 – Documentation substantiating that the selection was based on the lowest bidder was not provided. Condition 3 – Documentation demonstrating efforts were made to contact and solicit from other vendors was not provided.

Finding No. 2021-014 Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award Nos.: 7NM4004NM and 7NM400NM7 Area: Special Tests and Provisions – NAP Coupon Reconciliation Questioned Costs: $3,375,452 AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – EBT Reconciliation Questioned Costs: $442,933 Criteria: 1. Section 1.22 and 1.24 of the CNMI Nutrition Assistance Program’s (NAP) Memorandum of Understanding with the United States Department of Agriculture - Food and Nutrition Service specifies the following: • CNMI will perform a reconciliation of all transacted Authorization-to-Participate (ATP) at the end of each month. • CNMI shall perform reconciliation of all transacted NAP coupons and shall be responsible for the security, accountability and control prior to and during the issuance thereof. CNMI shall develop monthly reconciliation reports of transacted and unused ATP checks and NAP coupons each month. 2. In accordance with the July 2021 OMB Compliance Supplement for SNAP Cluster, States must have systems in place to reconcile all of the funds entering into, exiting from, and remaining in the system each day with the state’s benefit account with Treasury and EBT contractor records. This includes a reconciliation of the state’s issuance files of postings to recipient accounts with the EBT contractor. Condition: 1. CNMI did not reconcile differences between the submission of the monthly FNS-388, State Issuance and Participation Estimates report, and the monthly reconciliation provided by the authorized redemption agent. The redemption reports combine ALN 10.539 and ALN 10.551 Supplemental Nutrition Assistance Program food coupons, and the ratio of program benefits to total redemptions is 88.4% for ALN 10.539 and 11.6% for ALN 10.551. Finding No. 2021-014, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award Nos.: 7NM4004NM and 7NM400NM7 Area: Special Tests and Provisions – NAP Coupon Reconciliation Questioned Costs: $3,375,452 AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – EBT Reconciliation Questioned Costs: $442,933 Condition, continued: 2. Total redemption costs of $69,233 are not supported by the total of program benefits, as follows: Finding No. 2021-014, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award Nos.: 7NM4004NM and 7NM400NM7 Area: Special Tests and Provisions – NAP Coupon Reconciliation Questioned Costs: $3,375,452 AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – EBT Reconciliation Questioned Costs: $442,933 Cause: The CNMI did not periodically perform a reconciliation of its recorded program benefit costs to the total food coupons redeemed. Effect: The CNMI is in noncompliance with applicable special tests and provisions requirements for NAP coupon reconciliations and questioned costs of $3,375,452 and $442,933 results for ALN 10.539 and ALN 10.551, respectively. Recommendation: Responsible CNMI personnel should periodically perform reconciliations of recorded program benefit costs with total food coupons redeemed. Views of Responsible Officials: The CNMI-NAP disagrees with both findings. FNS-388 is only for regular NAP benefits and thus reports only on benefit distribution. CNMI-NAP realized that FNS-388 Reports for FY2021 records only Regular NAP Benefit (ALN 10.539). Auditors combined the Pandemic-Electronic Benefit (P-EBT) (ALN 10.542) and the SNAP Cluster (ALN 10.551/10.561) together with Regular NAP. Moreover, to derive from the Actual Redemption Report, Auditors need to recognize the old series. Finding No. 2021-014, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award Nos.: 7NM4004NM and 7NM400NM7 Area: Special Tests and Provisions – NAP Coupon Reconciliation Questioned Costs: $3,375,452 AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – EBT Reconciliation Questioned Costs: $442,933 Views of Responsible Officials, continued: These old series are usually received and verified in the following months. However, during the redemption process, one must abstract the old series and add to the previous month and vice versa deduct the amount from the current month received. Auditor Response: Conditions 1 and 2 – Reconciliations to substantiate that the variance between the FNS-388 reports and the monthly redemption reports pertain to old series and/or EBT benefits were not provided.

Finding No. 2021-012 Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award No.: 7NM4004NM Area: Allowable Costs/Cost Principles Questioned Costs: $1,620 Criteria: In accordance with 2 CFR Part 200, Subpart E, cost must be necessary and reasonable for the performance of the federal award and be allocable thereto. Further costs must conform to any limitations or exclusions and be adequately documented. Condition: Of twenty-nine payroll items tested, aggregating $46,339 of a total population of $1.7M in total Program payroll expenditures, the following were noted: 1. For one (or 3%), no Notice of Personal Action (NOPA) form was provided to substantiate payroll costs. 2. For three (or 10%), pay rates per approved NOPA forms do not agree to pay rates on the payroll registers for the following employees: 3. For three (or 10%), total hours worked per approved timesheets do not agree to total hours per payroll registers. In addition, the pay rate of $24.55 per the approved NOPA for Employee Number 246315 differs from the pay rate of $23.38 per the payroll register. Finding No. 2021-012, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award No.: 7NM4004NM Area: Allowable Costs/Cost Principles Questioned Costs: $1,620 Cause: CNMI did not effectively enforce recordkeeping controls and perform monitoring controls over compliance with applicable allowable costs/cost principles requirements. Effect: CNMI is in noncompliance with applicable allowable costs/cost principles requirements and questioned costs of $1,620 result as the projected questioned costs exceed the $25,000 threshold. Recommendation: CNMI management should establish a recordkeeping system whereby underlying support is filed accordingly to substantiate costs and management should also strengthen monitoring controls over transactions to substantiate program costs in accordance with applicable allowable costs/cost principles. Views of Responsible Officials: Condition 1 – CNMI NAP disagrees with the finding. The following employee is not a NAP employee. When work is performed for NAP, the hours spent will be compensated but in a Journal entry procedure. This is a fund transfer from one account to another under the MOA. Conditions 2 and 3 – CNMI NAP disagrees with the findings. The provided NOPAs and other payroll documents indicated the correct pay rate specified to the employees. Auditor Response: Condition 1 – Costs charged to the program should be adequately documented. Finding No. 2021-012, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award No.: 7NM4004NM Area: Allowable Costs/Cost Principles Questioned Costs: $1,620 Auditor Response, continued: Condition 2 – Pay rates on the approved NOPAs do not agree with the pay rates on the payroll registers. Condition 3 – Hours worked per approved timesheets do not agree with the total hours on the payroll registers.

Finding No. 2021-013 Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award No.: 7NM4004NM Area: Procurement and Suspension and Debarment Questioned Costs: $97,850 Criteria: Non-federal entities other than states, including those operating federal programs as subrecipients of states, must follow the procurement standards set out at 2 CFR sections 200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR Part 200. CNMI’s procurement regulations state the following: • All government procurement shall be awarded by competitive sealed bidding except under certain circumstances permitting other than full and open competition. • Bidding is not required but is encouraged for procurement of $2,500 and under $10,000. The individual with the expenditure authority must obtain price quotations from at least three vendors and should base the selection on competitive price and quality for procurement valued at $2,500 to $10,000. Any price quotations must be written, documented, and submitted to the Procurement and Supply (P&S) Director for approval. • For purchases that exceed $10,000 but which are less than or equal to $50,000, a minimum of three vendors shall be solicited to submit written or electronic quotations. If there are fewer than three vendors, the expenditure authority shall certify, in writing, to the P&S Director that fewer than three vendors responded and shall provide written proof of the request. • Based on Procurement Regulation 70-30.3-115(a), Contract Review, Processing, and Oversight, all contracts must first be prepared by the official with expenditure authority who shall certify that he has complied with the procurement regulations codified in this subchapter, and that the proposed contract is for a public purpose that does not constitute a waste or abuse of public funds. All contract documents are to be complete, including attachments and exhibits, if they are incorporated into the contract by reference. Condition: Of fifty nonpayroll expenditures tested, aggregating $401,852 of a total population of $756,436 in nonpayroll expenditures subject to procurement, the following were noted: 1. For one (or 2%), the bid summary was not on file (document no. 1624129, dated 02/24/21, amounting to $35,990). Therefore, the CNMI was not able to substantiate the number of bids received and whether the procurement process for competitive sealed bids were properly followed, for which the amount is questioned. Finding No. 2021-013, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award No.: 7NM4004NM Area: Procurement and Suspension and Debarment Questioned Costs: $97,850 Condition, continued: 2. For one (or 2%), the Bid Opening Summary report was not provided (document no. 1562306, dated 10/09/2020, amounting to $33,060) and no other documentations on file to substantiate that the selection was based on the lowest bidder. 3. For two (or 4%), expenditures were procured through sole source procurement methods. The written justification states that the CNMI NAP obtained quotations from two vendors. However, no documentation was provided to demonstrate efforts were made to contact and solicit from other vendors. Cause: CNMI did not enforce compliance with established regulations over procurement. Effect: CNMI is in noncompliance with applicable procurement regulations and questioned costs of $97,850 result. Identification as a Repeat Finding: Finding No. 2020-026   Finding No. 2021-013, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award No.: 7NM4004NM Area: Procurement and Suspension and Debarment Questioned Costs: $97,850 Recommendation: Responsible personnel should monitor and enforce compliance with applicable procurement requirements, including the review of procurement files for completeness as to written rationale for deviations from applicable procurement requirements. Further, responsible personnel should establish a recordkeeping system whereby underlying support is filed accordingly to substantiate compliance. Views of responsible officials: Condition 1 – The CNMI-NAP disagrees with the finding. This transaction was supposed to be processed in FY 2020 but because of the delay and completion date was done in FY 2021, a Change Order Contract No. 01 was processed, and the funds was carried over to FY 2021. The bid summary was not necessary because a change order was processed changing the account from A0551E to A1551L per NAP email dated 1/11/21 (Pending Change Order Contract) - CNC 01/13/21 Change Order #1 to charge $35,989.60 (Contract #707410-OC) to A1551L.64560 to extend the delivery period from thirty (30) days to ninety (90) days. Condition 2 – CNMI NAP disagrees with the finding. The Nutrition Assistance Program did follow the proper procurement method by processing Invitation to Bid and obtained the lowest bidder and processed the contract with a notice to proceed. Condition 3 – CNMI NAP disagrees with this finding. The CNMI NAP tried to obtain quotations to purchase perforator machines on island and there was none. However, the selected vendor submitted their price quotation stating that they are able to obtain the perforator machines from off-island and CNMI NAP can purchase from them. Finding No. 2021-013, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award No.: 7NM4004NM Area: Procurement and Suspension and Debarment Questioned Costs: $97,850 Auditor Response: Condition 1 – Although there was a change order from the original contract, all procurement records shall be retained for a period of five years after the completion of construction or full delivery of goods or services under a contract as per Section 70-30.3-285 of the Procurement Regulations. Condition 2 – Documentation substantiating that the selection was based on the lowest bidder was not provided. Condition 3 – Documentation demonstrating efforts were made to contact and solicit from other vendors was not provided.

Finding No. 2021-014 Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award Nos.: 7NM4004NM and 7NM400NM7 Area: Special Tests and Provisions – NAP Coupon Reconciliation Questioned Costs: $3,375,452 AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – EBT Reconciliation Questioned Costs: $442,933 Criteria: 1. Section 1.22 and 1.24 of the CNMI Nutrition Assistance Program’s (NAP) Memorandum of Understanding with the United States Department of Agriculture - Food and Nutrition Service specifies the following: • CNMI will perform a reconciliation of all transacted Authorization-to-Participate (ATP) at the end of each month. • CNMI shall perform reconciliation of all transacted NAP coupons and shall be responsible for the security, accountability and control prior to and during the issuance thereof. CNMI shall develop monthly reconciliation reports of transacted and unused ATP checks and NAP coupons each month. 2. In accordance with the July 2021 OMB Compliance Supplement for SNAP Cluster, States must have systems in place to reconcile all of the funds entering into, exiting from, and remaining in the system each day with the state’s benefit account with Treasury and EBT contractor records. This includes a reconciliation of the state’s issuance files of postings to recipient accounts with the EBT contractor. Condition: 1. CNMI did not reconcile differences between the submission of the monthly FNS-388, State Issuance and Participation Estimates report, and the monthly reconciliation provided by the authorized redemption agent. The redemption reports combine ALN 10.539 and ALN 10.551 Supplemental Nutrition Assistance Program food coupons, and the ratio of program benefits to total redemptions is 88.4% for ALN 10.539 and 11.6% for ALN 10.551. Finding No. 2021-014, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award Nos.: 7NM4004NM and 7NM400NM7 Area: Special Tests and Provisions – NAP Coupon Reconciliation Questioned Costs: $3,375,452 AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – EBT Reconciliation Questioned Costs: $442,933 Condition, continued: 2. Total redemption costs of $69,233 are not supported by the total of program benefits, as follows: Finding No. 2021-014, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award Nos.: 7NM4004NM and 7NM400NM7 Area: Special Tests and Provisions – NAP Coupon Reconciliation Questioned Costs: $3,375,452 AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – EBT Reconciliation Questioned Costs: $442,933 Cause: The CNMI did not periodically perform a reconciliation of its recorded program benefit costs to the total food coupons redeemed. Effect: The CNMI is in noncompliance with applicable special tests and provisions requirements for NAP coupon reconciliations and questioned costs of $3,375,452 and $442,933 results for ALN 10.539 and ALN 10.551, respectively. Recommendation: Responsible CNMI personnel should periodically perform reconciliations of recorded program benefit costs with total food coupons redeemed. Views of Responsible Officials: The CNMI-NAP disagrees with both findings. FNS-388 is only for regular NAP benefits and thus reports only on benefit distribution. CNMI-NAP realized that FNS-388 Reports for FY2021 records only Regular NAP Benefit (ALN 10.539). Auditors combined the Pandemic-Electronic Benefit (P-EBT) (ALN 10.542) and the SNAP Cluster (ALN 10.551/10.561) together with Regular NAP. Moreover, to derive from the Actual Redemption Report, Auditors need to recognize the old series. Finding No. 2021-014, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award Nos.: 7NM4004NM and 7NM400NM7 Area: Special Tests and Provisions – NAP Coupon Reconciliation Questioned Costs: $3,375,452 AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – EBT Reconciliation Questioned Costs: $442,933 Views of Responsible Officials, continued: These old series are usually received and verified in the following months. However, during the redemption process, one must abstract the old series and add to the previous month and vice versa deduct the amount from the current month received. Auditor Response: Conditions 1 and 2 – Reconciliations to substantiate that the variance between the FNS-388 reports and the monthly redemption reports pertain to old series and/or EBT benefits were not provided.

Finding No. 2021-015 Federal Agency: U.S. Department of Agriculture AL Program: 10.542 Pandemic EBT Food Benefits Federal Award No.: 7NM400NM2 Area: Eligibility Questioned Costs: $151,626 Criteria: Per Sections 3(a) and 4(a) of the CNMI State Plan for Pandemic EBT, a child is eligible for P-EBT benefits if two conditions are met: 1. The child would be eligible for free or reduced-price meals if the National School Lunch Program and School Breakfast Program were operating normally. This includes children who are: a. Directly certified or determined “other source categorically eligible” for SY 2020-2021, or b. Certified through submission of a household application processed by the child’s school district for SY 2020-2021, or c. Enrolled in a Community Eligibility Provision school or a school operating under Provisions 2 or 3, or d. Directly certified, determined other source categorically eligible, or certified by application in SY 2019-2020 and the school district has not made a new school meal eligibility determination for the child in SY 2020-2021. The date range covered by the State plan for children in school is from August 10, 2020 to June 11,2021 and from October 1, 2020 to June 11, 2021 for children in child care. 2. The child does not receive free or reduced-price meals at the school because the school is closed or has been operating with reduced attendance or hours for at least 5 consecutive days in the current school year. Once the minimum 5 consecutive day threshold is met, children are eligible to receive P-EBT benefits for closures or reductions in hours due to COVID-19. Condition: Of sixty (or 100%) eligibility files selected for testing, aggregating $151,626 in total benefits paid of a total population of $5.1M, documentations supporting eligibility determinations for the following P-EBT participants were not provided. Finding No. 2021-015, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.542 Pandemic EBT Food Benefits Federal Award No.: 7NM400NM2 Area: Eligibility Questioned Costs: $151,626 Condition, continued: Finding No. 2021-015, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.542 Pandemic EBT Food Benefits Federal Award No.: 7NM400NM2 Area: Eligibility Questioned Costs: $151,626 Condition, continued: Cause: The CNMI failed to provide the final eligibility listing and documentations supporting eligibility determinations within the deadline set by the CNMI Department of Finance. Effect: The CNMI is in noncompliance with applicable eligibility requirements and questioned costs of $151,626 result. Recommendation: The responsible CNMI personnel should maintain an accurate listing of P-EBT recipients and also coordinate audit requests directly with the CNP Office. Finding No. 2021-015, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.542 Pandemic EBT Food Benefits Federal Award No.: 7NM400NM2 Area: Eligibility Questioned Costs: $151,626 Views of Responsible Officials: CNMI-NAP disagrees with the finding. Under the Pandemic Electronic Benefit Transfer (P-EBT) Plan, CNMI NAP received the listing of the eligible children from CNMI Child Nutrition Program (CNP). CNMI-NAP only prepared and distributed the benefits. Applications and other requirements should be obtained from CNMI Public School System under CNP office. Due to the confidentiality and sensitivity of the records, the Auditor was informed to work with the CNP Director to review the documents. In addition, emails and correspondence with the Auditor were made to work with CNP regarding the records. NAP provided the auditor with the sample listings. NAP informed the audit team to contact PSS Child Nutrition Program (CNP) to review applications and documents pertaining to eligibility determination for P-EBT as it was PSS CNP that determined the eligibility. Contact information for PSS CNP was provided to the audit team by NAP staff. CNMI NAP wants to understand under the “Cause” of the finding. Auditor Response: The CNMI Department of Finance set an April 30, 2024 deadline for the CNMI to submit the required schedules and documents. The final eligibility listing was provided on May 16, 2024 while eligibility supporting documents were provided on May 30, 2024, which was past the April 30, 2024 deadline. Further, audit requests should be coordinated between the program office and the respective agency handling eligibility determinations.

Finding No. 2021-016 Federal Agency: U.S. Department of Agriculture AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – ADP System for SNAP Questioned Costs: $1,421 Criteria: In accordance with the July 2021 OMB Compliance Supplement, State agencies are required to automate their SNAP operations and computerize their systems for obtaining, maintaining, utilizing and transmitting information concerning SNAP. This includes (1) processing and storing all case file information necessary for eligibility determination and benefit calculation, identifying specific elements that affect eligibility, and notifying the certification unit of cases requiring notices of case disposition, adverse action and mass change, and expiration; (2) providing an automatic cutoff of participation of households that have not been recertified at the end of their certification period by reapplying and being determined eligible for a new period; and (3) generating data necessary to meet federal and reconciliation reporting requirements. Condition: Of forty case files tested, aggregating $23,692 of a total population of $3.08M, the following were noted: 1. For seven (or 18%), the estimated benefit amount per the Maven Automated Data Processing (ADP) system differed from the estimated benefits per audit expectation based on the applicable FY 2021 maximum monthly benefit schedule compared to the amount reflected in the Maven ADP system, which pertain to the maximum amount for Fiscal Year 2022. Finding No. 2021-016, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – ADP System for SNAP Questioned Costs: $1,421 Conditions, continued: 2. For one (or 3%), inconsistencies between the adjudicator’s maximum allotment per income threshold ($708 reflecting October 1, 2020 maximum) and the Maven ADP system ($1,002 reflecting February 1, 2021 maximum) were noted for Record ID B100081068, certified from 12/01/20 to 02/28/21, resulting in a variance of $294 between the estimated benefit amount per the Maven ADP system and per audit expectation, for which the amount is questioned. 3. For one (or 3%), inconsistencies between the adjudicator’s maximum allotment per income threshold ($389 reflecting October 1, 2020 maximum) and the Maven ADP system ($551 reflecting February 1, 2021 maximum) were noted for Record ID B100082118, certified from 01/01/21 to 03/31/21, resulting into a variance of $162 between the estimated benefit amount per Maven ADP system and per audit expectation, for which the amount is questioned. Cause: The applicable monthly income level schedule used covering FY 2021 was not on file. Effect: CNMI is in noncompliance with applicable Special Tests and Provisions - ADP System for SNAP requirements, and questioned costs of $1,421 result as the projected questioned costs exceed the $25,000 threshold. Recommendation: As the Maven ADP System automatically updates income guidelines and benefit levels, we recommend that the CNMI maintains on file the applicable income guidelines and benefit levels used for eligibility determinations and that the CNMI responsible personnel should thoroughly review eligibility determinations. Finding No. 2021-016, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – ADP System for SNAP Questioned Costs: $1,421 Views of Responsible Officials: Condition 1 - The CNMI-NAP disagrees with this finding. NAP staff has to guide the auditors during the time the audit is being performed to understand the history and process of files being audited. Case ID#B100092775 variance of $69 caused by change in income guideline and benefit level effective October 1st 2020 income level is 781 benefit for Saipan is $221. Corrective action taken by Eligibility worker processed income for household of 1 as SSI which gave household $41 benefit. Income should be counted as SSA which at the time the adjustment was made and increased the benefit amount for the household. Case ID#B100094249 variance of $180 a change in income and benefit level. Household income was $108 which changed to $120 for a household of 4. Adjustment was made to reflect changes including benefit level. From $708.00 to $1,231. Case ID #B100095019 variance of $69. Benefit level was $212, and household had $20 contribution as unearned income. Benefit issued was 295 new benefit level effective October 1st, 2021 adjusted benefit issuance at $364 (maximum benefit for household of one for zero income is $369). Case ID#B100095077 variance of $180. Benefit for household of 3 was issued for 2020 benefit and income level. November benefit effectuated new income and benefit level. Issued benefit is based by household and income of head of household. Case ID#B100094664 Variance of $69. Household is zero income maximum benefit level issued was $300 reflecting 2020 benefit level. On October 1st, 2021 eligibility system automatically adjust benefit to $369 as per new benefit level. Case ID#B10109695 variance of $126 household of 2 maximum benefit was $389 with ineligible household members earning SS benefits totaling at $167 (prorated income) benefit issued was $651. Increase in benefit and income level was automatically adjusted by the eligibility system. Finding No. 2021-016, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – ADP System for SNAP Questioned Costs: $1,421 Views of Responsible Officials, continued: Case ID#B100093732 Variance of 272 household of 5 maximum Benefit level for zero income Household is $1,462 deduction of 25 percent for over issuance ($272) increase of benefit level automatically adjusted by Eligibility system and still taking offset of 25% for over issued benefits. Over issuance claim is already paid off. Condition 2 - The CNMI-NAP disagrees with this finding. NAP staff has to guide the auditors during the time the audit is being performed to understand the history and process of files being audited. Case ID#B100081068 Questioned cost of $294. Head of household declared zero income. Benefit amount under issued in the amount of $229 by eligibility system for maximum level of benefits should be $1,231. Unable to do corrective action due to beyond 2 months from time the discrepancy was found: Corrective action for eligibility system to implement a system audit that will prevent future glitches that would create a loss for both the household and NAP program budget. Condition 3 - The CNMI-NAP disagrees with this finding. NAP staff has to guide the auditors during the time the audit is being performed to understand the history and process of files being audited. Case ID#B100082118 questioned cost is $162 household had income from ineligible parents which is prorated towards the two eligible household members. Total prorated unearned income is $843 which was counted towards the household’s benefits. Then household became zero income due to Furlough from COVID-19 pandemic. We disagree with the findings. When the auditor reviewed the case files, there was a misunderstanding of changes in household composition and income which is also affected by the increase in income guidelines and benefit levels between the certification period. This created the variances that the auditor noted in the findings. *CNMI NAP recommends having NAP staff guide the auditor during time the audit is being performed to understand history and process of files being audited. Finding No. 2021-016, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – ADP System for SNAP Questioned Costs: $1,421 Views of Responsible Officials, continued: CNMI-NAP recently hired a Certification Unit Supervisor who had been on board for close to three months. He had been actively working closely with the EWs and especially the Management Evaluation Unit (MEU) who oversees the program reviews and quality control. Mini Trainings and assessments of the Certification Unit are in the works. One training was done sometimes in April by the MEU to ensure compliance is met. More trainings and workshops are in being planned between the Certification Unit and Management Evaluation Unit for a better process and procedures. Auditor Response: Condition 1 – The applicable benefit level used for eligibility determination was not provided. Condition 2 – The CNMI acknowledges the discrepancy and planned on a corrective action to prevent future system glitches. Condition 3 – Documentation supporting the change in household composition and income were not provided.

Finding No. 2021-014 Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award Nos.: 7NM4004NM and 7NM400NM7 Area: Special Tests and Provisions – NAP Coupon Reconciliation Questioned Costs: $3,375,452 AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – EBT Reconciliation Questioned Costs: $442,933 Criteria: 1. Section 1.22 and 1.24 of the CNMI Nutrition Assistance Program’s (NAP) Memorandum of Understanding with the United States Department of Agriculture - Food and Nutrition Service specifies the following: • CNMI will perform a reconciliation of all transacted Authorization-to-Participate (ATP) at the end of each month. • CNMI shall perform reconciliation of all transacted NAP coupons and shall be responsible for the security, accountability and control prior to and during the issuance thereof. CNMI shall develop monthly reconciliation reports of transacted and unused ATP checks and NAP coupons each month. 2. In accordance with the July 2021 OMB Compliance Supplement for SNAP Cluster, States must have systems in place to reconcile all of the funds entering into, exiting from, and remaining in the system each day with the state’s benefit account with Treasury and EBT contractor records. This includes a reconciliation of the state’s issuance files of postings to recipient accounts with the EBT contractor. Condition: 1. CNMI did not reconcile differences between the submission of the monthly FNS-388, State Issuance and Participation Estimates report, and the monthly reconciliation provided by the authorized redemption agent. The redemption reports combine ALN 10.539 and ALN 10.551 Supplemental Nutrition Assistance Program food coupons, and the ratio of program benefits to total redemptions is 88.4% for ALN 10.539 and 11.6% for ALN 10.551. Finding No. 2021-014, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award Nos.: 7NM4004NM and 7NM400NM7 Area: Special Tests and Provisions – NAP Coupon Reconciliation Questioned Costs: $3,375,452 AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – EBT Reconciliation Questioned Costs: $442,933 Condition, continued: 2. Total redemption costs of $69,233 are not supported by the total of program benefits, as follows: Finding No. 2021-014, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award Nos.: 7NM4004NM and 7NM400NM7 Area: Special Tests and Provisions – NAP Coupon Reconciliation Questioned Costs: $3,375,452 AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – EBT Reconciliation Questioned Costs: $442,933 Cause: The CNMI did not periodically perform a reconciliation of its recorded program benefit costs to the total food coupons redeemed. Effect: The CNMI is in noncompliance with applicable special tests and provisions requirements for NAP coupon reconciliations and questioned costs of $3,375,452 and $442,933 results for ALN 10.539 and ALN 10.551, respectively. Recommendation: Responsible CNMI personnel should periodically perform reconciliations of recorded program benefit costs with total food coupons redeemed. Views of Responsible Officials: The CNMI-NAP disagrees with both findings. FNS-388 is only for regular NAP benefits and thus reports only on benefit distribution. CNMI-NAP realized that FNS-388 Reports for FY2021 records only Regular NAP Benefit (ALN 10.539). Auditors combined the Pandemic-Electronic Benefit (P-EBT) (ALN 10.542) and the SNAP Cluster (ALN 10.551/10.561) together with Regular NAP. Moreover, to derive from the Actual Redemption Report, Auditors need to recognize the old series. Finding No. 2021-014, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award Nos.: 7NM4004NM and 7NM400NM7 Area: Special Tests and Provisions – NAP Coupon Reconciliation Questioned Costs: $3,375,452 AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – EBT Reconciliation Questioned Costs: $442,933 Views of Responsible Officials, continued: These old series are usually received and verified in the following months. However, during the redemption process, one must abstract the old series and add to the previous month and vice versa deduct the amount from the current month received. Auditor Response: Conditions 1 and 2 – Reconciliations to substantiate that the variance between the FNS-388 reports and the monthly redemption reports pertain to old series and/or EBT benefits were not provided.

Finding No. 2021-016 Federal Agency: U.S. Department of Agriculture AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – ADP System for SNAP Questioned Costs: $1,421 Criteria: In accordance with the July 2021 OMB Compliance Supplement, State agencies are required to automate their SNAP operations and computerize their systems for obtaining, maintaining, utilizing and transmitting information concerning SNAP. This includes (1) processing and storing all case file information necessary for eligibility determination and benefit calculation, identifying specific elements that affect eligibility, and notifying the certification unit of cases requiring notices of case disposition, adverse action and mass change, and expiration; (2) providing an automatic cutoff of participation of households that have not been recertified at the end of their certification period by reapplying and being determined eligible for a new period; and (3) generating data necessary to meet federal and reconciliation reporting requirements. Condition: Of forty case files tested, aggregating $23,692 of a total population of $3.08M, the following were noted: 1. For seven (or 18%), the estimated benefit amount per the Maven Automated Data Processing (ADP) system differed from the estimated benefits per audit expectation based on the applicable FY 2021 maximum monthly benefit schedule compared to the amount reflected in the Maven ADP system, which pertain to the maximum amount for Fiscal Year 2022. Finding No. 2021-016, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – ADP System for SNAP Questioned Costs: $1,421 Conditions, continued: 2. For one (or 3%), inconsistencies between the adjudicator’s maximum allotment per income threshold ($708 reflecting October 1, 2020 maximum) and the Maven ADP system ($1,002 reflecting February 1, 2021 maximum) were noted for Record ID B100081068, certified from 12/01/20 to 02/28/21, resulting in a variance of $294 between the estimated benefit amount per the Maven ADP system and per audit expectation, for which the amount is questioned. 3. For one (or 3%), inconsistencies between the adjudicator’s maximum allotment per income threshold ($389 reflecting October 1, 2020 maximum) and the Maven ADP system ($551 reflecting February 1, 2021 maximum) were noted for Record ID B100082118, certified from 01/01/21 to 03/31/21, resulting into a variance of $162 between the estimated benefit amount per Maven ADP system and per audit expectation, for which the amount is questioned. Cause: The applicable monthly income level schedule used covering FY 2021 was not on file. Effect: CNMI is in noncompliance with applicable Special Tests and Provisions - ADP System for SNAP requirements, and questioned costs of $1,421 result as the projected questioned costs exceed the $25,000 threshold. Recommendation: As the Maven ADP System automatically updates income guidelines and benefit levels, we recommend that the CNMI maintains on file the applicable income guidelines and benefit levels used for eligibility determinations and that the CNMI responsible personnel should thoroughly review eligibility determinations. Finding No. 2021-016, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – ADP System for SNAP Questioned Costs: $1,421 Views of Responsible Officials: Condition 1 - The CNMI-NAP disagrees with this finding. NAP staff has to guide the auditors during the time the audit is being performed to understand the history and process of files being audited. Case ID#B100092775 variance of $69 caused by change in income guideline and benefit level effective October 1st 2020 income level is 781 benefit for Saipan is $221. Corrective action taken by Eligibility worker processed income for household of 1 as SSI which gave household $41 benefit. Income should be counted as SSA which at the time the adjustment was made and increased the benefit amount for the household. Case ID#B100094249 variance of $180 a change in income and benefit level. Household income was $108 which changed to $120 for a household of 4. Adjustment was made to reflect changes including benefit level. From $708.00 to $1,231. Case ID #B100095019 variance of $69. Benefit level was $212, and household had $20 contribution as unearned income. Benefit issued was 295 new benefit level effective October 1st, 2021 adjusted benefit issuance at $364 (maximum benefit for household of one for zero income is $369). Case ID#B100095077 variance of $180. Benefit for household of 3 was issued for 2020 benefit and income level. November benefit effectuated new income and benefit level. Issued benefit is based by household and income of head of household. Case ID#B100094664 Variance of $69. Household is zero income maximum benefit level issued was $300 reflecting 2020 benefit level. On October 1st, 2021 eligibility system automatically adjust benefit to $369 as per new benefit level. Case ID#B10109695 variance of $126 household of 2 maximum benefit was $389 with ineligible household members earning SS benefits totaling at $167 (prorated income) benefit issued was $651. Increase in benefit and income level was automatically adjusted by the eligibility system. Finding No. 2021-016, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – ADP System for SNAP Questioned Costs: $1,421 Views of Responsible Officials, continued: Case ID#B100093732 Variance of 272 household of 5 maximum Benefit level for zero income Household is $1,462 deduction of 25 percent for over issuance ($272) increase of benefit level automatically adjusted by Eligibility system and still taking offset of 25% for over issued benefits. Over issuance claim is already paid off. Condition 2 - The CNMI-NAP disagrees with this finding. NAP staff has to guide the auditors during the time the audit is being performed to understand the history and process of files being audited. Case ID#B100081068 Questioned cost of $294. Head of household declared zero income. Benefit amount under issued in the amount of $229 by eligibility system for maximum level of benefits should be $1,231. Unable to do corrective action due to beyond 2 months from time the discrepancy was found: Corrective action for eligibility system to implement a system audit that will prevent future glitches that would create a loss for both the household and NAP program budget. Condition 3 - The CNMI-NAP disagrees with this finding. NAP staff has to guide the auditors during the time the audit is being performed to understand the history and process of files being audited. Case ID#B100082118 questioned cost is $162 household had income from ineligible parents which is prorated towards the two eligible household members. Total prorated unearned income is $843 which was counted towards the household’s benefits. Then household became zero income due to Furlough from COVID-19 pandemic. We disagree with the findings. When the auditor reviewed the case files, there was a misunderstanding of changes in household composition and income which is also affected by the increase in income guidelines and benefit levels between the certification period. This created the variances that the auditor noted in the findings. *CNMI NAP recommends having NAP staff guide the auditor during time the audit is being performed to understand history and process of files being audited. Finding No. 2021-016, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – ADP System for SNAP Questioned Costs: $1,421 Views of Responsible Officials, continued: CNMI-NAP recently hired a Certification Unit Supervisor who had been on board for close to three months. He had been actively working closely with the EWs and especially the Management Evaluation Unit (MEU) who oversees the program reviews and quality control. Mini Trainings and assessments of the Certification Unit are in the works. One training was done sometimes in April by the MEU to ensure compliance is met. More trainings and workshops are in being planned between the Certification Unit and Management Evaluation Unit for a better process and procedures. Auditor Response: Condition 1 – The applicable benefit level used for eligibility determination was not provided. Condition 2 – The CNMI acknowledges the discrepancy and planned on a corrective action to prevent future system glitches. Condition 3 – Documentation supporting the change in household composition and income were not provided.

Finding No. 2021-014 Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award Nos.: 7NM4004NM and 7NM400NM7 Area: Special Tests and Provisions – NAP Coupon Reconciliation Questioned Costs: $3,375,452 AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – EBT Reconciliation Questioned Costs: $442,933 Criteria: 1. Section 1.22 and 1.24 of the CNMI Nutrition Assistance Program’s (NAP) Memorandum of Understanding with the United States Department of Agriculture - Food and Nutrition Service specifies the following: • CNMI will perform a reconciliation of all transacted Authorization-to-Participate (ATP) at the end of each month. • CNMI shall perform reconciliation of all transacted NAP coupons and shall be responsible for the security, accountability and control prior to and during the issuance thereof. CNMI shall develop monthly reconciliation reports of transacted and unused ATP checks and NAP coupons each month. 2. In accordance with the July 2021 OMB Compliance Supplement for SNAP Cluster, States must have systems in place to reconcile all of the funds entering into, exiting from, and remaining in the system each day with the state’s benefit account with Treasury and EBT contractor records. This includes a reconciliation of the state’s issuance files of postings to recipient accounts with the EBT contractor. Condition: 1. CNMI did not reconcile differences between the submission of the monthly FNS-388, State Issuance and Participation Estimates report, and the monthly reconciliation provided by the authorized redemption agent. The redemption reports combine ALN 10.539 and ALN 10.551 Supplemental Nutrition Assistance Program food coupons, and the ratio of program benefits to total redemptions is 88.4% for ALN 10.539 and 11.6% for ALN 10.551. Finding No. 2021-014, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award Nos.: 7NM4004NM and 7NM400NM7 Area: Special Tests and Provisions – NAP Coupon Reconciliation Questioned Costs: $3,375,452 AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – EBT Reconciliation Questioned Costs: $442,933 Condition, continued: 2. Total redemption costs of $69,233 are not supported by the total of program benefits, as follows: Finding No. 2021-014, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award Nos.: 7NM4004NM and 7NM400NM7 Area: Special Tests and Provisions – NAP Coupon Reconciliation Questioned Costs: $3,375,452 AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – EBT Reconciliation Questioned Costs: $442,933 Cause: The CNMI did not periodically perform a reconciliation of its recorded program benefit costs to the total food coupons redeemed. Effect: The CNMI is in noncompliance with applicable special tests and provisions requirements for NAP coupon reconciliations and questioned costs of $3,375,452 and $442,933 results for ALN 10.539 and ALN 10.551, respectively. Recommendation: Responsible CNMI personnel should periodically perform reconciliations of recorded program benefit costs with total food coupons redeemed. Views of Responsible Officials: The CNMI-NAP disagrees with both findings. FNS-388 is only for regular NAP benefits and thus reports only on benefit distribution. CNMI-NAP realized that FNS-388 Reports for FY2021 records only Regular NAP Benefit (ALN 10.539). Auditors combined the Pandemic-Electronic Benefit (P-EBT) (ALN 10.542) and the SNAP Cluster (ALN 10.551/10.561) together with Regular NAP. Moreover, to derive from the Actual Redemption Report, Auditors need to recognize the old series. Finding No. 2021-014, continued Federal Agency: U.S. Department of Agriculture AL Program: 10.539 CNMI Nutrition Assistance Federal Award Nos.: 7NM4004NM and 7NM400NM7 Area: Special Tests and Provisions – NAP Coupon Reconciliation Questioned Costs: $3,375,452 AL Program: 10.551/10.561 SNAP Cluster Federal Award No.: 7NM400NM5 Area: Special Tests and Provisions – EBT Reconciliation Questioned Costs: $442,933 Views of Responsible Officials, continued: These old series are usually received and verified in the following months. However, during the redemption process, one must abstract the old series and add to the previous month and vice versa deduct the amount from the current month received. Auditor Response: Conditions 1 and 2 – Reconciliations to substantiate that the variance between the FNS-388 reports and the monthly redemption reports pertain to old series and/or EBT benefits were not provided.

Finding No. 2021-017 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00134, D19AP00142, D21AF10004, D21AF10052 Area: Allowable Costs/Cost Principles Questioned Costs: $402,941 Criteria: In accordance with 2 CFR Part 200, Subpart E, cost must be necessary and reasonable for the performance of the federal award and be allocable thereto. Further costs must conform to any limitations or exclusions and be adequately documented. Condition: Of thirty-four nonpayroll expenditures tested, aggregating $4.8M of a total population of $11.8M, the following were noted: 1. For one (or 3%), no purchase order or contract was provided. 2. For three (or 9%), no documents such as invoices or contracts were provided to substantiate costs. 3. Tests of the general ledger expenditure details noted that business unit 5122 amounting to $261,832 pertains to locally funded transactions and should not have been charged to the program. No questioned cost is presented as no reimbursements were made under this business unit. Finding No. 2021-017, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00134, D19AP00142, D21AF10004, D21AF10052 Area: Allowable Costs/Cost Principles Questioned Costs: $402,941 Cause: CNMI did not effectively enforce recordkeeping controls and perform monitoring controls over compliance with applicable allowable costs/cost principles requirements. Further, the CNMI did not effectively monitor cumulative expenditures and approved funding limits.Effect: CNMI is in noncompliance with applicable allowable costs/cost principles requirements and questioned costs of $402,941 result. Recommendation: CNMI management should establish a recordkeeping system whereby underlying support is filed accordingly to substantiate costs and management should also strengthen monitoring controls over transactions to substantiate program costs in accordance with applicable allowable costs/cost principles. Views of responsible officials: Condition 3 – The CNMI Corrective Action Plan states agreement. Conditions 1 & 2 - The OMB disagrees with this finding. Compact Impact grants often operate on a reimbursement basis.  This means that when the award is received, we request payment or a transfer of expenses to cover prior expenses that have already been incurred and paid.  Therefore, the memo that was processed for such request and other supporting documents can be provided.  Auditor Response: Conditions 1 & 2 - Documentation substantiating the costs charged to the program were not provided.

Finding No. 2021-018 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award Nos.: D14AP00037, D16AP00064 D16AP00065, D17AP00111, D18AP00031, D18AP00130, D18AP00146, D18AP00165, D20AP00099, D20AP00119, and D21AP10003 Area: Equipment and Real Property Management Questioned Costs: $-0- Criteria: In accordance with 2 CFR section 200.313(b)), a state must use, manage, and dispose of equipment acquired under a federal award in accordance with state laws and procedures. The CNMI Property Management Policies and Procedures requires the Division of Procurement & Supply (PS) to conduct an annual inventory of property held by a designated official who has administrative control over the use of personal property within his area of jurisdiction. Also, PS shall perform random audits of property held by each accountable person to validate the integrity of the property control process. Further, property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the Federal award identification number), who holds title, the acquisition date, cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Condition: 1. Tests of internal controls noted that a complete physical inventory of equipment and property was not performed by PS in FY 2021. 2. A property listing was provided by PS; however, information such as the federal award identification number, source of the property, who holds title, percentage of federal participation in the cost of the property, and use of the property, was not documented. 3. A variance of $415,046 was noted between the general ledger details of $665,165 of capital assets and $250,119 per the property listing provided by PS. Cause: The CNMI lacks the human resources and financial management system structure needed to effect compliance with applicable equipment and real property management requirements. Finding No. 2021-018, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award Nos.: D14AP00037, D16AP00064 D16AP00065, D17AP00111, D18AP00031, D18AP00130, D18AP00146, D18AP00165, D20AP00099, D20AP00119, and D21AP10003 Area: Equipment and Real Property Management Questioned Costs: $-0- Effect: The CNMI is in noncompliance with applicable equipment and real property management requirements. See below for the cumulative dollar amount of property and equipment acquired with program grant funds over the past five years. Identification as a Repeat Finding: Finding No. 2020-030 Recommendation: The CNMI should consider seeking technical and financial support from Federal agencies to develop human resources and a financial management system capable of effecting compliance with applicable property management policies and procedures. Views of responsible officials: Conditions 1 and 2 – The CNMI Corrective Action Plan states agreement. Condition 3 - The Division of Procurement Services disagrees with this finding. The Division of Procurement Services, Property Management wasn't informed of this audit parameter. For FY2021 number of Transactions/Units processed was 4970 units and the dollar value is $9,526,239. Auditor Response: Condition 3 - The request was for the inventory listing as of 09/30/21 fiscal year end. Further, the dollar amount of the equipment and property are all capital assets in excess of $5,000.

Finding No. 2021-019 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00082 Area: Matching, Level of Effort and Earmarking Questioned Costs: $7,488 Criteria: In accordance with the July 2021 Compliance Supplement, matching or cost sharing includes requirements to provide contributions (usually non-federal) of a specified amount or percentage to match federal awards. Condition: For one (or 50%) of two transactions tested, aggregating $7,559 of a total population of $35,910, the project worksheet and disaster number did not agree to the projects listed on file for the cost sharing. As a result, the cost share percentage of 25% was inappropriately applied. Cause: The cause of the above condition is the lack of internal controls and inadequate file maintenance. Effect: The CNMI is in noncompliance with applicable matching requirements and questioned costs of $7,488 result as the projected questioned costs exceed the $25,000 threshold. Recommendation: The CNMI should establish and implement controls over compliance with applicable matching requirements. Responsible personnel should review local and federal share files for accuracy of disbursements. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-020 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Criteria: Non-federal entities other than states, including those operating federal programs as subrecipients of states, must follow the procurement standards set out at 2 CFR sections 200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR Part 200. CNMI’s procurement regulations state the following: Retention of Procurement Records: (a) All procurement records shall be retained by the Procurement and Supply (P&S) Director for a period of 5 years after completion of construction, or full delivery of the goods or services under the contract. The official with expenditure authority shall also keep copies of all procurement records for their respective agencies. Requirements for Competition: Officials with expenditure authority shall provide for full and open competition through use of the competitive procedure that is best suited to the circumstances of the contract action. The competitive procedures available for use in fulfilling the requirement for full and open competition are as follows: (a) Competitive sealed bidding (§ 70-30.3-205) (b) Competitive sealed proposals (§ 70-30.3-210) (c) Architect-engineer services (§ 70-30.3-305); and (d) Competitive selection procedures for professional services (§ 70-30.3-310). § 70-30.3-201 Competitive sealed bidding: If there is no adequate local competition, the invitation for bids shall also be advertised in at least one regional newspaper or at least one national publication or on the internet; in such case, the P&S Director shall consider extending the bidding period. Small Purchases: Bidding is not required but is encouraged for procurement over $2,500 and under $10,000. The official with expenditure authority must obtain price quotations from at least three vendors and base the selection on competitive price and quality for procurement valued at $2,500 to $10,000. Any price quotations obtained must be written, documented, and submitted to the P&S Director for approval. Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Condition: Of forty-five expenditures tested, aggregating $4.5M of a total population of $6.4M in nonpayroll expenditures subject to procurement, the following were noted: 1. For two (or 4%), purchase order, purchase requisitions and contracts were not on file. 2. For five (or 11%), bid submissions and invitation-to-bid publications were not on file. No questioned costs are presented for Business Unit 5122 as no reimbursement were received in FY 2021. 3. For two (or 4%), no price quotations were written, documented, or submitted with the purchase order. Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Condition, continued: 4. For two or (4%), written justifications and the P&S Director’s written approvals of the emergency procurement method used were not provided. In addition, the contracts indicated the procurement used were for competitive sealed proposals; however, the procurement files support emergency procurement. Cause: CNMI did not enforce compliance with established procurement regulations over procurement. Effect: CNMI is in noncompliance with applicable procurement regulations and questioned costs of $1,240,465 result. Identification as a Repeat Finding: Finding No. 2020-032 Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Views of responsible officials: Condition 1 – CNMI Corrective Action Plan statements agreement. Condition 2 - The CIP Office disagrees with this finding. The Capital Improvement Program provided information regarding these questioned costs. For 703-OS/32200344 - RFQ20-GOV-084 was provided to the Auditor for their review. Three (3) proposers submitted a proposal. For 702-OS/32200912 - The procurement method for this was processed through a Sole Source. For CUC-WW-18-C032 - Lower Base Sewer Phase 1 - Lift Station and Focemain - This contract was executed by the Commonwealth Utilities Corporation on July 12, 2018. Procurement Services was able to obtain a copy of the contract from CUC to satisfy the audit testing. For 712727-OC (ITB20-DLNR/DOA-098) - Purchase of One (1) 13" Chipper Machine. Two bidders responded to this ITB; Boyer Trading Company & J. & J Company. Boyer Trading was selected as the lowest and responsive bidder. Condition 3 - The Office of Grants Management disagrees with these findings because these are Open Accounts, and this would mean that no price quotations were required during the purchase requisition process in order to obtain the purchase orders. As confirmed by Financial Services and Procurement Services, quotations were not required on an open account. Open accounts were allowed during the JD Edwards period and were discontinued after September 30, 2021. MUNIS was implemented in October 2021. Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Views of responsible officials, continued: Condition 4 - The Office of Grants Management (assisting DHSEM) disagrees with the finding because assigned personnel were not made aware of the documents needed; however, OGM is more than happy to provide the following documents to substantiate the purchase of a mobile Covid-19 Biological Safety Lab for the Commonwealth Healthcare Center and for the Alternate Care Site at Kanoa Resort. Per the documentation, the Public Assistance Office and DHSEM followed competitive procurement processing and invoked the Public Health Emergency Executive Order#2020-04 and to which the CNMI Attorney General’s Office approved the purchase. Purchase Order # 708019 was used by the Department of Homeland Security and Emergency Management and the Covid-19 Task Force. Contract number Covid19-0-0626 was provided. Expenses were later transferred to Department of the Interior CARES Act Funds under D20AP00049 per OGM Memo Number 2021-013. Auditor Response: Condition 2 – The bid documents, bid submissions and advertisements were not provided. Condition 3 – Per §70-30.3-220 of the CNMI Procurement Regulations that was in effect prior to May 28, 2021, the official with expenditure authority must obtain price quotations from at least three vendors and base the selection on competitive price and quality at $2,500 to $10,000. Any price quotations obtained must be written, documented, and submitted to the P&S Director for approval. Condition 4 – The supporting documents were requested on January 25, 2024 and were not provided.

Finding No. 2021-021 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D18AP00135 and D19AP00083 Area: Reporting Questioned Costs: $1,165 Criteria: In accordance with Section 8 of the Grant and Cooperative Agreement between the CNMI and the Office of Insular Affairs (OIA), a SF-425 Federal Financial Report will be submitted semi-annually for the period beginning January 1 and ending June 30 and beginning July 1 and ending December 31. Condition: The total federal share of expenditures reported on the SF-425 differ from the underlying accounting records. No questioned costs result for D19AP00083 as no reimbursement was received in FY2021. Cause: CNMI did not effectively monitor the accuracy and completeness of the SF-425 report based on underlying accounting records. Effect: CNMI is in noncompliance with SF-425 reporting requirements and questioned costs of $1,165 result for D18AP00135 as actual reimbursement exceeded recorded expenditures and the projected questioned costs exceed the $25,000 threshold. Recommendation: CNMI should implement monitoring control procedures to verify that amounts reported are supported by underlying accounting records derived from CNMI’s accounting system. Finding No. 2021-021, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D18AP00135 and D19AP00083 Area: Reporting Questioned Costs: $1,165 Views of Responsible Officials: The Office of Grants Management (assisting Financial Services – Federal Section) disagrees with the finding. Per the SF-425, the amount noted is $288,849 (rounded) and their records are accurate. Auditors did not inquire with the Federal Section about the variance they noted and are unsure of what accounting records they are referring to. Auditors would need to review this finding again and reach out to the Federal Section. Auditor Response: The underlying accounting records we are referring to are the accounting records that the CNMI utilizes to prepare the SF-245 reports which should include the reconciliation substantiating the variance between the SF-425 and the general ledger detail report.

Finding No. 2021-022 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00006 and D21AF10004 Area: Subrecipient Monitoring Questioned Costs: $ -0- Criteria: In accordance with 2 CFR § 200.332, pass-through entity (PTE) must establish and implement subrecipient monitoring policies and procedures, including the following: • At the time of the award, clearly identifying to the subrecipient all requirements imposed by the PTE on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations, and the terms and conditions of the award. • Evaluating the impact of subrecipient activities on the pass-through entity’s ability to comply with applicable federal regulations. Condition: 1. The subrecipients of the Capital Improvement Projects (CIP) and Compact Impact programs did not match the listing per the SEFA. 2. The program did not include the following required information in the subrecipient agreements: • Subrecipient’s Data Universal Numbering System (DUNS) number; • Federal Award Identification Number (FAIN); • Subaward Period of Performance Start and End Date; • Amount of Federal Funds Obligated by this action; • Total Amount of Federal Funds Obligated to the subrecipient; and • Indirect cost rate for the Federal award. Finding No. 2021-022, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00006 and D21AF10004 Area: Subrecipient Monitoring Questioned Costs: $ -0- Condition, continued: 3. There was no evidence of procedures used to monitor subrecipient compliance with applicable laws, regulations, and provisions of contracts and grant agreements. We are aware that the subrecipients, Public School System and Northern Marianas College, have been subjected to Single Audits; however, there is no evidence that the Single Audit reports were used as a monitoring tool. 4. Documentation was not provided to demonstrate monitoring procedures were performed on the subrecipients. Further, narrative reports on project status were not provided and made available. Cause: The CNMI failed to enforce compliance with subrecipient monitoring requirements. Effect: The CNMI is in noncompliance with applicable subrecipient monitoring requirements. No questioned costs are presented as the Single Audit reports of the subrecipients tested have been issued with no findings noted. Identification as a Repeat Finding: Finding No. 2020-033 Recommendation: The responsible personnel should consider obtaining training in the area of subrecipient monitoring and establishing and implementing policies and procedures over compliance with applicable subrecipient monitoring requirements. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-023 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016 Area: Special Tests and Provisions – Grant Terms and Conditions Questioned Costs: $-0- Criteria: In accordance with Section 5 of the Grant and Cooperative Agreement between the CNMI and the Office of Insular Affairs (OIA), for construction activities funded by grants, the Office of Insular Affairs (OIA) seal should be displayed on all construction signage that is intended to identify the project and funders, as appropriate. The seal must remain intact and unchanged and may only be displayed using either the standard color scheme or a single color that complements the background where it appears. The OIA grant manager should be contacted for an electronic version of the seal if needed. Condition: Of eight expenditures tested, aggregating $4.5M of a total population of $11.8M, for one (or 13%), documentation substantiating that the Office of Insular Affairs seal requirement was complied with was not provided: Cause: The CNMI did not effectively monitor compliance with applicable special tests and provisions requirements. Effect: The CNMI is in noncompliance with special tests and provisions requirements. No questioned costs are reported as we are unable to quantify the extent of noncompliance. Identification as a Repeat Finding: Finding No. 2020-034 Recommendation: The responsible personnel should monitor grant terms and conditions so that requirements are complied with. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-017 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00134, D19AP00142, D21AF10004, D21AF10052 Area: Allowable Costs/Cost Principles Questioned Costs: $402,941 Criteria: In accordance with 2 CFR Part 200, Subpart E, cost must be necessary and reasonable for the performance of the federal award and be allocable thereto. Further costs must conform to any limitations or exclusions and be adequately documented. Condition: Of thirty-four nonpayroll expenditures tested, aggregating $4.8M of a total population of $11.8M, the following were noted: 1. For one (or 3%), no purchase order or contract was provided. 2. For three (or 9%), no documents such as invoices or contracts were provided to substantiate costs. 3. Tests of the general ledger expenditure details noted that business unit 5122 amounting to $261,832 pertains to locally funded transactions and should not have been charged to the program. No questioned cost is presented as no reimbursements were made under this business unit. Finding No. 2021-017, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00134, D19AP00142, D21AF10004, D21AF10052 Area: Allowable Costs/Cost Principles Questioned Costs: $402,941 Cause: CNMI did not effectively enforce recordkeeping controls and perform monitoring controls over compliance with applicable allowable costs/cost principles requirements. Further, the CNMI did not effectively monitor cumulative expenditures and approved funding limits.Effect: CNMI is in noncompliance with applicable allowable costs/cost principles requirements and questioned costs of $402,941 result. Recommendation: CNMI management should establish a recordkeeping system whereby underlying support is filed accordingly to substantiate costs and management should also strengthen monitoring controls over transactions to substantiate program costs in accordance with applicable allowable costs/cost principles. Views of responsible officials: Condition 3 – The CNMI Corrective Action Plan states agreement. Conditions 1 & 2 - The OMB disagrees with this finding. Compact Impact grants often operate on a reimbursement basis.  This means that when the award is received, we request payment or a transfer of expenses to cover prior expenses that have already been incurred and paid.  Therefore, the memo that was processed for such request and other supporting documents can be provided.  Auditor Response: Conditions 1 & 2 - Documentation substantiating the costs charged to the program were not provided.

Finding No. 2021-018 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award Nos.: D14AP00037, D16AP00064 D16AP00065, D17AP00111, D18AP00031, D18AP00130, D18AP00146, D18AP00165, D20AP00099, D20AP00119, and D21AP10003 Area: Equipment and Real Property Management Questioned Costs: $-0- Criteria: In accordance with 2 CFR section 200.313(b)), a state must use, manage, and dispose of equipment acquired under a federal award in accordance with state laws and procedures. The CNMI Property Management Policies and Procedures requires the Division of Procurement & Supply (PS) to conduct an annual inventory of property held by a designated official who has administrative control over the use of personal property within his area of jurisdiction. Also, PS shall perform random audits of property held by each accountable person to validate the integrity of the property control process. Further, property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the Federal award identification number), who holds title, the acquisition date, cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Condition: 1. Tests of internal controls noted that a complete physical inventory of equipment and property was not performed by PS in FY 2021. 2. A property listing was provided by PS; however, information such as the federal award identification number, source of the property, who holds title, percentage of federal participation in the cost of the property, and use of the property, was not documented. 3. A variance of $415,046 was noted between the general ledger details of $665,165 of capital assets and $250,119 per the property listing provided by PS. Cause: The CNMI lacks the human resources and financial management system structure needed to effect compliance with applicable equipment and real property management requirements. Finding No. 2021-018, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award Nos.: D14AP00037, D16AP00064 D16AP00065, D17AP00111, D18AP00031, D18AP00130, D18AP00146, D18AP00165, D20AP00099, D20AP00119, and D21AP10003 Area: Equipment and Real Property Management Questioned Costs: $-0- Effect: The CNMI is in noncompliance with applicable equipment and real property management requirements. See below for the cumulative dollar amount of property and equipment acquired with program grant funds over the past five years. Identification as a Repeat Finding: Finding No. 2020-030 Recommendation: The CNMI should consider seeking technical and financial support from Federal agencies to develop human resources and a financial management system capable of effecting compliance with applicable property management policies and procedures. Views of responsible officials: Conditions 1 and 2 – The CNMI Corrective Action Plan states agreement. Condition 3 - The Division of Procurement Services disagrees with this finding. The Division of Procurement Services, Property Management wasn't informed of this audit parameter. For FY2021 number of Transactions/Units processed was 4970 units and the dollar value is $9,526,239. Auditor Response: Condition 3 - The request was for the inventory listing as of 09/30/21 fiscal year end. Further, the dollar amount of the equipment and property are all capital assets in excess of $5,000.

Finding No. 2021-019 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00082 Area: Matching, Level of Effort and Earmarking Questioned Costs: $7,488 Criteria: In accordance with the July 2021 Compliance Supplement, matching or cost sharing includes requirements to provide contributions (usually non-federal) of a specified amount or percentage to match federal awards. Condition: For one (or 50%) of two transactions tested, aggregating $7,559 of a total population of $35,910, the project worksheet and disaster number did not agree to the projects listed on file for the cost sharing. As a result, the cost share percentage of 25% was inappropriately applied. Cause: The cause of the above condition is the lack of internal controls and inadequate file maintenance. Effect: The CNMI is in noncompliance with applicable matching requirements and questioned costs of $7,488 result as the projected questioned costs exceed the $25,000 threshold. Recommendation: The CNMI should establish and implement controls over compliance with applicable matching requirements. Responsible personnel should review local and federal share files for accuracy of disbursements. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-020 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Criteria: Non-federal entities other than states, including those operating federal programs as subrecipients of states, must follow the procurement standards set out at 2 CFR sections 200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR Part 200. CNMI’s procurement regulations state the following: Retention of Procurement Records: (a) All procurement records shall be retained by the Procurement and Supply (P&S) Director for a period of 5 years after completion of construction, or full delivery of the goods or services under the contract. The official with expenditure authority shall also keep copies of all procurement records for their respective agencies. Requirements for Competition: Officials with expenditure authority shall provide for full and open competition through use of the competitive procedure that is best suited to the circumstances of the contract action. The competitive procedures available for use in fulfilling the requirement for full and open competition are as follows: (a) Competitive sealed bidding (§ 70-30.3-205) (b) Competitive sealed proposals (§ 70-30.3-210) (c) Architect-engineer services (§ 70-30.3-305); and (d) Competitive selection procedures for professional services (§ 70-30.3-310). § 70-30.3-201 Competitive sealed bidding: If there is no adequate local competition, the invitation for bids shall also be advertised in at least one regional newspaper or at least one national publication or on the internet; in such case, the P&S Director shall consider extending the bidding period. Small Purchases: Bidding is not required but is encouraged for procurement over $2,500 and under $10,000. The official with expenditure authority must obtain price quotations from at least three vendors and base the selection on competitive price and quality for procurement valued at $2,500 to $10,000. Any price quotations obtained must be written, documented, and submitted to the P&S Director for approval. Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Condition: Of forty-five expenditures tested, aggregating $4.5M of a total population of $6.4M in nonpayroll expenditures subject to procurement, the following were noted: 1. For two (or 4%), purchase order, purchase requisitions and contracts were not on file. 2. For five (or 11%), bid submissions and invitation-to-bid publications were not on file. No questioned costs are presented for Business Unit 5122 as no reimbursement were received in FY 2021. 3. For two (or 4%), no price quotations were written, documented, or submitted with the purchase order. Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Condition, continued: 4. For two or (4%), written justifications and the P&S Director’s written approvals of the emergency procurement method used were not provided. In addition, the contracts indicated the procurement used were for competitive sealed proposals; however, the procurement files support emergency procurement. Cause: CNMI did not enforce compliance with established procurement regulations over procurement. Effect: CNMI is in noncompliance with applicable procurement regulations and questioned costs of $1,240,465 result. Identification as a Repeat Finding: Finding No. 2020-032 Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Views of responsible officials: Condition 1 – CNMI Corrective Action Plan statements agreement. Condition 2 - The CIP Office disagrees with this finding. The Capital Improvement Program provided information regarding these questioned costs. For 703-OS/32200344 - RFQ20-GOV-084 was provided to the Auditor for their review. Three (3) proposers submitted a proposal. For 702-OS/32200912 - The procurement method for this was processed through a Sole Source. For CUC-WW-18-C032 - Lower Base Sewer Phase 1 - Lift Station and Focemain - This contract was executed by the Commonwealth Utilities Corporation on July 12, 2018. Procurement Services was able to obtain a copy of the contract from CUC to satisfy the audit testing. For 712727-OC (ITB20-DLNR/DOA-098) - Purchase of One (1) 13" Chipper Machine. Two bidders responded to this ITB; Boyer Trading Company & J. & J Company. Boyer Trading was selected as the lowest and responsive bidder. Condition 3 - The Office of Grants Management disagrees with these findings because these are Open Accounts, and this would mean that no price quotations were required during the purchase requisition process in order to obtain the purchase orders. As confirmed by Financial Services and Procurement Services, quotations were not required on an open account. Open accounts were allowed during the JD Edwards period and were discontinued after September 30, 2021. MUNIS was implemented in October 2021. Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Views of responsible officials, continued: Condition 4 - The Office of Grants Management (assisting DHSEM) disagrees with the finding because assigned personnel were not made aware of the documents needed; however, OGM is more than happy to provide the following documents to substantiate the purchase of a mobile Covid-19 Biological Safety Lab for the Commonwealth Healthcare Center and for the Alternate Care Site at Kanoa Resort. Per the documentation, the Public Assistance Office and DHSEM followed competitive procurement processing and invoked the Public Health Emergency Executive Order#2020-04 and to which the CNMI Attorney General’s Office approved the purchase. Purchase Order # 708019 was used by the Department of Homeland Security and Emergency Management and the Covid-19 Task Force. Contract number Covid19-0-0626 was provided. Expenses were later transferred to Department of the Interior CARES Act Funds under D20AP00049 per OGM Memo Number 2021-013. Auditor Response: Condition 2 – The bid documents, bid submissions and advertisements were not provided. Condition 3 – Per §70-30.3-220 of the CNMI Procurement Regulations that was in effect prior to May 28, 2021, the official with expenditure authority must obtain price quotations from at least three vendors and base the selection on competitive price and quality at $2,500 to $10,000. Any price quotations obtained must be written, documented, and submitted to the P&S Director for approval. Condition 4 – The supporting documents were requested on January 25, 2024 and were not provided.

Finding No. 2021-021 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D18AP00135 and D19AP00083 Area: Reporting Questioned Costs: $1,165 Criteria: In accordance with Section 8 of the Grant and Cooperative Agreement between the CNMI and the Office of Insular Affairs (OIA), a SF-425 Federal Financial Report will be submitted semi-annually for the period beginning January 1 and ending June 30 and beginning July 1 and ending December 31. Condition: The total federal share of expenditures reported on the SF-425 differ from the underlying accounting records. No questioned costs result for D19AP00083 as no reimbursement was received in FY2021. Cause: CNMI did not effectively monitor the accuracy and completeness of the SF-425 report based on underlying accounting records. Effect: CNMI is in noncompliance with SF-425 reporting requirements and questioned costs of $1,165 result for D18AP00135 as actual reimbursement exceeded recorded expenditures and the projected questioned costs exceed the $25,000 threshold. Recommendation: CNMI should implement monitoring control procedures to verify that amounts reported are supported by underlying accounting records derived from CNMI’s accounting system. Finding No. 2021-021, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D18AP00135 and D19AP00083 Area: Reporting Questioned Costs: $1,165 Views of Responsible Officials: The Office of Grants Management (assisting Financial Services – Federal Section) disagrees with the finding. Per the SF-425, the amount noted is $288,849 (rounded) and their records are accurate. Auditors did not inquire with the Federal Section about the variance they noted and are unsure of what accounting records they are referring to. Auditors would need to review this finding again and reach out to the Federal Section. Auditor Response: The underlying accounting records we are referring to are the accounting records that the CNMI utilizes to prepare the SF-245 reports which should include the reconciliation substantiating the variance between the SF-425 and the general ledger detail report.

Finding No. 2021-022 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00006 and D21AF10004 Area: Subrecipient Monitoring Questioned Costs: $ -0- Criteria: In accordance with 2 CFR § 200.332, pass-through entity (PTE) must establish and implement subrecipient monitoring policies and procedures, including the following: • At the time of the award, clearly identifying to the subrecipient all requirements imposed by the PTE on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations, and the terms and conditions of the award. • Evaluating the impact of subrecipient activities on the pass-through entity’s ability to comply with applicable federal regulations. Condition: 1. The subrecipients of the Capital Improvement Projects (CIP) and Compact Impact programs did not match the listing per the SEFA. 2. The program did not include the following required information in the subrecipient agreements: • Subrecipient’s Data Universal Numbering System (DUNS) number; • Federal Award Identification Number (FAIN); • Subaward Period of Performance Start and End Date; • Amount of Federal Funds Obligated by this action; • Total Amount of Federal Funds Obligated to the subrecipient; and • Indirect cost rate for the Federal award. Finding No. 2021-022, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00006 and D21AF10004 Area: Subrecipient Monitoring Questioned Costs: $ -0- Condition, continued: 3. There was no evidence of procedures used to monitor subrecipient compliance with applicable laws, regulations, and provisions of contracts and grant agreements. We are aware that the subrecipients, Public School System and Northern Marianas College, have been subjected to Single Audits; however, there is no evidence that the Single Audit reports were used as a monitoring tool. 4. Documentation was not provided to demonstrate monitoring procedures were performed on the subrecipients. Further, narrative reports on project status were not provided and made available. Cause: The CNMI failed to enforce compliance with subrecipient monitoring requirements. Effect: The CNMI is in noncompliance with applicable subrecipient monitoring requirements. No questioned costs are presented as the Single Audit reports of the subrecipients tested have been issued with no findings noted. Identification as a Repeat Finding: Finding No. 2020-033 Recommendation: The responsible personnel should consider obtaining training in the area of subrecipient monitoring and establishing and implementing policies and procedures over compliance with applicable subrecipient monitoring requirements. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-023 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016 Area: Special Tests and Provisions – Grant Terms and Conditions Questioned Costs: $-0- Criteria: In accordance with Section 5 of the Grant and Cooperative Agreement between the CNMI and the Office of Insular Affairs (OIA), for construction activities funded by grants, the Office of Insular Affairs (OIA) seal should be displayed on all construction signage that is intended to identify the project and funders, as appropriate. The seal must remain intact and unchanged and may only be displayed using either the standard color scheme or a single color that complements the background where it appears. The OIA grant manager should be contacted for an electronic version of the seal if needed. Condition: Of eight expenditures tested, aggregating $4.5M of a total population of $11.8M, for one (or 13%), documentation substantiating that the Office of Insular Affairs seal requirement was complied with was not provided: Cause: The CNMI did not effectively monitor compliance with applicable special tests and provisions requirements. Effect: The CNMI is in noncompliance with special tests and provisions requirements. No questioned costs are reported as we are unable to quantify the extent of noncompliance. Identification as a Repeat Finding: Finding No. 2020-034 Recommendation: The responsible personnel should monitor grant terms and conditions so that requirements are complied with. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-017 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00134, D19AP00142, D21AF10004, D21AF10052 Area: Allowable Costs/Cost Principles Questioned Costs: $402,941 Criteria: In accordance with 2 CFR Part 200, Subpart E, cost must be necessary and reasonable for the performance of the federal award and be allocable thereto. Further costs must conform to any limitations or exclusions and be adequately documented. Condition: Of thirty-four nonpayroll expenditures tested, aggregating $4.8M of a total population of $11.8M, the following were noted: 1. For one (or 3%), no purchase order or contract was provided. 2. For three (or 9%), no documents such as invoices or contracts were provided to substantiate costs. 3. Tests of the general ledger expenditure details noted that business unit 5122 amounting to $261,832 pertains to locally funded transactions and should not have been charged to the program. No questioned cost is presented as no reimbursements were made under this business unit. Finding No. 2021-017, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00134, D19AP00142, D21AF10004, D21AF10052 Area: Allowable Costs/Cost Principles Questioned Costs: $402,941 Cause: CNMI did not effectively enforce recordkeeping controls and perform monitoring controls over compliance with applicable allowable costs/cost principles requirements. Further, the CNMI did not effectively monitor cumulative expenditures and approved funding limits.Effect: CNMI is in noncompliance with applicable allowable costs/cost principles requirements and questioned costs of $402,941 result. Recommendation: CNMI management should establish a recordkeeping system whereby underlying support is filed accordingly to substantiate costs and management should also strengthen monitoring controls over transactions to substantiate program costs in accordance with applicable allowable costs/cost principles. Views of responsible officials: Condition 3 – The CNMI Corrective Action Plan states agreement. Conditions 1 & 2 - The OMB disagrees with this finding. Compact Impact grants often operate on a reimbursement basis.  This means that when the award is received, we request payment or a transfer of expenses to cover prior expenses that have already been incurred and paid.  Therefore, the memo that was processed for such request and other supporting documents can be provided.  Auditor Response: Conditions 1 & 2 - Documentation substantiating the costs charged to the program were not provided.

Finding No. 2021-018 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award Nos.: D14AP00037, D16AP00064 D16AP00065, D17AP00111, D18AP00031, D18AP00130, D18AP00146, D18AP00165, D20AP00099, D20AP00119, and D21AP10003 Area: Equipment and Real Property Management Questioned Costs: $-0- Criteria: In accordance with 2 CFR section 200.313(b)), a state must use, manage, and dispose of equipment acquired under a federal award in accordance with state laws and procedures. The CNMI Property Management Policies and Procedures requires the Division of Procurement & Supply (PS) to conduct an annual inventory of property held by a designated official who has administrative control over the use of personal property within his area of jurisdiction. Also, PS shall perform random audits of property held by each accountable person to validate the integrity of the property control process. Further, property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the Federal award identification number), who holds title, the acquisition date, cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Condition: 1. Tests of internal controls noted that a complete physical inventory of equipment and property was not performed by PS in FY 2021. 2. A property listing was provided by PS; however, information such as the federal award identification number, source of the property, who holds title, percentage of federal participation in the cost of the property, and use of the property, was not documented. 3. A variance of $415,046 was noted between the general ledger details of $665,165 of capital assets and $250,119 per the property listing provided by PS. Cause: The CNMI lacks the human resources and financial management system structure needed to effect compliance with applicable equipment and real property management requirements. Finding No. 2021-018, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award Nos.: D14AP00037, D16AP00064 D16AP00065, D17AP00111, D18AP00031, D18AP00130, D18AP00146, D18AP00165, D20AP00099, D20AP00119, and D21AP10003 Area: Equipment and Real Property Management Questioned Costs: $-0- Effect: The CNMI is in noncompliance with applicable equipment and real property management requirements. See below for the cumulative dollar amount of property and equipment acquired with program grant funds over the past five years. Identification as a Repeat Finding: Finding No. 2020-030 Recommendation: The CNMI should consider seeking technical and financial support from Federal agencies to develop human resources and a financial management system capable of effecting compliance with applicable property management policies and procedures. Views of responsible officials: Conditions 1 and 2 – The CNMI Corrective Action Plan states agreement. Condition 3 - The Division of Procurement Services disagrees with this finding. The Division of Procurement Services, Property Management wasn't informed of this audit parameter. For FY2021 number of Transactions/Units processed was 4970 units and the dollar value is $9,526,239. Auditor Response: Condition 3 - The request was for the inventory listing as of 09/30/21 fiscal year end. Further, the dollar amount of the equipment and property are all capital assets in excess of $5,000.

Finding No. 2021-019 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00082 Area: Matching, Level of Effort and Earmarking Questioned Costs: $7,488 Criteria: In accordance with the July 2021 Compliance Supplement, matching or cost sharing includes requirements to provide contributions (usually non-federal) of a specified amount or percentage to match federal awards. Condition: For one (or 50%) of two transactions tested, aggregating $7,559 of a total population of $35,910, the project worksheet and disaster number did not agree to the projects listed on file for the cost sharing. As a result, the cost share percentage of 25% was inappropriately applied. Cause: The cause of the above condition is the lack of internal controls and inadequate file maintenance. Effect: The CNMI is in noncompliance with applicable matching requirements and questioned costs of $7,488 result as the projected questioned costs exceed the $25,000 threshold. Recommendation: The CNMI should establish and implement controls over compliance with applicable matching requirements. Responsible personnel should review local and federal share files for accuracy of disbursements. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-020 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Criteria: Non-federal entities other than states, including those operating federal programs as subrecipients of states, must follow the procurement standards set out at 2 CFR sections 200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR Part 200. CNMI’s procurement regulations state the following: Retention of Procurement Records: (a) All procurement records shall be retained by the Procurement and Supply (P&S) Director for a period of 5 years after completion of construction, or full delivery of the goods or services under the contract. The official with expenditure authority shall also keep copies of all procurement records for their respective agencies. Requirements for Competition: Officials with expenditure authority shall provide for full and open competition through use of the competitive procedure that is best suited to the circumstances of the contract action. The competitive procedures available for use in fulfilling the requirement for full and open competition are as follows: (a) Competitive sealed bidding (§ 70-30.3-205) (b) Competitive sealed proposals (§ 70-30.3-210) (c) Architect-engineer services (§ 70-30.3-305); and (d) Competitive selection procedures for professional services (§ 70-30.3-310). § 70-30.3-201 Competitive sealed bidding: If there is no adequate local competition, the invitation for bids shall also be advertised in at least one regional newspaper or at least one national publication or on the internet; in such case, the P&S Director shall consider extending the bidding period. Small Purchases: Bidding is not required but is encouraged for procurement over $2,500 and under $10,000. The official with expenditure authority must obtain price quotations from at least three vendors and base the selection on competitive price and quality for procurement valued at $2,500 to $10,000. Any price quotations obtained must be written, documented, and submitted to the P&S Director for approval. Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Condition: Of forty-five expenditures tested, aggregating $4.5M of a total population of $6.4M in nonpayroll expenditures subject to procurement, the following were noted: 1. For two (or 4%), purchase order, purchase requisitions and contracts were not on file. 2. For five (or 11%), bid submissions and invitation-to-bid publications were not on file. No questioned costs are presented for Business Unit 5122 as no reimbursement were received in FY 2021. 3. For two (or 4%), no price quotations were written, documented, or submitted with the purchase order. Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Condition, continued: 4. For two or (4%), written justifications and the P&S Director’s written approvals of the emergency procurement method used were not provided. In addition, the contracts indicated the procurement used were for competitive sealed proposals; however, the procurement files support emergency procurement. Cause: CNMI did not enforce compliance with established procurement regulations over procurement. Effect: CNMI is in noncompliance with applicable procurement regulations and questioned costs of $1,240,465 result. Identification as a Repeat Finding: Finding No. 2020-032 Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Views of responsible officials: Condition 1 – CNMI Corrective Action Plan statements agreement. Condition 2 - The CIP Office disagrees with this finding. The Capital Improvement Program provided information regarding these questioned costs. For 703-OS/32200344 - RFQ20-GOV-084 was provided to the Auditor for their review. Three (3) proposers submitted a proposal. For 702-OS/32200912 - The procurement method for this was processed through a Sole Source. For CUC-WW-18-C032 - Lower Base Sewer Phase 1 - Lift Station and Focemain - This contract was executed by the Commonwealth Utilities Corporation on July 12, 2018. Procurement Services was able to obtain a copy of the contract from CUC to satisfy the audit testing. For 712727-OC (ITB20-DLNR/DOA-098) - Purchase of One (1) 13" Chipper Machine. Two bidders responded to this ITB; Boyer Trading Company & J. & J Company. Boyer Trading was selected as the lowest and responsive bidder. Condition 3 - The Office of Grants Management disagrees with these findings because these are Open Accounts, and this would mean that no price quotations were required during the purchase requisition process in order to obtain the purchase orders. As confirmed by Financial Services and Procurement Services, quotations were not required on an open account. Open accounts were allowed during the JD Edwards period and were discontinued after September 30, 2021. MUNIS was implemented in October 2021. Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Views of responsible officials, continued: Condition 4 - The Office of Grants Management (assisting DHSEM) disagrees with the finding because assigned personnel were not made aware of the documents needed; however, OGM is more than happy to provide the following documents to substantiate the purchase of a mobile Covid-19 Biological Safety Lab for the Commonwealth Healthcare Center and for the Alternate Care Site at Kanoa Resort. Per the documentation, the Public Assistance Office and DHSEM followed competitive procurement processing and invoked the Public Health Emergency Executive Order#2020-04 and to which the CNMI Attorney General’s Office approved the purchase. Purchase Order # 708019 was used by the Department of Homeland Security and Emergency Management and the Covid-19 Task Force. Contract number Covid19-0-0626 was provided. Expenses were later transferred to Department of the Interior CARES Act Funds under D20AP00049 per OGM Memo Number 2021-013. Auditor Response: Condition 2 – The bid documents, bid submissions and advertisements were not provided. Condition 3 – Per §70-30.3-220 of the CNMI Procurement Regulations that was in effect prior to May 28, 2021, the official with expenditure authority must obtain price quotations from at least three vendors and base the selection on competitive price and quality at $2,500 to $10,000. Any price quotations obtained must be written, documented, and submitted to the P&S Director for approval. Condition 4 – The supporting documents were requested on January 25, 2024 and were not provided.

Finding No. 2021-021 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D18AP00135 and D19AP00083 Area: Reporting Questioned Costs: $1,165 Criteria: In accordance with Section 8 of the Grant and Cooperative Agreement between the CNMI and the Office of Insular Affairs (OIA), a SF-425 Federal Financial Report will be submitted semi-annually for the period beginning January 1 and ending June 30 and beginning July 1 and ending December 31. Condition: The total federal share of expenditures reported on the SF-425 differ from the underlying accounting records. No questioned costs result for D19AP00083 as no reimbursement was received in FY2021. Cause: CNMI did not effectively monitor the accuracy and completeness of the SF-425 report based on underlying accounting records. Effect: CNMI is in noncompliance with SF-425 reporting requirements and questioned costs of $1,165 result for D18AP00135 as actual reimbursement exceeded recorded expenditures and the projected questioned costs exceed the $25,000 threshold. Recommendation: CNMI should implement monitoring control procedures to verify that amounts reported are supported by underlying accounting records derived from CNMI’s accounting system. Finding No. 2021-021, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D18AP00135 and D19AP00083 Area: Reporting Questioned Costs: $1,165 Views of Responsible Officials: The Office of Grants Management (assisting Financial Services – Federal Section) disagrees with the finding. Per the SF-425, the amount noted is $288,849 (rounded) and their records are accurate. Auditors did not inquire with the Federal Section about the variance they noted and are unsure of what accounting records they are referring to. Auditors would need to review this finding again and reach out to the Federal Section. Auditor Response: The underlying accounting records we are referring to are the accounting records that the CNMI utilizes to prepare the SF-245 reports which should include the reconciliation substantiating the variance between the SF-425 and the general ledger detail report.

Finding No. 2021-022 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00006 and D21AF10004 Area: Subrecipient Monitoring Questioned Costs: $ -0- Criteria: In accordance with 2 CFR § 200.332, pass-through entity (PTE) must establish and implement subrecipient monitoring policies and procedures, including the following: • At the time of the award, clearly identifying to the subrecipient all requirements imposed by the PTE on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations, and the terms and conditions of the award. • Evaluating the impact of subrecipient activities on the pass-through entity’s ability to comply with applicable federal regulations. Condition: 1. The subrecipients of the Capital Improvement Projects (CIP) and Compact Impact programs did not match the listing per the SEFA. 2. The program did not include the following required information in the subrecipient agreements: • Subrecipient’s Data Universal Numbering System (DUNS) number; • Federal Award Identification Number (FAIN); • Subaward Period of Performance Start and End Date; • Amount of Federal Funds Obligated by this action; • Total Amount of Federal Funds Obligated to the subrecipient; and • Indirect cost rate for the Federal award. Finding No. 2021-022, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00006 and D21AF10004 Area: Subrecipient Monitoring Questioned Costs: $ -0- Condition, continued: 3. There was no evidence of procedures used to monitor subrecipient compliance with applicable laws, regulations, and provisions of contracts and grant agreements. We are aware that the subrecipients, Public School System and Northern Marianas College, have been subjected to Single Audits; however, there is no evidence that the Single Audit reports were used as a monitoring tool. 4. Documentation was not provided to demonstrate monitoring procedures were performed on the subrecipients. Further, narrative reports on project status were not provided and made available. Cause: The CNMI failed to enforce compliance with subrecipient monitoring requirements. Effect: The CNMI is in noncompliance with applicable subrecipient monitoring requirements. No questioned costs are presented as the Single Audit reports of the subrecipients tested have been issued with no findings noted. Identification as a Repeat Finding: Finding No. 2020-033 Recommendation: The responsible personnel should consider obtaining training in the area of subrecipient monitoring and establishing and implementing policies and procedures over compliance with applicable subrecipient monitoring requirements. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-023 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016 Area: Special Tests and Provisions – Grant Terms and Conditions Questioned Costs: $-0- Criteria: In accordance with Section 5 of the Grant and Cooperative Agreement between the CNMI and the Office of Insular Affairs (OIA), for construction activities funded by grants, the Office of Insular Affairs (OIA) seal should be displayed on all construction signage that is intended to identify the project and funders, as appropriate. The seal must remain intact and unchanged and may only be displayed using either the standard color scheme or a single color that complements the background where it appears. The OIA grant manager should be contacted for an electronic version of the seal if needed. Condition: Of eight expenditures tested, aggregating $4.5M of a total population of $11.8M, for one (or 13%), documentation substantiating that the Office of Insular Affairs seal requirement was complied with was not provided: Cause: The CNMI did not effectively monitor compliance with applicable special tests and provisions requirements. Effect: The CNMI is in noncompliance with special tests and provisions requirements. No questioned costs are reported as we are unable to quantify the extent of noncompliance. Identification as a Repeat Finding: Finding No. 2020-034 Recommendation: The responsible personnel should monitor grant terms and conditions so that requirements are complied with. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-017 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00134, D19AP00142, D21AF10004, D21AF10052 Area: Allowable Costs/Cost Principles Questioned Costs: $402,941 Criteria: In accordance with 2 CFR Part 200, Subpart E, cost must be necessary and reasonable for the performance of the federal award and be allocable thereto. Further costs must conform to any limitations or exclusions and be adequately documented. Condition: Of thirty-four nonpayroll expenditures tested, aggregating $4.8M of a total population of $11.8M, the following were noted: 1. For one (or 3%), no purchase order or contract was provided. 2. For three (or 9%), no documents such as invoices or contracts were provided to substantiate costs. 3. Tests of the general ledger expenditure details noted that business unit 5122 amounting to $261,832 pertains to locally funded transactions and should not have been charged to the program. No questioned cost is presented as no reimbursements were made under this business unit. Finding No. 2021-017, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00134, D19AP00142, D21AF10004, D21AF10052 Area: Allowable Costs/Cost Principles Questioned Costs: $402,941 Cause: CNMI did not effectively enforce recordkeeping controls and perform monitoring controls over compliance with applicable allowable costs/cost principles requirements. Further, the CNMI did not effectively monitor cumulative expenditures and approved funding limits.Effect: CNMI is in noncompliance with applicable allowable costs/cost principles requirements and questioned costs of $402,941 result. Recommendation: CNMI management should establish a recordkeeping system whereby underlying support is filed accordingly to substantiate costs and management should also strengthen monitoring controls over transactions to substantiate program costs in accordance with applicable allowable costs/cost principles. Views of responsible officials: Condition 3 – The CNMI Corrective Action Plan states agreement. Conditions 1 & 2 - The OMB disagrees with this finding. Compact Impact grants often operate on a reimbursement basis.  This means that when the award is received, we request payment or a transfer of expenses to cover prior expenses that have already been incurred and paid.  Therefore, the memo that was processed for such request and other supporting documents can be provided.  Auditor Response: Conditions 1 & 2 - Documentation substantiating the costs charged to the program were not provided.

Finding No. 2021-018 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award Nos.: D14AP00037, D16AP00064 D16AP00065, D17AP00111, D18AP00031, D18AP00130, D18AP00146, D18AP00165, D20AP00099, D20AP00119, and D21AP10003 Area: Equipment and Real Property Management Questioned Costs: $-0- Criteria: In accordance with 2 CFR section 200.313(b)), a state must use, manage, and dispose of equipment acquired under a federal award in accordance with state laws and procedures. The CNMI Property Management Policies and Procedures requires the Division of Procurement & Supply (PS) to conduct an annual inventory of property held by a designated official who has administrative control over the use of personal property within his area of jurisdiction. Also, PS shall perform random audits of property held by each accountable person to validate the integrity of the property control process. Further, property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the Federal award identification number), who holds title, the acquisition date, cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Condition: 1. Tests of internal controls noted that a complete physical inventory of equipment and property was not performed by PS in FY 2021. 2. A property listing was provided by PS; however, information such as the federal award identification number, source of the property, who holds title, percentage of federal participation in the cost of the property, and use of the property, was not documented. 3. A variance of $415,046 was noted between the general ledger details of $665,165 of capital assets and $250,119 per the property listing provided by PS. Cause: The CNMI lacks the human resources and financial management system structure needed to effect compliance with applicable equipment and real property management requirements. Finding No. 2021-018, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award Nos.: D14AP00037, D16AP00064 D16AP00065, D17AP00111, D18AP00031, D18AP00130, D18AP00146, D18AP00165, D20AP00099, D20AP00119, and D21AP10003 Area: Equipment and Real Property Management Questioned Costs: $-0- Effect: The CNMI is in noncompliance with applicable equipment and real property management requirements. See below for the cumulative dollar amount of property and equipment acquired with program grant funds over the past five years. Identification as a Repeat Finding: Finding No. 2020-030 Recommendation: The CNMI should consider seeking technical and financial support from Federal agencies to develop human resources and a financial management system capable of effecting compliance with applicable property management policies and procedures. Views of responsible officials: Conditions 1 and 2 – The CNMI Corrective Action Plan states agreement. Condition 3 - The Division of Procurement Services disagrees with this finding. The Division of Procurement Services, Property Management wasn't informed of this audit parameter. For FY2021 number of Transactions/Units processed was 4970 units and the dollar value is $9,526,239. Auditor Response: Condition 3 - The request was for the inventory listing as of 09/30/21 fiscal year end. Further, the dollar amount of the equipment and property are all capital assets in excess of $5,000.

Finding No. 2021-019 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00082 Area: Matching, Level of Effort and Earmarking Questioned Costs: $7,488 Criteria: In accordance with the July 2021 Compliance Supplement, matching or cost sharing includes requirements to provide contributions (usually non-federal) of a specified amount or percentage to match federal awards. Condition: For one (or 50%) of two transactions tested, aggregating $7,559 of a total population of $35,910, the project worksheet and disaster number did not agree to the projects listed on file for the cost sharing. As a result, the cost share percentage of 25% was inappropriately applied. Cause: The cause of the above condition is the lack of internal controls and inadequate file maintenance. Effect: The CNMI is in noncompliance with applicable matching requirements and questioned costs of $7,488 result as the projected questioned costs exceed the $25,000 threshold. Recommendation: The CNMI should establish and implement controls over compliance with applicable matching requirements. Responsible personnel should review local and federal share files for accuracy of disbursements. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-020 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Criteria: Non-federal entities other than states, including those operating federal programs as subrecipients of states, must follow the procurement standards set out at 2 CFR sections 200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR Part 200. CNMI’s procurement regulations state the following: Retention of Procurement Records: (a) All procurement records shall be retained by the Procurement and Supply (P&S) Director for a period of 5 years after completion of construction, or full delivery of the goods or services under the contract. The official with expenditure authority shall also keep copies of all procurement records for their respective agencies. Requirements for Competition: Officials with expenditure authority shall provide for full and open competition through use of the competitive procedure that is best suited to the circumstances of the contract action. The competitive procedures available for use in fulfilling the requirement for full and open competition are as follows: (a) Competitive sealed bidding (§ 70-30.3-205) (b) Competitive sealed proposals (§ 70-30.3-210) (c) Architect-engineer services (§ 70-30.3-305); and (d) Competitive selection procedures for professional services (§ 70-30.3-310). § 70-30.3-201 Competitive sealed bidding: If there is no adequate local competition, the invitation for bids shall also be advertised in at least one regional newspaper or at least one national publication or on the internet; in such case, the P&S Director shall consider extending the bidding period. Small Purchases: Bidding is not required but is encouraged for procurement over $2,500 and under $10,000. The official with expenditure authority must obtain price quotations from at least three vendors and base the selection on competitive price and quality for procurement valued at $2,500 to $10,000. Any price quotations obtained must be written, documented, and submitted to the P&S Director for approval. Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Condition: Of forty-five expenditures tested, aggregating $4.5M of a total population of $6.4M in nonpayroll expenditures subject to procurement, the following were noted: 1. For two (or 4%), purchase order, purchase requisitions and contracts were not on file. 2. For five (or 11%), bid submissions and invitation-to-bid publications were not on file. No questioned costs are presented for Business Unit 5122 as no reimbursement were received in FY 2021. 3. For two (or 4%), no price quotations were written, documented, or submitted with the purchase order. Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Condition, continued: 4. For two or (4%), written justifications and the P&S Director’s written approvals of the emergency procurement method used were not provided. In addition, the contracts indicated the procurement used were for competitive sealed proposals; however, the procurement files support emergency procurement. Cause: CNMI did not enforce compliance with established procurement regulations over procurement. Effect: CNMI is in noncompliance with applicable procurement regulations and questioned costs of $1,240,465 result. Identification as a Repeat Finding: Finding No. 2020-032 Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Views of responsible officials: Condition 1 – CNMI Corrective Action Plan statements agreement. Condition 2 - The CIP Office disagrees with this finding. The Capital Improvement Program provided information regarding these questioned costs. For 703-OS/32200344 - RFQ20-GOV-084 was provided to the Auditor for their review. Three (3) proposers submitted a proposal. For 702-OS/32200912 - The procurement method for this was processed through a Sole Source. For CUC-WW-18-C032 - Lower Base Sewer Phase 1 - Lift Station and Focemain - This contract was executed by the Commonwealth Utilities Corporation on July 12, 2018. Procurement Services was able to obtain a copy of the contract from CUC to satisfy the audit testing. For 712727-OC (ITB20-DLNR/DOA-098) - Purchase of One (1) 13" Chipper Machine. Two bidders responded to this ITB; Boyer Trading Company & J. & J Company. Boyer Trading was selected as the lowest and responsive bidder. Condition 3 - The Office of Grants Management disagrees with these findings because these are Open Accounts, and this would mean that no price quotations were required during the purchase requisition process in order to obtain the purchase orders. As confirmed by Financial Services and Procurement Services, quotations were not required on an open account. Open accounts were allowed during the JD Edwards period and were discontinued after September 30, 2021. MUNIS was implemented in October 2021. Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Views of responsible officials, continued: Condition 4 - The Office of Grants Management (assisting DHSEM) disagrees with the finding because assigned personnel were not made aware of the documents needed; however, OGM is more than happy to provide the following documents to substantiate the purchase of a mobile Covid-19 Biological Safety Lab for the Commonwealth Healthcare Center and for the Alternate Care Site at Kanoa Resort. Per the documentation, the Public Assistance Office and DHSEM followed competitive procurement processing and invoked the Public Health Emergency Executive Order#2020-04 and to which the CNMI Attorney General’s Office approved the purchase. Purchase Order # 708019 was used by the Department of Homeland Security and Emergency Management and the Covid-19 Task Force. Contract number Covid19-0-0626 was provided. Expenses were later transferred to Department of the Interior CARES Act Funds under D20AP00049 per OGM Memo Number 2021-013. Auditor Response: Condition 2 – The bid documents, bid submissions and advertisements were not provided. Condition 3 – Per §70-30.3-220 of the CNMI Procurement Regulations that was in effect prior to May 28, 2021, the official with expenditure authority must obtain price quotations from at least three vendors and base the selection on competitive price and quality at $2,500 to $10,000. Any price quotations obtained must be written, documented, and submitted to the P&S Director for approval. Condition 4 – The supporting documents were requested on January 25, 2024 and were not provided.

Finding No. 2021-021 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D18AP00135 and D19AP00083 Area: Reporting Questioned Costs: $1,165 Criteria: In accordance with Section 8 of the Grant and Cooperative Agreement between the CNMI and the Office of Insular Affairs (OIA), a SF-425 Federal Financial Report will be submitted semi-annually for the period beginning January 1 and ending June 30 and beginning July 1 and ending December 31. Condition: The total federal share of expenditures reported on the SF-425 differ from the underlying accounting records. No questioned costs result for D19AP00083 as no reimbursement was received in FY2021. Cause: CNMI did not effectively monitor the accuracy and completeness of the SF-425 report based on underlying accounting records. Effect: CNMI is in noncompliance with SF-425 reporting requirements and questioned costs of $1,165 result for D18AP00135 as actual reimbursement exceeded recorded expenditures and the projected questioned costs exceed the $25,000 threshold. Recommendation: CNMI should implement monitoring control procedures to verify that amounts reported are supported by underlying accounting records derived from CNMI’s accounting system. Finding No. 2021-021, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D18AP00135 and D19AP00083 Area: Reporting Questioned Costs: $1,165 Views of Responsible Officials: The Office of Grants Management (assisting Financial Services – Federal Section) disagrees with the finding. Per the SF-425, the amount noted is $288,849 (rounded) and their records are accurate. Auditors did not inquire with the Federal Section about the variance they noted and are unsure of what accounting records they are referring to. Auditors would need to review this finding again and reach out to the Federal Section. Auditor Response: The underlying accounting records we are referring to are the accounting records that the CNMI utilizes to prepare the SF-245 reports which should include the reconciliation substantiating the variance between the SF-425 and the general ledger detail report.

Finding No. 2021-022 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00006 and D21AF10004 Area: Subrecipient Monitoring Questioned Costs: $ -0- Criteria: In accordance with 2 CFR § 200.332, pass-through entity (PTE) must establish and implement subrecipient monitoring policies and procedures, including the following: • At the time of the award, clearly identifying to the subrecipient all requirements imposed by the PTE on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations, and the terms and conditions of the award. • Evaluating the impact of subrecipient activities on the pass-through entity’s ability to comply with applicable federal regulations. Condition: 1. The subrecipients of the Capital Improvement Projects (CIP) and Compact Impact programs did not match the listing per the SEFA. 2. The program did not include the following required information in the subrecipient agreements: • Subrecipient’s Data Universal Numbering System (DUNS) number; • Federal Award Identification Number (FAIN); • Subaward Period of Performance Start and End Date; • Amount of Federal Funds Obligated by this action; • Total Amount of Federal Funds Obligated to the subrecipient; and • Indirect cost rate for the Federal award. Finding No. 2021-022, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00006 and D21AF10004 Area: Subrecipient Monitoring Questioned Costs: $ -0- Condition, continued: 3. There was no evidence of procedures used to monitor subrecipient compliance with applicable laws, regulations, and provisions of contracts and grant agreements. We are aware that the subrecipients, Public School System and Northern Marianas College, have been subjected to Single Audits; however, there is no evidence that the Single Audit reports were used as a monitoring tool. 4. Documentation was not provided to demonstrate monitoring procedures were performed on the subrecipients. Further, narrative reports on project status were not provided and made available. Cause: The CNMI failed to enforce compliance with subrecipient monitoring requirements. Effect: The CNMI is in noncompliance with applicable subrecipient monitoring requirements. No questioned costs are presented as the Single Audit reports of the subrecipients tested have been issued with no findings noted. Identification as a Repeat Finding: Finding No. 2020-033 Recommendation: The responsible personnel should consider obtaining training in the area of subrecipient monitoring and establishing and implementing policies and procedures over compliance with applicable subrecipient monitoring requirements. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-023 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016 Area: Special Tests and Provisions – Grant Terms and Conditions Questioned Costs: $-0- Criteria: In accordance with Section 5 of the Grant and Cooperative Agreement between the CNMI and the Office of Insular Affairs (OIA), for construction activities funded by grants, the Office of Insular Affairs (OIA) seal should be displayed on all construction signage that is intended to identify the project and funders, as appropriate. The seal must remain intact and unchanged and may only be displayed using either the standard color scheme or a single color that complements the background where it appears. The OIA grant manager should be contacted for an electronic version of the seal if needed. Condition: Of eight expenditures tested, aggregating $4.5M of a total population of $11.8M, for one (or 13%), documentation substantiating that the Office of Insular Affairs seal requirement was complied with was not provided: Cause: The CNMI did not effectively monitor compliance with applicable special tests and provisions requirements. Effect: The CNMI is in noncompliance with special tests and provisions requirements. No questioned costs are reported as we are unable to quantify the extent of noncompliance. Identification as a Repeat Finding: Finding No. 2020-034 Recommendation: The responsible personnel should monitor grant terms and conditions so that requirements are complied with. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-017 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00134, D19AP00142, D21AF10004, D21AF10052 Area: Allowable Costs/Cost Principles Questioned Costs: $402,941 Criteria: In accordance with 2 CFR Part 200, Subpart E, cost must be necessary and reasonable for the performance of the federal award and be allocable thereto. Further costs must conform to any limitations or exclusions and be adequately documented. Condition: Of thirty-four nonpayroll expenditures tested, aggregating $4.8M of a total population of $11.8M, the following were noted: 1. For one (or 3%), no purchase order or contract was provided. 2. For three (or 9%), no documents such as invoices or contracts were provided to substantiate costs. 3. Tests of the general ledger expenditure details noted that business unit 5122 amounting to $261,832 pertains to locally funded transactions and should not have been charged to the program. No questioned cost is presented as no reimbursements were made under this business unit. Finding No. 2021-017, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00134, D19AP00142, D21AF10004, D21AF10052 Area: Allowable Costs/Cost Principles Questioned Costs: $402,941 Cause: CNMI did not effectively enforce recordkeeping controls and perform monitoring controls over compliance with applicable allowable costs/cost principles requirements. Further, the CNMI did not effectively monitor cumulative expenditures and approved funding limits.Effect: CNMI is in noncompliance with applicable allowable costs/cost principles requirements and questioned costs of $402,941 result. Recommendation: CNMI management should establish a recordkeeping system whereby underlying support is filed accordingly to substantiate costs and management should also strengthen monitoring controls over transactions to substantiate program costs in accordance with applicable allowable costs/cost principles. Views of responsible officials: Condition 3 – The CNMI Corrective Action Plan states agreement. Conditions 1 & 2 - The OMB disagrees with this finding. Compact Impact grants often operate on a reimbursement basis.  This means that when the award is received, we request payment or a transfer of expenses to cover prior expenses that have already been incurred and paid.  Therefore, the memo that was processed for such request and other supporting documents can be provided.  Auditor Response: Conditions 1 & 2 - Documentation substantiating the costs charged to the program were not provided.

Finding No. 2021-018 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award Nos.: D14AP00037, D16AP00064 D16AP00065, D17AP00111, D18AP00031, D18AP00130, D18AP00146, D18AP00165, D20AP00099, D20AP00119, and D21AP10003 Area: Equipment and Real Property Management Questioned Costs: $-0- Criteria: In accordance with 2 CFR section 200.313(b)), a state must use, manage, and dispose of equipment acquired under a federal award in accordance with state laws and procedures. The CNMI Property Management Policies and Procedures requires the Division of Procurement & Supply (PS) to conduct an annual inventory of property held by a designated official who has administrative control over the use of personal property within his area of jurisdiction. Also, PS shall perform random audits of property held by each accountable person to validate the integrity of the property control process. Further, property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the Federal award identification number), who holds title, the acquisition date, cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Condition: 1. Tests of internal controls noted that a complete physical inventory of equipment and property was not performed by PS in FY 2021. 2. A property listing was provided by PS; however, information such as the federal award identification number, source of the property, who holds title, percentage of federal participation in the cost of the property, and use of the property, was not documented. 3. A variance of $415,046 was noted between the general ledger details of $665,165 of capital assets and $250,119 per the property listing provided by PS. Cause: The CNMI lacks the human resources and financial management system structure needed to effect compliance with applicable equipment and real property management requirements. Finding No. 2021-018, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award Nos.: D14AP00037, D16AP00064 D16AP00065, D17AP00111, D18AP00031, D18AP00130, D18AP00146, D18AP00165, D20AP00099, D20AP00119, and D21AP10003 Area: Equipment and Real Property Management Questioned Costs: $-0- Effect: The CNMI is in noncompliance with applicable equipment and real property management requirements. See below for the cumulative dollar amount of property and equipment acquired with program grant funds over the past five years. Identification as a Repeat Finding: Finding No. 2020-030 Recommendation: The CNMI should consider seeking technical and financial support from Federal agencies to develop human resources and a financial management system capable of effecting compliance with applicable property management policies and procedures. Views of responsible officials: Conditions 1 and 2 – The CNMI Corrective Action Plan states agreement. Condition 3 - The Division of Procurement Services disagrees with this finding. The Division of Procurement Services, Property Management wasn't informed of this audit parameter. For FY2021 number of Transactions/Units processed was 4970 units and the dollar value is $9,526,239. Auditor Response: Condition 3 - The request was for the inventory listing as of 09/30/21 fiscal year end. Further, the dollar amount of the equipment and property are all capital assets in excess of $5,000.

Finding No. 2021-019 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00082 Area: Matching, Level of Effort and Earmarking Questioned Costs: $7,488 Criteria: In accordance with the July 2021 Compliance Supplement, matching or cost sharing includes requirements to provide contributions (usually non-federal) of a specified amount or percentage to match federal awards. Condition: For one (or 50%) of two transactions tested, aggregating $7,559 of a total population of $35,910, the project worksheet and disaster number did not agree to the projects listed on file for the cost sharing. As a result, the cost share percentage of 25% was inappropriately applied. Cause: The cause of the above condition is the lack of internal controls and inadequate file maintenance. Effect: The CNMI is in noncompliance with applicable matching requirements and questioned costs of $7,488 result as the projected questioned costs exceed the $25,000 threshold. Recommendation: The CNMI should establish and implement controls over compliance with applicable matching requirements. Responsible personnel should review local and federal share files for accuracy of disbursements. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-020 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Criteria: Non-federal entities other than states, including those operating federal programs as subrecipients of states, must follow the procurement standards set out at 2 CFR sections 200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR Part 200. CNMI’s procurement regulations state the following: Retention of Procurement Records: (a) All procurement records shall be retained by the Procurement and Supply (P&S) Director for a period of 5 years after completion of construction, or full delivery of the goods or services under the contract. The official with expenditure authority shall also keep copies of all procurement records for their respective agencies. Requirements for Competition: Officials with expenditure authority shall provide for full and open competition through use of the competitive procedure that is best suited to the circumstances of the contract action. The competitive procedures available for use in fulfilling the requirement for full and open competition are as follows: (a) Competitive sealed bidding (§ 70-30.3-205) (b) Competitive sealed proposals (§ 70-30.3-210) (c) Architect-engineer services (§ 70-30.3-305); and (d) Competitive selection procedures for professional services (§ 70-30.3-310). § 70-30.3-201 Competitive sealed bidding: If there is no adequate local competition, the invitation for bids shall also be advertised in at least one regional newspaper or at least one national publication or on the internet; in such case, the P&S Director shall consider extending the bidding period. Small Purchases: Bidding is not required but is encouraged for procurement over $2,500 and under $10,000. The official with expenditure authority must obtain price quotations from at least three vendors and base the selection on competitive price and quality for procurement valued at $2,500 to $10,000. Any price quotations obtained must be written, documented, and submitted to the P&S Director for approval. Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Condition: Of forty-five expenditures tested, aggregating $4.5M of a total population of $6.4M in nonpayroll expenditures subject to procurement, the following were noted: 1. For two (or 4%), purchase order, purchase requisitions and contracts were not on file. 2. For five (or 11%), bid submissions and invitation-to-bid publications were not on file. No questioned costs are presented for Business Unit 5122 as no reimbursement were received in FY 2021. 3. For two (or 4%), no price quotations were written, documented, or submitted with the purchase order. Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Condition, continued: 4. For two or (4%), written justifications and the P&S Director’s written approvals of the emergency procurement method used were not provided. In addition, the contracts indicated the procurement used were for competitive sealed proposals; however, the procurement files support emergency procurement. Cause: CNMI did not enforce compliance with established procurement regulations over procurement. Effect: CNMI is in noncompliance with applicable procurement regulations and questioned costs of $1,240,465 result. Identification as a Repeat Finding: Finding No. 2020-032 Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Views of responsible officials: Condition 1 – CNMI Corrective Action Plan statements agreement. Condition 2 - The CIP Office disagrees with this finding. The Capital Improvement Program provided information regarding these questioned costs. For 703-OS/32200344 - RFQ20-GOV-084 was provided to the Auditor for their review. Three (3) proposers submitted a proposal. For 702-OS/32200912 - The procurement method for this was processed through a Sole Source. For CUC-WW-18-C032 - Lower Base Sewer Phase 1 - Lift Station and Focemain - This contract was executed by the Commonwealth Utilities Corporation on July 12, 2018. Procurement Services was able to obtain a copy of the contract from CUC to satisfy the audit testing. For 712727-OC (ITB20-DLNR/DOA-098) - Purchase of One (1) 13" Chipper Machine. Two bidders responded to this ITB; Boyer Trading Company & J. & J Company. Boyer Trading was selected as the lowest and responsive bidder. Condition 3 - The Office of Grants Management disagrees with these findings because these are Open Accounts, and this would mean that no price quotations were required during the purchase requisition process in order to obtain the purchase orders. As confirmed by Financial Services and Procurement Services, quotations were not required on an open account. Open accounts were allowed during the JD Edwards period and were discontinued after September 30, 2021. MUNIS was implemented in October 2021. Finding No. 2021-020, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00026, D18AP00130, D18AP00140 D19AP00090, D20AP00064, D20AP00049 Area: Procurement and Suspension and Debarment Questioned Costs: $1,240,465 Views of responsible officials, continued: Condition 4 - The Office of Grants Management (assisting DHSEM) disagrees with the finding because assigned personnel were not made aware of the documents needed; however, OGM is more than happy to provide the following documents to substantiate the purchase of a mobile Covid-19 Biological Safety Lab for the Commonwealth Healthcare Center and for the Alternate Care Site at Kanoa Resort. Per the documentation, the Public Assistance Office and DHSEM followed competitive procurement processing and invoked the Public Health Emergency Executive Order#2020-04 and to which the CNMI Attorney General’s Office approved the purchase. Purchase Order # 708019 was used by the Department of Homeland Security and Emergency Management and the Covid-19 Task Force. Contract number Covid19-0-0626 was provided. Expenses were later transferred to Department of the Interior CARES Act Funds under D20AP00049 per OGM Memo Number 2021-013. Auditor Response: Condition 2 – The bid documents, bid submissions and advertisements were not provided. Condition 3 – Per §70-30.3-220 of the CNMI Procurement Regulations that was in effect prior to May 28, 2021, the official with expenditure authority must obtain price quotations from at least three vendors and base the selection on competitive price and quality at $2,500 to $10,000. Any price quotations obtained must be written, documented, and submitted to the P&S Director for approval. Condition 4 – The supporting documents were requested on January 25, 2024 and were not provided.

Finding No. 2021-021 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D18AP00135 and D19AP00083 Area: Reporting Questioned Costs: $1,165 Criteria: In accordance with Section 8 of the Grant and Cooperative Agreement between the CNMI and the Office of Insular Affairs (OIA), a SF-425 Federal Financial Report will be submitted semi-annually for the period beginning January 1 and ending June 30 and beginning July 1 and ending December 31. Condition: The total federal share of expenditures reported on the SF-425 differ from the underlying accounting records. No questioned costs result for D19AP00083 as no reimbursement was received in FY2021. Cause: CNMI did not effectively monitor the accuracy and completeness of the SF-425 report based on underlying accounting records. Effect: CNMI is in noncompliance with SF-425 reporting requirements and questioned costs of $1,165 result for D18AP00135 as actual reimbursement exceeded recorded expenditures and the projected questioned costs exceed the $25,000 threshold. Recommendation: CNMI should implement monitoring control procedures to verify that amounts reported are supported by underlying accounting records derived from CNMI’s accounting system. Finding No. 2021-021, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D18AP00135 and D19AP00083 Area: Reporting Questioned Costs: $1,165 Views of Responsible Officials: The Office of Grants Management (assisting Financial Services – Federal Section) disagrees with the finding. Per the SF-425, the amount noted is $288,849 (rounded) and their records are accurate. Auditors did not inquire with the Federal Section about the variance they noted and are unsure of what accounting records they are referring to. Auditors would need to review this finding again and reach out to the Federal Section. Auditor Response: The underlying accounting records we are referring to are the accounting records that the CNMI utilizes to prepare the SF-245 reports which should include the reconciliation substantiating the variance between the SF-425 and the general ledger detail report.

Finding No. 2021-022 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00006 and D21AF10004 Area: Subrecipient Monitoring Questioned Costs: $ -0- Criteria: In accordance with 2 CFR § 200.332, pass-through entity (PTE) must establish and implement subrecipient monitoring policies and procedures, including the following: • At the time of the award, clearly identifying to the subrecipient all requirements imposed by the PTE on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations, and the terms and conditions of the award. • Evaluating the impact of subrecipient activities on the pass-through entity’s ability to comply with applicable federal regulations. Condition: 1. The subrecipients of the Capital Improvement Projects (CIP) and Compact Impact programs did not match the listing per the SEFA. 2. The program did not include the following required information in the subrecipient agreements: • Subrecipient’s Data Universal Numbering System (DUNS) number; • Federal Award Identification Number (FAIN); • Subaward Period of Performance Start and End Date; • Amount of Federal Funds Obligated by this action; • Total Amount of Federal Funds Obligated to the subrecipient; and • Indirect cost rate for the Federal award. Finding No. 2021-022, continued Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D19AP00006 and D21AF10004 Area: Subrecipient Monitoring Questioned Costs: $ -0- Condition, continued: 3. There was no evidence of procedures used to monitor subrecipient compliance with applicable laws, regulations, and provisions of contracts and grant agreements. We are aware that the subrecipients, Public School System and Northern Marianas College, have been subjected to Single Audits; however, there is no evidence that the Single Audit reports were used as a monitoring tool. 4. Documentation was not provided to demonstrate monitoring procedures were performed on the subrecipients. Further, narrative reports on project status were not provided and made available. Cause: The CNMI failed to enforce compliance with subrecipient monitoring requirements. Effect: The CNMI is in noncompliance with applicable subrecipient monitoring requirements. No questioned costs are presented as the Single Audit reports of the subrecipients tested have been issued with no findings noted. Identification as a Repeat Finding: Finding No. 2020-033 Recommendation: The responsible personnel should consider obtaining training in the area of subrecipient monitoring and establishing and implementing policies and procedures over compliance with applicable subrecipient monitoring requirements. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-023 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016 Area: Special Tests and Provisions – Grant Terms and Conditions Questioned Costs: $-0- Criteria: In accordance with Section 5 of the Grant and Cooperative Agreement between the CNMI and the Office of Insular Affairs (OIA), for construction activities funded by grants, the Office of Insular Affairs (OIA) seal should be displayed on all construction signage that is intended to identify the project and funders, as appropriate. The seal must remain intact and unchanged and may only be displayed using either the standard color scheme or a single color that complements the background where it appears. The OIA grant manager should be contacted for an electronic version of the seal if needed. Condition: Of eight expenditures tested, aggregating $4.5M of a total population of $11.8M, for one (or 13%), documentation substantiating that the Office of Insular Affairs seal requirement was complied with was not provided: Cause: The CNMI did not effectively monitor compliance with applicable special tests and provisions requirements. Effect: The CNMI is in noncompliance with special tests and provisions requirements. No questioned costs are reported as we are unable to quantify the extent of noncompliance. Identification as a Repeat Finding: Finding No. 2020-034 Recommendation: The responsible personnel should monitor grant terms and conditions so that requirements are complied with. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-024 Federal Agency: U.S. Department of Labor AL Program: 17.225 Unemployment Insurance Federal Award No.: UI-34837-20-55-A-69 Area: Eligibility Questioned Costs: $1,131,117 Criteria: In accordance with the July 2021 OMB Compliance Supplement, applicants are determined to be eligible based on the criteria set forth in the Standard Operating Policies and Procedures for Pandemic Unemployment Assistance (PUA) and Federal Pandemic Unemployment Compensation (FPUC) Programs. To qualify, applicants must be a U.S. citizen, U.S. national, or qualified alien who reside in the CNMI and unable to work as a direct result of COVID-19. In addition, supporting documentation, when applicable, are required to be submitted to confirm residency, employment, and claims. Condition: Of sixty claimants tested, aggregating $35,970 in total benefits paid of a total population of $125.9M, deficiencies were noted as follows: 1. For four (or 7%), no copy of the social security card was provided. No questioned costs result as the claimants provided their social security numbers. 2. For forty-one (or 68%), the Pandemic Unemployment Qualification Determination letter sent to the claimant did not state the weeks of unemployment assistance the claimant requested. No questioned costs are presented as weeks claimed were within the period of performance date. 3. For four (or 7%), no evidence of verification through the United States Citizenship and Immigration Services’ (USCIS) Systematic Alien Verification for Entitlement (SAVE) program was on file to determine the eligibility of qualified aliens. Finding No. 2021-024, continued Federal Agency: U.S. Department of Labor AL Program: 17.225 Unemployment Insurance Federal Award No.: UI-34837-20-55-A-69 Area: Eligibility Questioned Costs: $1,131,117 Conditions, continued: Condition 3, continued: 4. Of the $24,919,128 in PUA/FPUC overpayments reported during FY2021, the CNMI subsequently recovered $23,790,333. Therefore, the remaining overpayment of $1,128,615 (consisting of $487,578 under PUA and $641,037 under FPUC) is assessed as questioned costs. Cause: The CNMI Department of Labor (DOL) did not effectively monitor compliance with applicable eligibility requirements and its Standard Operating Policies and Procedures for PUA and FPUC Programs. Effect: The CNMI is in noncompliance with applicable eligibility requirements and questioned costs of $1,131,117 result. Identification as a Repeat Finding: Finding No. 2020-037 Finding No. 2021-024, continued Federal Agency: U.S. Department of Labor AL Program: 17.225 Unemployment Insurance Federal Award No.: UI-34837-20-55-A-69 Area: Eligibility Questioned Costs: $1,131,117 Recommendation: The CNMI should strengthen monitoring controls over compliance with applicable eligibility requirements. Responsible personnel should timely perform quality control reviews and maintain relevant documentation in accordance with the applicable eligibility requirements. Further, the responsible CNMI personnel should enforce recovery of overpayments. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-025 Federal Agency: U.S. Department of Labor AL Program: 17.225 Unemployment Insurance Federal Award No.: UI-34837-20-55-A-69 Area: Special Tests and Provisions – UI Program Integrity - Overpayments Questioned Costs: $ -0- Criteria: In accordance with the July 2021 OMB Compliance Supplement, states must properly identify and handle overpayments including (a) detecting benefits paid in error, (b) deterring claimants from obtaining benefits through willful misrepresentation/fraud, (c) investigating and reporting fraudulent claims, and (d) recovering benefits overpaid. Condition: Of sixty claimant files tested, aggregating $903,883 of a total population of $24.9M in overpayments, we noted the following deficiencies: 1. For fifty-five (or 92%), none was reported to the Office of the Inspector General for suspected fraudulent activity. The claimant’s location was identified as out of state. No questioned costs are presented as amounts are questioned at Finding No. 2021-024, Condition 4. Finding No. 2021-025, continued Federal Agency: U.S. Department of Labor AL Program: 17.225 Unemployment Insurance Federal Award No.: UI-34837-20-55-A-69 Area: Special Tests and Provisions – UI Program Integrity - Overpayments Questioned Costs: $ -0- Condition, continued: 2. For one (or 2%) (OP Case No. PUAOP000181, amounting to $14,840, which consists of $6,200 under PUA and $8,640 under FPUC), a repayment plan has not been established for the recovery of overpayments. No questioned costs are presented as the amount is questioned at Finding No. 2021-024, Condition 4. 3. For one (or 2%) (OP Case No. PUAOP000437, amounting to $5,099, which consists of $1,859 under PUA and $3,240 under FPUC), the CNMI was not able to substantiate whether a debit or credit card was used for the repayment of benefits received. No questioned costs are presented as the amount is questioned at Finding No. 2021-024, Condition 4. 4. For one (or 2%) (OP Case No. PUAOP001010, amounting to $4,340 in PUA benefits), the written decision letter for appeal of overpayments was issued more than 30 days of the appeal filing. No questioned costs are presented as the amount is questioned at Finding No. 2021-024, Condition 4. 5. For sixteen (or 27%), documents were not made available for examination to determine whether funds from voided checks and/or cancelled ACH payments were returned to the respective program accounts for Business Units L0225A, L0225B, L0225F, L0225G, L0225I and L0225K. No questioned costs are presented as amounts are questioned at Finding No. 2021-024, Condition 4. Finding No. 2021-025, continued Federal Agency: U.S. Department of Labor AL Program: 17.225 Unemployment Insurance Federal Award No.: UI-34837-20-55-A-69 Area: Special Tests and Provisions – UI Program Integrity - Overpayments Questioned Costs: $ -0- Condition, continued: Condition 5, continued: Cause: The CNMI did not enforce compliance with applicable special tests and provisions requirements for overpayments. Effect: The CNMI is in noncompliance with applicable Special Tests and Provisions – UI Program Integrity- Overpayments Program requirements. Identification as a Repeat Finding: Finding No. 2020-039 Recommendation: Responsible CNMI personnel should enforce controls over compliance with applicable special tests and provision requirements for overpayments and should enforce recovery of overpayments. Views of Responsible Officials: Conditions 1, 2, 4 and 5 – The CNMI Corrective Plan states agreement. Finding No. 2021-025, continued Federal Agency: U.S. Department of Labor AL Program: 17.225 Unemployment Insurance Federal Award No.: UI-34837-20-55-A-69 Area: Special Tests and Provisions – UI Program Integrity - Overpayments Questioned Costs: $ -0- Views of Responsible Officials, Continued: Condition 3 - CNMI DOL does not agree with this finding. With respect to OP Case No. PUAOP000437, repayment was not necessary as the payment in this overpayment case was processed as a paper check. The paper check was noted as “Intercepted” due to having an out-of-state mailing address. Therefore, the initial benefit disbursement was not received by the claimant. No official overpayment determination was issued as payment was intercepted. Auditor Response: Condition 3 - Documentations supporting the “interception” of overpayments were not provided.

Finding No. 2021-024 Federal Agency: U.S. Department of Labor AL Program: 17.225 Unemployment Insurance Federal Award No.: UI-34837-20-55-A-69 Area: Eligibility Questioned Costs: $1,131,117 Criteria: In accordance with the July 2021 OMB Compliance Supplement, applicants are determined to be eligible based on the criteria set forth in the Standard Operating Policies and Procedures for Pandemic Unemployment Assistance (PUA) and Federal Pandemic Unemployment Compensation (FPUC) Programs. To qualify, applicants must be a U.S. citizen, U.S. national, or qualified alien who reside in the CNMI and unable to work as a direct result of COVID-19. In addition, supporting documentation, when applicable, are required to be submitted to confirm residency, employment, and claims. Condition: Of sixty claimants tested, aggregating $35,970 in total benefits paid of a total population of $125.9M, deficiencies were noted as follows: 1. For four (or 7%), no copy of the social security card was provided. No questioned costs result as the claimants provided their social security numbers. 2. For forty-one (or 68%), the Pandemic Unemployment Qualification Determination letter sent to the claimant did not state the weeks of unemployment assistance the claimant requested. No questioned costs are presented as weeks claimed were within the period of performance date. 3. For four (or 7%), no evidence of verification through the United States Citizenship and Immigration Services’ (USCIS) Systematic Alien Verification for Entitlement (SAVE) program was on file to determine the eligibility of qualified aliens. Finding No. 2021-024, continued Federal Agency: U.S. Department of Labor AL Program: 17.225 Unemployment Insurance Federal Award No.: UI-34837-20-55-A-69 Area: Eligibility Questioned Costs: $1,131,117 Conditions, continued: Condition 3, continued: 4. Of the $24,919,128 in PUA/FPUC overpayments reported during FY2021, the CNMI subsequently recovered $23,790,333. Therefore, the remaining overpayment of $1,128,615 (consisting of $487,578 under PUA and $641,037 under FPUC) is assessed as questioned costs. Cause: The CNMI Department of Labor (DOL) did not effectively monitor compliance with applicable eligibility requirements and its Standard Operating Policies and Procedures for PUA and FPUC Programs. Effect: The CNMI is in noncompliance with applicable eligibility requirements and questioned costs of $1,131,117 result. Identification as a Repeat Finding: Finding No. 2020-037 Finding No. 2021-024, continued Federal Agency: U.S. Department of Labor AL Program: 17.225 Unemployment Insurance Federal Award No.: UI-34837-20-55-A-69 Area: Eligibility Questioned Costs: $1,131,117 Recommendation: The CNMI should strengthen monitoring controls over compliance with applicable eligibility requirements. Responsible personnel should timely perform quality control reviews and maintain relevant documentation in accordance with the applicable eligibility requirements. Further, the responsible CNMI personnel should enforce recovery of overpayments. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-025 Federal Agency: U.S. Department of Labor AL Program: 17.225 Unemployment Insurance Federal Award No.: UI-34837-20-55-A-69 Area: Special Tests and Provisions – UI Program Integrity - Overpayments Questioned Costs: $ -0- Criteria: In accordance with the July 2021 OMB Compliance Supplement, states must properly identify and handle overpayments including (a) detecting benefits paid in error, (b) deterring claimants from obtaining benefits through willful misrepresentation/fraud, (c) investigating and reporting fraudulent claims, and (d) recovering benefits overpaid. Condition: Of sixty claimant files tested, aggregating $903,883 of a total population of $24.9M in overpayments, we noted the following deficiencies: 1. For fifty-five (or 92%), none was reported to the Office of the Inspector General for suspected fraudulent activity. The claimant’s location was identified as out of state. No questioned costs are presented as amounts are questioned at Finding No. 2021-024, Condition 4. Finding No. 2021-025, continued Federal Agency: U.S. Department of Labor AL Program: 17.225 Unemployment Insurance Federal Award No.: UI-34837-20-55-A-69 Area: Special Tests and Provisions – UI Program Integrity - Overpayments Questioned Costs: $ -0- Condition, continued: 2. For one (or 2%) (OP Case No. PUAOP000181, amounting to $14,840, which consists of $6,200 under PUA and $8,640 under FPUC), a repayment plan has not been established for the recovery of overpayments. No questioned costs are presented as the amount is questioned at Finding No. 2021-024, Condition 4. 3. For one (or 2%) (OP Case No. PUAOP000437, amounting to $5,099, which consists of $1,859 under PUA and $3,240 under FPUC), the CNMI was not able to substantiate whether a debit or credit card was used for the repayment of benefits received. No questioned costs are presented as the amount is questioned at Finding No. 2021-024, Condition 4. 4. For one (or 2%) (OP Case No. PUAOP001010, amounting to $4,340 in PUA benefits), the written decision letter for appeal of overpayments was issued more than 30 days of the appeal filing. No questioned costs are presented as the amount is questioned at Finding No. 2021-024, Condition 4. 5. For sixteen (or 27%), documents were not made available for examination to determine whether funds from voided checks and/or cancelled ACH payments were returned to the respective program accounts for Business Units L0225A, L0225B, L0225F, L0225G, L0225I and L0225K. No questioned costs are presented as amounts are questioned at Finding No. 2021-024, Condition 4. Finding No. 2021-025, continued Federal Agency: U.S. Department of Labor AL Program: 17.225 Unemployment Insurance Federal Award No.: UI-34837-20-55-A-69 Area: Special Tests and Provisions – UI Program Integrity - Overpayments Questioned Costs: $ -0- Condition, continued: Condition 5, continued: Cause: The CNMI did not enforce compliance with applicable special tests and provisions requirements for overpayments. Effect: The CNMI is in noncompliance with applicable Special Tests and Provisions – UI Program Integrity- Overpayments Program requirements. Identification as a Repeat Finding: Finding No. 2020-039 Recommendation: Responsible CNMI personnel should enforce controls over compliance with applicable special tests and provision requirements for overpayments and should enforce recovery of overpayments. Views of Responsible Officials: Conditions 1, 2, 4 and 5 – The CNMI Corrective Plan states agreement. Finding No. 2021-025, continued Federal Agency: U.S. Department of Labor AL Program: 17.225 Unemployment Insurance Federal Award No.: UI-34837-20-55-A-69 Area: Special Tests and Provisions – UI Program Integrity - Overpayments Questioned Costs: $ -0- Views of Responsible Officials, Continued: Condition 3 - CNMI DOL does not agree with this finding. With respect to OP Case No. PUAOP000437, repayment was not necessary as the payment in this overpayment case was processed as a paper check. The paper check was noted as “Intercepted” due to having an out-of-state mailing address. Therefore, the initial benefit disbursement was not received by the claimant. No official overpayment determination was issued as payment was intercepted. Auditor Response: Condition 3 - Documentations supporting the “interception” of overpayments were not provided.

Finding No. 2021-026 Federal Agency: U.S. Department of the Treasury AL Program: 21.019 Coronavirus Relief Fund Federal Award No.: COVID-19 Area: Allowable Costs/Cost Principles Questioned Costs: $20,341,913 Criteria: In accordance with 2 CFR Part 200, Subpart E, cost must be necessary and reasonable for the performance of the federal award and be allocable thereto. Further costs must conform to any limitations or exclusions and be adequately documented. Condition: Of nine expenditures tested, aggregating $20.8M of a total population of $25M, for two (or 22%), either the check payments and/or invoices were not provided. Cause: CNMI did not enforce monitoring controls over compliance with applicable allowable costs/cost principles requirements. Effect: CNMI is in noncompliance with applicable allowable costs/cost principles requirements and questioned costs of $20,341,913 result. Identification as a Repeat Finding: Finding No. 2020-041 Recommendation: CNMI should strengthen monitoring controls over compliance with applicable allowable costs/cost principles requirements. Views of responsible officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-027 Federal Agency: U.S. Department of the Treasury AL Program: 21.019 Coronavirus Relief Fund Federal Award No.: COVID-19 Area: Reporting Questioned Costs: $-0- Criteria: In accordance with the July 2021 OMB Compliance Supplement, each prime recipient of the Coronavirus Relief Fund (CRF) shall provide a quarterly Financial Progress Report that contains COVID-19 related costs incurred during the covered period (the period beginning on March 1, 2020 and ending on December 30, 2021) to Treasury’s Office of Inspector General. For quarterly reporting, each prime recipient shall report this quarterly information into the Grant Solutions portal. The Prime recipient’s quarterly Financial Progress Report submissions is only for the reporting of costs incurred related to CRF proceeds received from Treasury and should be supported by the data in the prime recipient’s accounting system. Quarterly reporting will be due no later than ten days after each calendar quarter. If the 10th calendar day falls on a weekend or a federal holiday, the due date will be the next working day. Condition: Tests of the quarterly Financial Progress reports for the quarters ended 03/31/2021 and 09/30/2021 noted the following: 1. The underlying accounting records supporting amounts reported were not provided. Quarter Ended 03/31/21 Quarter Ended 09/30/21 Finding No. 2021-027, continued Federal Agency: U.S. Department of the Treasury AL Program: 21.019 Coronavirus Relief Fund Federal Award No.: COVID-19 Area: Reporting Questioned Costs: $-0- Condition, continued: 2. The 12/31/20 and 6/30/21 reporting periods were not submitted in the Grant Solutions portal. No questioned costs are presented as we are not able to quantify the extent of noncompliance. Cause: The CNMI lacks monitoring control procedures to verify that amounts reported are supported by underlying accounting records derived from the CNMI's accounting system and that the required financial progress reports are submitted in the Grant Solutions portal by applicable due dates. Effect: The CNMI is in noncompliance with Financial Progress reporting requirements. Identification as a Repeat Finding: Finding No. 2020-043 Recommendation: CNMI should implement monitoring control procedures to verify that amounts reported are supported by underlying accounting records derived from CNMI's accounting system and that required financial progress reports are submitted in the Grant Solutions portal by applicable due dates. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-028 Federal Agency: U.S. Department of the Treasury AL Program: 21.019 Coronavirus Relief Fund Federal Award No.: COVID-19 Area: Subrecipient Monitoring Questioned Costs: $59,158 Criteria: In accordance with 2 CFR § 200.332, the pass-through entity (PTE) must establish and implement subrecipient monitoring policies and procedures, including the following: • At the time of the award, clearly identifying to the subrecipient all requirements imposed by the PTE on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations, and the terms and conditions of the award. • Evaluating the impact of subrecipient activities on the pass-through entity’s ability to comply with applicable federal regulations. Condition: 1. Subrecipient monitoring policies and procedures was not provided; as such, we did not obtain an understanding of CNMI’s process to identify subawards, evaluate risk of noncompliance, and perform monitoring procedures based upon identified risks. 2. Of one (or 100%) subrecipient tested, aggregating $59,158 of a total population of $5.097M, the subrecipient agreement was not provided and there was no evidence of monitoring procedures performed to determine whether the subrecipient is in compliance with applicable laws, regulations, and provisions of contracts and grant agreements, for which amount is questioned. Cause: The CNMI failed to enforce compliance with subrecipient monitoring requirements. Effect: The CNMI is in noncompliance with applicable subrecipient monitoring requirements and questioned costs of $59,158 result. Finding No. 2021-028, continued Federal Agency: U.S. Department of the Treasury AL Program: 21.019 Coronavirus Relief Fund Federal Award No.: COVID-19 Area: Subrecipient Monitoring Questioned Costs: $59,158 Recommendation: The responsible personnel should consider obtaining training in the area of subrecipient monitoring and establishing and implementing policies and procedures over compliance with applicable subrecipient monitoring requirements. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-029 Federal Agency: U.S. Department of the Treasury AL Program: 21.023 Emergency Rental Assistance Program Federal Award No.: COVID-19 Area: Eligibility Questioned Costs: $4,252 Criteria: In accordance with Section 501 of Division N of the Consolidated Act, 2021, Publication L No. 116-260 (Dec. 27, 2020), grantee may only use funds provided in the Emergency Rental Assistance (ERA) program to provide financial assistance and housing stability services to eligible households. Eligibility is limited to households with income that does not exceed 80 percent of the median income for the area in which the household is located. Condition: Of sixty case files tested, aggregating $196,992 of a total population of $3,680,786, for two (or 3%), the housing instability and financial hardship attestations, check stubs, lease, and other supporting documents to verify applicant’s eligibility were not provided. Cause: The CNMI did not effectively monitor compliance with applicable eligibility requirements. Effect: The CNMI is in noncompliance with applicable eligibility requirements and questioned costs of $4,252 result as the total projected questioned costs exceed the $25,000 threshold. Recommendation: The CNMI should strengthen monitoring controls over compliance with applicable eligibility requirements. Prior to approving applications, responsible personnel should verify that the applicable documentations are on file to substantiate eligibility determinations. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-030 Federal Agency: U.S. Department of the Treasury AL Program: 21.023 Emergency Rental Assistance Program Federal Award No.: COVID-19 Area: Reporting Questioned Costs: $-0- Criteria: The Emergency Rental Assistance Program Reporting Guidance states that ERA1 and ERA2 recipients are required to submit partial Quarterly Compliance Q2 reports and must provide brief monthly reports for the months of July and August 2021. Condition: Partial quarterly compliance Q2 reports and brief monthly reports for July and August 2021 were not submitted for ERA1 and ERA2. No questioned cost is presented as we are not able to quantify the extent of noncompliance. Cause: CNMI did not submit the required ERA1 and ERA2 Q2 compliance reports and brief monthly reports. Effect: CNMI is in noncompliance with the Q2 compliance reports and the brief monthly reports reporting requirements. Recommendation: CNMI should implement monitoring control procedures to verify that required compliance and brief monthly reports are submitted by the applicable due dates. Views of Responsible Officials: The Office of Grants Management disagrees with the finding because OGM was not in charge of reporting in the beginning; we had no access to upload the reports nor knew exactly what to load. The Secretary of Finance Office personnel at that time had all the controls and knowledge of what was needed. Auditor Response: The CNMI did not comply with the quarterly progress and brief monthly reporting requirements.

Finding No. 2021-031 Federal Agency: U.S. Department of the Treasury AL Program: 21.027 Coronavirus State And Local Fiscal Recovery Funds Federal Award No.: COVID-19 Area: Allowable Costs/Cost Principles Questioned Costs: $1,035,442 Criteria: In accordance with 2 CFR Part 200, Subpart E, cost must be necessary and reasonable for the performance of the federal award and be allocable thereto. Further costs must conform to any limitations or exclusions and be adequately documented. Condition: Of thirty-seven nonpayroll expenditures tested, aggregating $11.9M of a total population of $49.3M, for three (or 8%), journal vouchers, invoices and contracts were not provided. Cause: CNMI did not enforce monitoring controls over compliance with applicable allowable costs/cost principles requirements. Effect: CNMI is in noncompliance with applicable allowable costs/cost principles requirements and questioned costs of $1,035,442 result. Recommendation: CNMI should strengthen monitoring controls over compliance with applicable allowable costs/cost principles requirements. Views of responsible officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-032 Federal Agency: U.S. Department of the Treasury AL Program: 21.027 Coronavirus State and Local Fiscal Recovery Funds Federal Award No.: COVID-19 Area: Procurement and Suspension and Debarment Questioned Costs: $2,775,965 Criteria: Non-federal entities other than states, including those operating federal programs as subrecipients of states, must follow the procurement standards set out at 2 CFR sections 200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR Part 200. CNMI’s procurement regulations state the following: • All government procurement shall be awarded by competitive sealed bidding except under certain circumstances permitting other than full and open competition. • Bidding is not required but is encouraged for procurement of $2,500 and under $10,000. The individual with the expenditure authority must obtain price quotations from at least three vendors and should base the selection on competitive price and quality for procurement valued at $2,500 to $10,000. Any price quotations must be written, documented, and submitted to the Procurement and Supply (P&S) Director for approval. • For purchases that exceed $10,000 but which are less than or equal to $50,000, a minimum of three vendors shall be solicited to submit written or electronic quotations. If there are fewer than three vendors, the expenditure authority shall certify, in writing, to the P&S Director that fewer than three vendors responded and shall provide written proof of the request. Condition: Of fifty-one nonpayroll expenditures tested, aggregating $3.1M of a total population of $6.7M expenditures subject to procurement, the following were noted: 1. For thirty-four (or 67%), no procurement documents were provided. Finding No. 2021-032, continued Federal Agency: U.S. Department of the Treasury AL Program: 21.027 Coronavirus State and Local Fiscal Recovery Funds Federal Award No.: COVID-19 Area: Procurement and Suspension and Debarment Questioned Costs: $2,775,965 Condition, continued: Condition 1, continued: 2. For one (or 2%) (document no. 1718052 dated 08/10/21 amounting to $26,100), the contract and underlying procurement files were not provided, for which the amount is questioned. 3. For four (or 8%), vendor quotations were not provided. Finding No. 2021-032, continued Federal Agency: U.S. Department of the Treasury AL Program: 21.027 Coronavirus State and Local Fiscal Recovery Funds Federal Award No.: COVID-19 Area: Procurement and Suspension and Debarment Questioned Costs: $2,775,965 Condition, continued: 4. For one (or 2%) (document no. 1719396 dated 08/17/21 amounting $764,345), the procurement method used was not specified and the P&S Director’s written determination were not provided, for which the amount is questioned. Cause: CNMI did not enforce compliance with established procurement regulations. Effect: CNMI is in noncompliance with established procurement regulations and questioned costs of $2,775,965 result. Recommendation: Responsible personnel should monitor and enforce compliance with applicable procurement regulations, including the review of procurement files for completeness as to written rationale for deviations from applicable procurement requirements. Further, responsible personnel should maintain procurement documents to substantiate compliance. Views of Responsible Officials: Condition 2, 3 for Doc No. 263066 and 4 – The CNMI Corrective Action Plan states agreement. Condition 1 – The Department of Finance – Procurement Services disagrees with this finding. No procurement documents were provided because these thirty-four transactions were for payments made out for Travel, Medical Referral Patients, etc. Finding No. 2021-032, continued Federal Agency: U.S. Department of the Treasury AL Program: 21.027 Coronavirus State and Local Fiscal Recovery Funds Federal Award No.: COVID-19 Area: Procurement and Suspension and Debarment Questioned Costs: $2,775,965 Views of responsible officials: Condition 3 - The Department of Finance – Procurement Services disagrees with these findings. For 732176-000 OP $13,440 - No other quotes provided as it was the PS Acting Director's (FC Aguon) discretion, and the purchase requisition was approved by the former SOF (D. Atalig). For 724870-000 OP $8,789 - No other quotes provided as it was the PS Acting Director's (FC Aguon) discretion, and the purchase requisition was approved by the former SOF (D. Atalig). The Emergency Declaration suspended the procurement regulations and authorized the Expenditure Authority to procure any items/procure services exceeding the threshold without obtaining any price quotes. For PO #732176 & 728470, these are not part of the Gov’s Executive Order #2022-04. The Division of Procurement Services will accept the findings as noncompliance with the CNMI Procurement Regulations. Auditor Response: Condition 1 – No supporting documentation were provided to substantiate that the transactions pertain to travel and medical referral patients. In addition, based on the general ledger descriptions, Document Nos. 921922, 1727770, 1727772, 1735047, 1721009, 1717349, 261094, 1722328, 1722338, 261528, 1666323, 1665777 and 1732183 pertain to legal professional fees, Tourism Resumption Investment Plan (TRIP) program, professional services, postage meter, lease rental, air condition service, fuel, office supplies, Pelican LED rechargeable, project improvements, tents and picnic tables rental and vacuum purchases. Further, we were not able to determine the type of expenditure for document no. 1674103 as the only description stated was "JUN 2021". Condition 3 – Pursuant to § 70-30.3-220, if fewer than three vendors submit quotations, the expenditure authority shall certify, in writing, to the Director that fewer than three vendors responded and shall provide written proof of the request. If fewer than three of the solicited vendors submit quotes, the Director may either approve the request or instruct the expenditure authority to solicit additional quotes.

Finding No. 2021-033 Federal Agency: U.S. Department of the Treasury AL Program: 21.027 Coronavirus State and Local Fiscal Recovery Funds Federal Award No.: COVID-19 Area: Subrecipient Monitoring Questioned Costs: $0 Criteria: In accordance with 2 CFR § 200.332, pass-through entity (PTE) must establish and implement subrecipient monitoring policies and procedures, including the following: • At the time of the award, clearly identifying to the subrecipient all requirements imposed by the PTE on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations, and the terms and conditions of the award. • Evaluating the impact of subrecipient activities on the pass-through entity’s ability to comply with applicable federal regulations. Condition: 1. The CNMI has no existing written subrecipient monitoring policies and procedures. 2. Of one (or 100%) subrecipient tested, aggregating $541,495 of a total population of $11.4M, the subaward agreement was only executed on August 5, 2022, which was subsequent to when funds were disbursed to vendors. 3. Subsequent to FY 2021 and during our audit fieldwork was when the CNMI identified certain transactions to be beneficiaries in nature rather than as subrecipients. Accordingly, the CNMI revised its subrecipients listing from eleven to six amounting from $12,671,495 to $11,421,495. Cause: The CNMI lacks written subrecipient monitoring policies and procedures and lacks monitoring control procedures over distinctions between a beneficiary and a subrecipient. Effect: The CNMI is in noncompliance with applicable subrecipient monitoring requirements. No questioned costs are presented as all transactions were processed and paid out through the central government. Finding No. 2021-033, continued Federal Agency: U.S. Department of the Treasury AL Program: 21.027 Coronavirus State and Local Fiscal Recovery Funds Federal Award No.: COVID-19 Area: Subrecipient Monitoring Questioned Costs: $0 Recommendation: The responsible CNMI personnel should consider obtaining training in the area of subrecipient distinction and establish written policies and procedures over compliance with applicable subrecipient monitoring requirements. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-034 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: 2001MPCCC3, 2101MPCCDF, 2101MPCCC5 Area: Eligibility Questioned Costs: $39,200 Criteria: In accordance with CCDF State Plan, an applicant's eligibility for child care service shall be made within fifteen calendar days after submission of a complete application. The date of application shall be the date the signed form and all supporting documents are received by the Child Care Program. Further, to be eligible for child care services, applicants must meet the following requirements, among others: • If the parent qualifies for work, required documents include the most recent 1040 tax form and a current and valid CW work permit; • If claiming to be a single parent, the program requires an Affidavit to be completed. Affidavit must be signed by the applicant; • Applicant's identity (parent or guardian) should be verified using valid identification such as a current and valid photo ID (CNMI Driver's License; Mayor's ID; Passport); • If the parent qualifies under work, verify income to three (3) most recent pay stubs, employment verification (prescribed), and most recent 1040 tax form. Condition: Of forty eligibility case files tested, aggregating $17,750 in total benefits paid of a total population of $2.8M, the following were noted: 1. For three (or 8%), documentation of the valid work permits for the following applicants who are non-U.S. citizens before eligibility period would begin were not on file. Finding No. 2021-034, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: 2001MPCCC3, 2101MPCCDF, 2101MPCCC5 Area: Eligibility Questioned Costs: $39,200 Condition, continued: 2. For three (or 8%), the single parent affidavits were not dated. No questioned cost is presented for Case ID 3170B as amount is questioned at Condition 1. 3. For three (or 8%), recent 1040 tax forms were not on file. 4. For one (or 3%), the applicant was ineligible to work in the CNMI. No questioned cost is presented as the amount is questioned at Condition 3. Cause: The CNMI did not effectively perform controls over compliance with applicable eligibility requirements. Finding No. 2021-034, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: 2001MPCCC3, 2101MPCCDF, 2101MPCCC5 Area: Eligibility Questioned Costs: $39,200 Effect: The CNMI is in noncompliance with applicable eligibility requirements and questioned costs of $39,200 result. Identification as a Repeat Finding: 2020-049 Recommendation: The CNMI should strengthen controls over compliance with applicable eligibility requirements. Responsible personnel should utilize the application checklist and review it against the applicant's files to verify that all required forms and information are completed and filed accordingly. Views of Responsible Officials: Condition 2 – The CNMI Corrective Action Plan states agreement. Condition 1 – CCDF disagrees with this finding. Case ID 3170B: CW1-upon submission of the CCDF Waitlist application the CW1 was valid. Case ID 3242B: CW1-upon submission of the CCDF Waitlist application the CW1 was valid. Case ID 3097A: CW1-upon submission of the CCDF Waitlist application the CW1 was valid. Condition 3 – CCDF disagrees with this finding. 1040 tax forms are not required for the CCDF Renewal application, and it is only required for self-employed applicants. Please see the application checklist on the questioned cases. Finding No. 2021-034, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: 2001MPCCC3, 2101MPCCDF, 2101MPCCC5 Area: Eligibility Questioned Costs: $39,200 Views of Responsible Officials, continued: Condition 4 - CCDF disagrees with this finding. At the time of the submission of the renewal application, the applicant had a valid CW1. The application was submitted on June 15, 2020, the CW1 that was submitted did not expire until September 9, 2020. All documents for verification are on file. Applicant was off island for medical purposes at the time of Certificate of Confirmation (renewal certificate) routing, upon her return she submitted a copy of her passport that indicated that she became a CW2 holder, CCDF then proceeded with termination because of her CW2 status. Auditor Response: Condition 1 – Verification of work authorizations for waitlisted applicants before the eligibility period would begin were not performed. Condition 3 – Per the 2019 - 2021 CCDF State Plan, the 1040 tax forms are required for eligibility determination. Condition 4 – Date of application was on 09/11/20 and eligibility determination was performed on 09/18/20, for which those dates were after the CW-1 visa expiration date of 09/09/20.

Finding No. 2021-035 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: G-1802MPCCDF and G-1901MPCCDD Area: Special Tests and Provisions – Health and Safety Requirements Questioned Costs: $1,303,790 Criteria: In accordance with the July 2021 OMB Compliance Supplement, lead agencies must have procedures in effect to ensure that providers serving children who receive subsidies comply with all applicable health and safety requirements. This includes verifying and documenting that child care providers serving children who receive subsidies meet requirements pertaining to health and safety in eleven specific areas, including first aid and CPR, safe sleeping practices, and administration of medication, and child care workers must be trained in these areas. In addition, per FY2021 State Plan, two (2) unannounced inspections of licensed childcare center providers will be conducted to monitor compliance relative to the health, safety, and well-being of the children in care. Health and Safety inspections are performed by the Child Care Licensing Program (CCLP). Further, providers must annually complete a minimum of 30 hours of training and technical assistance. Condition: 1. For one (or 50%) of two child care providers tested, aggregating $951,410 of a total population of $2.6M, health and safety inspections were not performed during the fiscal year. However, only one unannounced inspection was scheduled on August 3, 2021 for this provider to validate compliance with monitoring and enforcement. No questioned costs result as the amount is questioned at Condition 3. 2. The number of providers receiving subsidies from the program did not agree to the number obtained from CCLP. The matter was resolved during field work. 3. For nine (or 43%) of twenty-one provider staff tested, aggregating $2.4M of a total population of $2.6M, one or more required training in the following areas was deficient: 1) First aid and CPR; 2) Safe sleeping practices; and 3) Administration of Medication. Finding No. 2021-035, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: G-1802MPCCDF and G-1901MPCCDD Area: Special Tests and Provisions – Health and Safety Requirements Questioned Costs: $1,303,790 Condition, continued: Condition 3, continued: Cause: The CNMI did not enforce compliance with applicable special tests and provisions for health and safety requirements including training requirements. Effect: The CNMI is in noncompliance with applicable special tests and provision for health and safety requirements and questioned costs of $1,303,790 result for Condition 3. Identification as a Repeat Finding: 2020-051 Recommendation: The CNMI should establish and implement procedures to ensure that providers serving children who receive subsidies comply with all applicable health and safety requirements including training requirements. In addition, responsible personnel should maintain documentation to substantiate compliance. Finding No. 2021-035, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: G-1802MPCCDF and G-1901MPCCDD Area: Special Tests and Provisions – Health and Safety Requirements Questioned Costs: $1,303,790 Views of Responsible Officials: Condition 2 – The CNMI Corrective Action Plan states agreement. Condition 1 – CCLP disagrees with this finding. Because CCLP does not administer any amount of federal monies, CCLP does not comprehend the rationale behind these monetary figures. However, because it mentions that documentation was not provided for the unannounced inspections, evidence was provided to the auditors. Therefore, as a matter of record, CCLP hereby disagrees with this section in its entirety. Relative to the provider selected for testing, on January 22, 2021, the provider closed its doors and stopped providing childcare services. The announced inspection was scheduled for April 6, 2021 while the unannounced inspection was scheduled for August 3, 2021. In light of that information, an inspection report was never generated because the provider ceased its operation before the scheduled CCLP inspection. However, the provider was included in the listing of 21 providers due to the fact that it fell within the fiscal year (FY21) that was requested from CCLP. Condition 2 – A response from CCLP is not necessary for this section as it states that the matter has been resolved. Condition 3 – CCLP disagrees with these findings. The topics listed above are topics under the pre-service training requirements under the Child Care and Development Fund program, not under the Child Care Licensing Program. Auditor Response: Condition 1 – The program’s state plan, effective FY2021, indicated two unannounced inspections will be conducted. Only one unannounced inspection was scheduled in FY2021. Condition 3 – The training requirement is applicable to the program as per 42 USC 9858C(c)(2)(I). Further, federal requirements must be followed.

Finding No. 2021-034 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: 2001MPCCC3, 2101MPCCDF, 2101MPCCC5 Area: Eligibility Questioned Costs: $39,200 Criteria: In accordance with CCDF State Plan, an applicant's eligibility for child care service shall be made within fifteen calendar days after submission of a complete application. The date of application shall be the date the signed form and all supporting documents are received by the Child Care Program. Further, to be eligible for child care services, applicants must meet the following requirements, among others: • If the parent qualifies for work, required documents include the most recent 1040 tax form and a current and valid CW work permit; • If claiming to be a single parent, the program requires an Affidavit to be completed. Affidavit must be signed by the applicant; • Applicant's identity (parent or guardian) should be verified using valid identification such as a current and valid photo ID (CNMI Driver's License; Mayor's ID; Passport); • If the parent qualifies under work, verify income to three (3) most recent pay stubs, employment verification (prescribed), and most recent 1040 tax form. Condition: Of forty eligibility case files tested, aggregating $17,750 in total benefits paid of a total population of $2.8M, the following were noted: 1. For three (or 8%), documentation of the valid work permits for the following applicants who are non-U.S. citizens before eligibility period would begin were not on file. Finding No. 2021-034, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: 2001MPCCC3, 2101MPCCDF, 2101MPCCC5 Area: Eligibility Questioned Costs: $39,200 Condition, continued: 2. For three (or 8%), the single parent affidavits were not dated. No questioned cost is presented for Case ID 3170B as amount is questioned at Condition 1. 3. For three (or 8%), recent 1040 tax forms were not on file. 4. For one (or 3%), the applicant was ineligible to work in the CNMI. No questioned cost is presented as the amount is questioned at Condition 3. Cause: The CNMI did not effectively perform controls over compliance with applicable eligibility requirements. Finding No. 2021-034, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: 2001MPCCC3, 2101MPCCDF, 2101MPCCC5 Area: Eligibility Questioned Costs: $39,200 Effect: The CNMI is in noncompliance with applicable eligibility requirements and questioned costs of $39,200 result. Identification as a Repeat Finding: 2020-049 Recommendation: The CNMI should strengthen controls over compliance with applicable eligibility requirements. Responsible personnel should utilize the application checklist and review it against the applicant's files to verify that all required forms and information are completed and filed accordingly. Views of Responsible Officials: Condition 2 – The CNMI Corrective Action Plan states agreement. Condition 1 – CCDF disagrees with this finding. Case ID 3170B: CW1-upon submission of the CCDF Waitlist application the CW1 was valid. Case ID 3242B: CW1-upon submission of the CCDF Waitlist application the CW1 was valid. Case ID 3097A: CW1-upon submission of the CCDF Waitlist application the CW1 was valid. Condition 3 – CCDF disagrees with this finding. 1040 tax forms are not required for the CCDF Renewal application, and it is only required for self-employed applicants. Please see the application checklist on the questioned cases. Finding No. 2021-034, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: 2001MPCCC3, 2101MPCCDF, 2101MPCCC5 Area: Eligibility Questioned Costs: $39,200 Views of Responsible Officials, continued: Condition 4 - CCDF disagrees with this finding. At the time of the submission of the renewal application, the applicant had a valid CW1. The application was submitted on June 15, 2020, the CW1 that was submitted did not expire until September 9, 2020. All documents for verification are on file. Applicant was off island for medical purposes at the time of Certificate of Confirmation (renewal certificate) routing, upon her return she submitted a copy of her passport that indicated that she became a CW2 holder, CCDF then proceeded with termination because of her CW2 status. Auditor Response: Condition 1 – Verification of work authorizations for waitlisted applicants before the eligibility period would begin were not performed. Condition 3 – Per the 2019 - 2021 CCDF State Plan, the 1040 tax forms are required for eligibility determination. Condition 4 – Date of application was on 09/11/20 and eligibility determination was performed on 09/18/20, for which those dates were after the CW-1 visa expiration date of 09/09/20.

Finding No. 2021-035 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: G-1802MPCCDF and G-1901MPCCDD Area: Special Tests and Provisions – Health and Safety Requirements Questioned Costs: $1,303,790 Criteria: In accordance with the July 2021 OMB Compliance Supplement, lead agencies must have procedures in effect to ensure that providers serving children who receive subsidies comply with all applicable health and safety requirements. This includes verifying and documenting that child care providers serving children who receive subsidies meet requirements pertaining to health and safety in eleven specific areas, including first aid and CPR, safe sleeping practices, and administration of medication, and child care workers must be trained in these areas. In addition, per FY2021 State Plan, two (2) unannounced inspections of licensed childcare center providers will be conducted to monitor compliance relative to the health, safety, and well-being of the children in care. Health and Safety inspections are performed by the Child Care Licensing Program (CCLP). Further, providers must annually complete a minimum of 30 hours of training and technical assistance. Condition: 1. For one (or 50%) of two child care providers tested, aggregating $951,410 of a total population of $2.6M, health and safety inspections were not performed during the fiscal year. However, only one unannounced inspection was scheduled on August 3, 2021 for this provider to validate compliance with monitoring and enforcement. No questioned costs result as the amount is questioned at Condition 3. 2. The number of providers receiving subsidies from the program did not agree to the number obtained from CCLP. The matter was resolved during field work. 3. For nine (or 43%) of twenty-one provider staff tested, aggregating $2.4M of a total population of $2.6M, one or more required training in the following areas was deficient: 1) First aid and CPR; 2) Safe sleeping practices; and 3) Administration of Medication. Finding No. 2021-035, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: G-1802MPCCDF and G-1901MPCCDD Area: Special Tests and Provisions – Health and Safety Requirements Questioned Costs: $1,303,790 Condition, continued: Condition 3, continued: Cause: The CNMI did not enforce compliance with applicable special tests and provisions for health and safety requirements including training requirements. Effect: The CNMI is in noncompliance with applicable special tests and provision for health and safety requirements and questioned costs of $1,303,790 result for Condition 3. Identification as a Repeat Finding: 2020-051 Recommendation: The CNMI should establish and implement procedures to ensure that providers serving children who receive subsidies comply with all applicable health and safety requirements including training requirements. In addition, responsible personnel should maintain documentation to substantiate compliance. Finding No. 2021-035, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: G-1802MPCCDF and G-1901MPCCDD Area: Special Tests and Provisions – Health and Safety Requirements Questioned Costs: $1,303,790 Views of Responsible Officials: Condition 2 – The CNMI Corrective Action Plan states agreement. Condition 1 – CCLP disagrees with this finding. Because CCLP does not administer any amount of federal monies, CCLP does not comprehend the rationale behind these monetary figures. However, because it mentions that documentation was not provided for the unannounced inspections, evidence was provided to the auditors. Therefore, as a matter of record, CCLP hereby disagrees with this section in its entirety. Relative to the provider selected for testing, on January 22, 2021, the provider closed its doors and stopped providing childcare services. The announced inspection was scheduled for April 6, 2021 while the unannounced inspection was scheduled for August 3, 2021. In light of that information, an inspection report was never generated because the provider ceased its operation before the scheduled CCLP inspection. However, the provider was included in the listing of 21 providers due to the fact that it fell within the fiscal year (FY21) that was requested from CCLP. Condition 2 – A response from CCLP is not necessary for this section as it states that the matter has been resolved. Condition 3 – CCLP disagrees with these findings. The topics listed above are topics under the pre-service training requirements under the Child Care and Development Fund program, not under the Child Care Licensing Program. Auditor Response: Condition 1 – The program’s state plan, effective FY2021, indicated two unannounced inspections will be conducted. Only one unannounced inspection was scheduled in FY2021. Condition 3 – The training requirement is applicable to the program as per 42 USC 9858C(c)(2)(I). Further, federal requirements must be followed.

Finding No. 2021-034 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: 2001MPCCC3, 2101MPCCDF, 2101MPCCC5 Area: Eligibility Questioned Costs: $39,200 Criteria: In accordance with CCDF State Plan, an applicant's eligibility for child care service shall be made within fifteen calendar days after submission of a complete application. The date of application shall be the date the signed form and all supporting documents are received by the Child Care Program. Further, to be eligible for child care services, applicants must meet the following requirements, among others: • If the parent qualifies for work, required documents include the most recent 1040 tax form and a current and valid CW work permit; • If claiming to be a single parent, the program requires an Affidavit to be completed. Affidavit must be signed by the applicant; • Applicant's identity (parent or guardian) should be verified using valid identification such as a current and valid photo ID (CNMI Driver's License; Mayor's ID; Passport); • If the parent qualifies under work, verify income to three (3) most recent pay stubs, employment verification (prescribed), and most recent 1040 tax form. Condition: Of forty eligibility case files tested, aggregating $17,750 in total benefits paid of a total population of $2.8M, the following were noted: 1. For three (or 8%), documentation of the valid work permits for the following applicants who are non-U.S. citizens before eligibility period would begin were not on file. Finding No. 2021-034, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: 2001MPCCC3, 2101MPCCDF, 2101MPCCC5 Area: Eligibility Questioned Costs: $39,200 Condition, continued: 2. For three (or 8%), the single parent affidavits were not dated. No questioned cost is presented for Case ID 3170B as amount is questioned at Condition 1. 3. For three (or 8%), recent 1040 tax forms were not on file. 4. For one (or 3%), the applicant was ineligible to work in the CNMI. No questioned cost is presented as the amount is questioned at Condition 3. Cause: The CNMI did not effectively perform controls over compliance with applicable eligibility requirements. Finding No. 2021-034, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: 2001MPCCC3, 2101MPCCDF, 2101MPCCC5 Area: Eligibility Questioned Costs: $39,200 Effect: The CNMI is in noncompliance with applicable eligibility requirements and questioned costs of $39,200 result. Identification as a Repeat Finding: 2020-049 Recommendation: The CNMI should strengthen controls over compliance with applicable eligibility requirements. Responsible personnel should utilize the application checklist and review it against the applicant's files to verify that all required forms and information are completed and filed accordingly. Views of Responsible Officials: Condition 2 – The CNMI Corrective Action Plan states agreement. Condition 1 – CCDF disagrees with this finding. Case ID 3170B: CW1-upon submission of the CCDF Waitlist application the CW1 was valid. Case ID 3242B: CW1-upon submission of the CCDF Waitlist application the CW1 was valid. Case ID 3097A: CW1-upon submission of the CCDF Waitlist application the CW1 was valid. Condition 3 – CCDF disagrees with this finding. 1040 tax forms are not required for the CCDF Renewal application, and it is only required for self-employed applicants. Please see the application checklist on the questioned cases. Finding No. 2021-034, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: 2001MPCCC3, 2101MPCCDF, 2101MPCCC5 Area: Eligibility Questioned Costs: $39,200 Views of Responsible Officials, continued: Condition 4 - CCDF disagrees with this finding. At the time of the submission of the renewal application, the applicant had a valid CW1. The application was submitted on June 15, 2020, the CW1 that was submitted did not expire until September 9, 2020. All documents for verification are on file. Applicant was off island for medical purposes at the time of Certificate of Confirmation (renewal certificate) routing, upon her return she submitted a copy of her passport that indicated that she became a CW2 holder, CCDF then proceeded with termination because of her CW2 status. Auditor Response: Condition 1 – Verification of work authorizations for waitlisted applicants before the eligibility period would begin were not performed. Condition 3 – Per the 2019 - 2021 CCDF State Plan, the 1040 tax forms are required for eligibility determination. Condition 4 – Date of application was on 09/11/20 and eligibility determination was performed on 09/18/20, for which those dates were after the CW-1 visa expiration date of 09/09/20.

Finding No. 2021-035 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: G-1802MPCCDF and G-1901MPCCDD Area: Special Tests and Provisions – Health and Safety Requirements Questioned Costs: $1,303,790 Criteria: In accordance with the July 2021 OMB Compliance Supplement, lead agencies must have procedures in effect to ensure that providers serving children who receive subsidies comply with all applicable health and safety requirements. This includes verifying and documenting that child care providers serving children who receive subsidies meet requirements pertaining to health and safety in eleven specific areas, including first aid and CPR, safe sleeping practices, and administration of medication, and child care workers must be trained in these areas. In addition, per FY2021 State Plan, two (2) unannounced inspections of licensed childcare center providers will be conducted to monitor compliance relative to the health, safety, and well-being of the children in care. Health and Safety inspections are performed by the Child Care Licensing Program (CCLP). Further, providers must annually complete a minimum of 30 hours of training and technical assistance. Condition: 1. For one (or 50%) of two child care providers tested, aggregating $951,410 of a total population of $2.6M, health and safety inspections were not performed during the fiscal year. However, only one unannounced inspection was scheduled on August 3, 2021 for this provider to validate compliance with monitoring and enforcement. No questioned costs result as the amount is questioned at Condition 3. 2. The number of providers receiving subsidies from the program did not agree to the number obtained from CCLP. The matter was resolved during field work. 3. For nine (or 43%) of twenty-one provider staff tested, aggregating $2.4M of a total population of $2.6M, one or more required training in the following areas was deficient: 1) First aid and CPR; 2) Safe sleeping practices; and 3) Administration of Medication. Finding No. 2021-035, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: G-1802MPCCDF and G-1901MPCCDD Area: Special Tests and Provisions – Health and Safety Requirements Questioned Costs: $1,303,790 Condition, continued: Condition 3, continued: Cause: The CNMI did not enforce compliance with applicable special tests and provisions for health and safety requirements including training requirements. Effect: The CNMI is in noncompliance with applicable special tests and provision for health and safety requirements and questioned costs of $1,303,790 result for Condition 3. Identification as a Repeat Finding: 2020-051 Recommendation: The CNMI should establish and implement procedures to ensure that providers serving children who receive subsidies comply with all applicable health and safety requirements including training requirements. In addition, responsible personnel should maintain documentation to substantiate compliance. Finding No. 2021-035, continued Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award Nos.: G-1802MPCCDF and G-1901MPCCDD Area: Special Tests and Provisions – Health and Safety Requirements Questioned Costs: $1,303,790 Views of Responsible Officials: Condition 2 – The CNMI Corrective Action Plan states agreement. Condition 1 – CCLP disagrees with this finding. Because CCLP does not administer any amount of federal monies, CCLP does not comprehend the rationale behind these monetary figures. However, because it mentions that documentation was not provided for the unannounced inspections, evidence was provided to the auditors. Therefore, as a matter of record, CCLP hereby disagrees with this section in its entirety. Relative to the provider selected for testing, on January 22, 2021, the provider closed its doors and stopped providing childcare services. The announced inspection was scheduled for April 6, 2021 while the unannounced inspection was scheduled for August 3, 2021. In light of that information, an inspection report was never generated because the provider ceased its operation before the scheduled CCLP inspection. However, the provider was included in the listing of 21 providers due to the fact that it fell within the fiscal year (FY21) that was requested from CCLP. Condition 2 – A response from CCLP is not necessary for this section as it states that the matter has been resolved. Condition 3 – CCLP disagrees with these findings. The topics listed above are topics under the pre-service training requirements under the Child Care and Development Fund program, not under the Child Care Licensing Program. Auditor Response: Condition 1 – The program’s state plan, effective FY2021, indicated two unannounced inspections will be conducted. Only one unannounced inspection was scheduled in FY2021. Condition 3 – The training requirement is applicable to the program as per 42 USC 9858C(c)(2)(I). Further, federal requirements must be followed.

Finding No. 2021-036 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.778 Medical Assistance Program Federal Award No.: 2105CQTMAP Area: Special Tests and Provisions – ADP Risk Analysis and System Security Review Questioned Costs: $0 Criteria: In accordance with the July 2021 OMB Compliance Supplement, State agencies must establish and maintain a program for conducting periodic risk analysis to ensure appropriate, cost effective safeguards are incorporated into new and existing systems. State agencies must perform risk analysis whenever significant system changes occur. On a biennial basis, State agencies shall review the ADP system security installations involved in the administration of HHS programs. At a minimum, the reviews shall include an evaluation of physical and data security operating procedures, and personnel practices. The State agencies shall maintain reports on its biennial ADP system security reviews, together with pertinent supporting documentation, for HHS on-site reviews (45 CFR section 95.621). Condition: The biennial review of the Program’s ADP system security was not performed. Cause: The CNMI lacked monitoring procedures in place to determine that the biennial review of the Program’s ADP system security is being performed. Effect: The CNMI is in noncompliance with special tests and provisions requirements for the biennial ADP system security review. No questioned costs are presented as this finding does not pertain to federal expenditures. Identification as a Repeat Finding: Finding No. 2020-056 Recommendation: The responsible CNMI personnel should enforce policies and procedures over the biennial review of the Program’s ADP system security in accordance with applicable special tests and provisions requirements for the ADP system security. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-037 Federal Agency: U.S. Department of Homeland Security AL Program: 97.030 Community Disaster Loans Federal Award No.: EMO-2020-LF-4404MP01 Area: Procurement and Suspension and Debarment Questioned Costs: $18,353,963 Criteria: Non-federal entities other than states, including those operating federal programs as subrecipients of states, must follow the procurement standards set out at 2 CFR sections 200.318 through 200.326. They must use their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR Part 200. CNMI’s procurement regulations state the following: • Officials with expenditure authority shall provide for full and open competition through use of the competitive procedure that is best suited to the circumstances of the contract action. The competitive procedures available for use in fulfilling the requirement for full and open competition are as follows: (a) Competitive sealed bidding; (b) Competitive sealed proposals; (c) Architect-engineer services; and (d) Competitive selection procedures for professional services. • Emergency Procurement. o Notwithstanding any other provision of the regulations in this subchapter, the government may make emergency procurement when there exists a threat to public health, safety or welfare under emergency conditions. An emergency procurement must be as competitive as practicable under the circumstances. o A written justification of the basis for the emergency and for the selection of the particular contractor must be made by the official with expenditure authority. o If the Procurement and Supply (P&S) Director is satisfied, he shall state his approval in writing. Condition: Of fourteen expenditures tested, aggregating $18.4M of a total population of $20.2M in nonpayroll expenditures subject to procurement, the following were noted: 1. For eleven (or 79%, either the procurement files, written justifications, and the P&S Director’s written approvals of the Emergency Procurement method used were not provided. In addition, the contracts for Document Nos. 904160, 912446, 922508 and 907725 indicated procurement methods used were for competitive sealed proposals; however, the procurement files support emergency procurement. Further, the procurement information page that specifies the procurement method used for Document Nos. 912931 and 913016 were left blank but were initialed by the Legal reviewer. Finding No. 2021-037, continued Federal Agency: U.S. Department of Homeland Security AL Program: 97.030 Community Disaster Loans Federal Award No.: EMO-2020-LF-4404MP01 Area: Procurement and Suspension and Debarment Questioned Costs: $18,353,963 Condition, continued: Condition 1, continued: 2. For three (or 21%), purchase orders do not specify the procurement methods used. Finding No. 2021-037, continued Federal Agency: U.S. Department of Homeland Security AL Program: 97.030 Community Disaster Loans Federal Award No.: EMO-2020-LF-4404MP01 Area: Procurement and Suspension and Debarment Questioned Costs: $18,353,963 Cause: CNMI did not enforce compliance with applicable procurement requirements. Effect: CNMI is in noncompliance with applicable procurement requirements and questioned costs of $18,353,963 result. Recommendation: Responsible personnel should monitor and enforce compliance with applicable procurement requirements, including the review of procurement files for completeness as to written rationale for deviations from applicable procurement requirements. Further, responsible personnel should maintain procurement documents to substantiate compliance. Views of Responsible Officials: Condition 1 – The CNMI Corrective Action Plan states agreement. Condition 2 - The Department of Finance – Procurement Services disagrees with this finding. For 715112-000 OP / 727492-000 OP / 730942-000 OP. These three purchase orders were provided in the list for ALN 97.030 and were available for testing during auditor’s fieldwork. Auditors failed to perform the required testing. Auditor Response: Condition 2 – Purchase orders do not demonstrate compliance with procurement regulations.

Finding No. 2021-038 Federal Agency: U.S. Department of Homeland Security AL Program: 97.036 Disaster Grants - Public Assistance (Presidentially Declared Disasters) Federal Award No.: FEMA-4404-DR Area: Matching, Level of Effort, Earmarking Questioned Costs: $944,661 Criteria: In accordance with the July 2021 OMB Compliance Supplement, costs must be on a shared basis, as specified in the FEMA-State Agreement. In addition, the CNMI is required to match a 10% local share based on its agreement with FEMA. Condition: Of thirty-two expenditures tested, aggregating $31.9M of a total population of $48.7M, documentations of local share payments for four (or 13%) were not provided to substantiate the accuracy of computed local share costs. Cause: The CNMI did not enforce compliance with applicable matching requirements. Effect: The CNMI is in noncompliance with applicable matching requirements and questioned costs of $944,661 result. Finding No. 2021-038, continued Federal Agency: U.S. Department of Homeland Security AL Program: 97.036 Disaster Grants - Public Assistance (Presidentially Declared Disasters) Federal Award No.: FEMA-4404-DR Area: Matching, Level of Effort, Earmarking Questioned Costs: $944,661 Recommendation: The CNMI should establish and implement controls over compliance with applicable matching requirements. Responsible personnel should review local and federal share files for accuracy of check disbursements. Further, responsible personnel should maintain documents to substantiate the accuracy and completeness of expenditures. Views of responsible officials: The CNMI PAO disagrees with this finding. For that specific transaction, the CNMI Government paid the vendor 100% of the invoice(s), which the CNMI PAO later reimbursed the Government for 90%. As for the following line items we acknowledge that this may be a finding. As we were looking through our documents and through the PW history, we had previously been awarded hazard mitigation to replace wooden poles with concrete poles. Approved hazard mitigation work would be covered at 100%. In the latest version, concrete poles are still written in the scope of work, but the cost of hazard mitigation was removed. We believe this to be an error which we will discuss and work out with our grantor. Auditor Response: We noted inconsistencies for Document No. 904239 under PW 9, wherein the cost share was noted to be 90% Federal and 10% local. However, the documents provided indicates costs for PW 9 were recorded as 100% Federal share. Accordingly, the finding stands.

Finding No. 2021-039 Federal Agency: U.S. Department of Homeland Security AL Program: 97.036 Disaster Grants - Public Assistance (Presidentially Declared Disasters) Federal Award No.: FEMA-4235-DR, FEMA-4396-DR, FEMA-4404-DR, FEMA-4511-DR Area: Reporting Questioned Costs: $-0- Criteria: In accordance with the Federal Funding Accountability and Transparency Act (FFATA), an FFATA report that pertains to the appropriate award period is required for submission. Condition: The relevant Federal awards for Disasters 4511, 4235, 4396 and 4404 were unable to be identified in the FFATA Subaward Reporting System. Based on the screenshots provided, a service ticket was opened due to the Public Accountability Office’s inability in submitting Federal award information to the awardee worklist. No other documents relating to FFATA were provided. Cause: CNMI did not effectively monitor compliance with applicable reporting requirements. Effect: CNMI is in noncompliance with reporting requirements. No questioned costs are presented as we are unable to quantify the extent of noncompliance. Recommendation: The CNMI should strengthen monitoring controls over compliance with applicable reporting requirements. Views of responsible officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-038 Federal Agency: U.S. Department of Homeland Security AL Program: 97.036 Disaster Grants - Public Assistance (Presidentially Declared Disasters) Federal Award No.: FEMA-4404-DR Area: Matching, Level of Effort, Earmarking Questioned Costs: $944,661 Criteria: In accordance with the July 2021 OMB Compliance Supplement, costs must be on a shared basis, as specified in the FEMA-State Agreement. In addition, the CNMI is required to match a 10% local share based on its agreement with FEMA. Condition: Of thirty-two expenditures tested, aggregating $31.9M of a total population of $48.7M, documentations of local share payments for four (or 13%) were not provided to substantiate the accuracy of computed local share costs. Cause: The CNMI did not enforce compliance with applicable matching requirements. Effect: The CNMI is in noncompliance with applicable matching requirements and questioned costs of $944,661 result. Finding No. 2021-038, continued Federal Agency: U.S. Department of Homeland Security AL Program: 97.036 Disaster Grants - Public Assistance (Presidentially Declared Disasters) Federal Award No.: FEMA-4404-DR Area: Matching, Level of Effort, Earmarking Questioned Costs: $944,661 Recommendation: The CNMI should establish and implement controls over compliance with applicable matching requirements. Responsible personnel should review local and federal share files for accuracy of check disbursements. Further, responsible personnel should maintain documents to substantiate the accuracy and completeness of expenditures. Views of responsible officials: The CNMI PAO disagrees with this finding. For that specific transaction, the CNMI Government paid the vendor 100% of the invoice(s), which the CNMI PAO later reimbursed the Government for 90%. As for the following line items we acknowledge that this may be a finding. As we were looking through our documents and through the PW history, we had previously been awarded hazard mitigation to replace wooden poles with concrete poles. Approved hazard mitigation work would be covered at 100%. In the latest version, concrete poles are still written in the scope of work, but the cost of hazard mitigation was removed. We believe this to be an error which we will discuss and work out with our grantor. Auditor Response: We noted inconsistencies for Document No. 904239 under PW 9, wherein the cost share was noted to be 90% Federal and 10% local. However, the documents provided indicates costs for PW 9 were recorded as 100% Federal share. Accordingly, the finding stands.

Finding No. 2021-039 Federal Agency: U.S. Department of Homeland Security AL Program: 97.036 Disaster Grants - Public Assistance (Presidentially Declared Disasters) Federal Award No.: FEMA-4235-DR, FEMA-4396-DR, FEMA-4404-DR, FEMA-4511-DR Area: Reporting Questioned Costs: $-0- Criteria: In accordance with the Federal Funding Accountability and Transparency Act (FFATA), an FFATA report that pertains to the appropriate award period is required for submission. Condition: The relevant Federal awards for Disasters 4511, 4235, 4396 and 4404 were unable to be identified in the FFATA Subaward Reporting System. Based on the screenshots provided, a service ticket was opened due to the Public Accountability Office’s inability in submitting Federal award information to the awardee worklist. No other documents relating to FFATA were provided. Cause: CNMI did not effectively monitor compliance with applicable reporting requirements. Effect: CNMI is in noncompliance with reporting requirements. No questioned costs are presented as we are unable to quantify the extent of noncompliance. Recommendation: The CNMI should strengthen monitoring controls over compliance with applicable reporting requirements. Views of responsible officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-040 Federal Agency: U.S. Department of Homeland Security AL Program: 97.050 Presidential Declared Disaster Assistance to Individuals and Households - Other Needs Federal Award No.: 4511DRMPSPLW Area: Allowable Costs/Cost Principles Questioned Costs: $247,774 Criteria: In accordance with 2 CFR Part 200, Subpart E, cost must be necessary and reasonable for the performance of the federal award and be allocable thereto. Further costs must conform to any limitations or exclusions and be adequately documented. Condition: The CNMI had overdrawn $247,774 from the Lost Wages Assistance (LWA) program, which exceeded the funding limit, thus amount is questioned. Cause: CNMI did not enforce monitoring controls over compliance with applicable allowable costs/cost principles requirements. Effect: CNMI is in noncompliance with applicable allowable costs/cost principles requirements and questioned costs of $247,774 result. Recommendation: CNMI should strengthen monitoring controls over compliance with applicable allowable costs/cost principles requirements. Views of responsible officials: The CNMI disagrees with this finding. The Lost Wages Assistance Program is not a reimbursement program. A drawdown of funds obligated was needed prior to services being rendered. After all payments were made, eligible expenses were calculated and submitted in the Lost Wages Assistance Program Final Closeout that was submitted to FEMA. After the closeout, the CNMI understands that the remaining funds will need to return the overdrawn amount. The final closeout document was received from FEMA on June 13, 2024. Auditor Response: The CNMI acknowledges the overdrawn amount of $247,774 and its obligation to reimburse FEMA.

Finding No. 2021-041 Federal Agency: U.S. Department of Homeland Security AL Program: 97.050 Presidential Declared Disaster Assistance to Individuals and Households - Other Needs Federal Award No.: 4511DRMPSPLW Area: Eligibility Questioned Costs: $2,430 Criteria: In accordance with the July 2021 OMB Compliance Supplement, recipients of the Other Needs Assistance (ONA) – Supplemental Payments for Lost Wages Assistance (LWA) must demonstrate the following: 1. The individual was a recipient of at least $100 per week for any of the following benefits, beginning back to August 1, 2020: a. Unemployment compensation, including Unemployment Compensation for Federal Employees (UCFE) and Unemployment Compensation for Ex-Service members (UCX); b. Pandemic Emergency Unemployment Compensation (PEUC); c. Pandemic Unemployment Assistance (PUA); d. Extended Benefits (EB); e. Short-Time Compensation (STC); and 2. The individual must submit a self-certification that the individual is unemployed, partially unemployed, or unable or unavailable to work due to disruptions caused by COVID-19. Condition: Of sixty eligibility claims tested, aggregating $16,710 in total benefits paid of a total population of $5.4M, for three (or 5%), LWA payments were made to claimants who were deemed as ineligible to receive PUA and FPUC benefits. Finding No. 2021-041, continued Federal Agency: U.S. Department of Homeland Security AL Program: 97.050 Presidential Declared Disaster Assistance to Individuals and Households - Other Needs Federal Award No.: 4511DRMPSPLW Area: Eligibility Questioned Costs: $2,430 Cause: The CNMI did not enforce compliance with applicable eligibility requirements. Effect: The CNMI is in noncompliance with applicable eligibility requirements and questioned costs of $2,430 result as the projected questioned costs exceed the $25,000 threshold. Recommendation: The CNMI should establish and implement controls over compliance with applicable eligibility requirements. Views of Responsible Officials: The CNMI Corrective Action Plan states agreement.

Finding No. 2021-042 Federal Agency: U.S. Department of Homeland Security AL Program: 97.050 Presidential Declared Disaster Assistance to Individuals and Households - Other Needs Federal Award No.: 4511DRMPSPLW Area: Reporting Questioned Costs: $-0- Criteria: In accordance with the “Federal Financial Reporting Requirements” section of the LWA Grant Award Notification, the grantee shall submit an accurate SF 425 Federal Financial Report on a quarterly basis, which should be supported with underlying accounting records. Condition: The total federal share of expenditures reported on the SF 425 differs from the underlying accounting records for which no reconciliation was provided for the variance. No questioned costs are presented as the amount is questioned at Finding 2021-043. Cause: CNMI did not effectively monitor the accuracy and completeness of the SF 425 reports based on underlying accounting records. Effect: CNMI is in noncompliance with SF 425 reporting requirements and the SEFA could potentially be understated. Recommendation: The CNMI should strengthen monitoring controls over compliance with applicable reporting requirements. Responsible personnel should maintain underlying accounting records to substantiate reported amounts. Finding No. 2021-042, continued Federal Agency: U.S. Department of Homeland Security AL Program: 97.050 Presidential Declared Disaster Assistance to Individuals and Households - Other Needs Federal Award No.: 4511DRMPSPLW Area: Reporting Questioned Costs: $-0- Views of responsible officials: The CNMI disagrees with this finding. The SF-425 is prepared by Financial Services and reflects the total amount that has been drawn down for the Lost Wages Assistance Program. The Lost Wages Assistance Program is not a reimbursement program and a drawdown of funds obligated was needed prior to services being rendered. After the overdraft amount is returned to FEMA, there will be a SF-425 that reflects the actual amount expensed. Auditor’s Response: Reconciliation for the variance was not provided.