FAC Explorer

Audit 355992

FY End
2023-09-30
Total Expended
$16.43M
Findings
10
Programs
6
Organization: Commonwealth Ports Authority (MP)
Year: 2023 Accepted: 2025-05-11
Auditor: Ernst & Young (cnmi) INC

Organization Exclusion Status:

Findings

ID Ref Severity Repeat Requirement
560053 2023-003 Material Weakness Yes F
560054 2023-003 Material Weakness Yes F
560055 2023-004 Material Weakness - N
560056 2023-004 Material Weakness - N
560057 2023-005 Material Weakness - L
1136495 2023-003 Material Weakness Yes F
1136496 2023-003 Material Weakness Yes F
1136497 2023-004 Material Weakness - N
1136498 2023-004 Material Weakness - N
1136499 2023-005 Material Weakness - L

Programs

ALN Program Spent Major Findings
20.106 Airport Improvement Program, Covid-19 Airports Programs, and Infrastructure Investment and Jobs Act Programs $7.59M Yes 2
97.U01 Electronic Baggage Screening Program $4.80M - 0
21.027 Coronavirus State and Local Fiscal Recovery Funds $940,923 Yes 1
15.875 Economic, Social, and Political Development of the Territories $181,291 - 0
97.072 National Explosives Detection Canine Team Program $159,257 - 0
97.U02 Law Enforcement Officer Reimbursement Program $55,850 - 0

Contacts

Name Title Type
XGK1P65NW429 Sheryl Sizemore Auditee
6702376500 James N. Whitt Auditor
No contacts on file

Notes to SEFA

Title: 1. Scope of Audit Accounting Policies: 3. Summary of Significant Accounting Policies Matching Requirements In allocating project expenditures between the federal share and the local share, a percentage is used based upon local matching requirements, unless funds are specifically identified to a certain phase of the project. Basis of Accounting Expenditures reported on the Schedule are reported on the accrual basis of accounting. All expenses and capital outlays are reported as expenditures. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Pass-through entity identifying numbers are presented where available. De Minimis Rate Used: N Rate Explanation: The Commonwealth Ports Authority did not elect to use the de minimis indirect cost rate allowed under the Uniform Guidance. CPA was established as a public corporation by the CNMI by Public Law 2-48, effective November 8, 1981. All significant operations of CPA are included in the scope of the Single Audit. The U.S. Department of the Interior’s Office of the Inspector General has been designated as CPA’s cognizant agency for the Single Audit.
Title: 2. Basis of Presentation Accounting Policies: 3. Summary of Significant Accounting Policies Matching Requirements In allocating project expenditures between the federal share and the local share, a percentage is used based upon local matching requirements, unless funds are specifically identified to a certain phase of the project. Basis of Accounting Expenditures reported on the Schedule are reported on the accrual basis of accounting. All expenses and capital outlays are reported as expenditures. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Pass-through entity identifying numbers are presented where available. De Minimis Rate Used: N Rate Explanation: The Commonwealth Ports Authority did not elect to use the de minimis indirect cost rate allowed under the Uniform Guidance. The accompanying Schedule of Expenditures of Federal Awards (the Schedule) includes the federal award activity of CPA under programs of the federal government for the year ended September 30, 2023. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because of the Schedule presents only a selected portion of the operations of CPA, it is not intended to and does not present the financial position, changes in net position or cash flows of CPA.
Title: 3. Summary of Significant Accounting Policies Accounting Policies: 3. Summary of Significant Accounting Policies Matching Requirements In allocating project expenditures between the federal share and the local share, a percentage is used based upon local matching requirements, unless funds are specifically identified to a certain phase of the project. Basis of Accounting Expenditures reported on the Schedule are reported on the accrual basis of accounting. All expenses and capital outlays are reported as expenditures. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Pass-through entity identifying numbers are presented where available. De Minimis Rate Used: N Rate Explanation: The Commonwealth Ports Authority did not elect to use the de minimis indirect cost rate allowed under the Uniform Guidance. Matching Requirements In allocating project expenditures between the federal share and the local share, a percentage is used based upon local matching requirements, unless funds are specifically identified to a certain phase of the project. Basis of Accounting Expenditures reported on the Schedule are reported on the accrual basis of accounting. All expenses and capital outlays are reported as expenditures. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Pass-through entity identifying numbers are presented where available.
Title: 4. Indirect Cost Rate Accounting Policies: 3. Summary of Significant Accounting Policies Matching Requirements In allocating project expenditures between the federal share and the local share, a percentage is used based upon local matching requirements, unless funds are specifically identified to a certain phase of the project. Basis of Accounting Expenditures reported on the Schedule are reported on the accrual basis of accounting. All expenses and capital outlays are reported as expenditures. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Pass-through entity identifying numbers are presented where available. De Minimis Rate Used: N Rate Explanation: The Commonwealth Ports Authority did not elect to use the de minimis indirect cost rate allowed under the Uniform Guidance. CPA does not elect to use the de minimis indirect cost rate allowed under Uniform Guidance.

Finding Details

Finding 2023-003
Federal Agency: U.S. Department of Transportation AL Program: 20.106 Airport Improvement Program Federal Award Nos.: All AIP Grants 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 by the State in accordance with State laws and procedures. SOP 216.1 and 216.6: • A physical inventory of the property must be taken and the results reconciled with the property records annually. SOP 215.1 and 215.2: • Adequate maintenance procedures must be developed to keep the property in good condition. Condition: Tests of equipment and real property noted the following: 1. CPA performed a capital assets inventory during fiscal year 2023. Based on controls testing, the worksheet of the count was approved by the Comptroller; however, it was not dated. 2. A reconciliation was not performed for FAA only assets which should be compared with accounting records. As such, the completeness and accuracy of program assets could not be determined. Total fixed asset additions capitalized and related to CPA’s major program, is as follows: Finding No.: 2023-003, continued Federal Agency: U.S. Department of Transportation AL Program: 20.106 Airport Improvement Program Federal Award Nos.: All AIP Grants Area: Equipment and Real Property Management Questioned Costs: $-0- Condition, continued: 3. Of fifteen items (or 17%) tested of a total population of eighty-eight FAA-funded capital assets, we noted deficiencies, as follows: a. One item (or 7%) has been unidentified, and management was not able to substantiate the existence of the actual fixed asset. This asset was cited in the prior year as a finding but was not corrected. As such, it is a repeat finding for FY2023. b. Seven items (or 47%) did not have any record or log of maintenance conducted during FY2023. No questioned costs are noted as we are unable to quantify the extent of the noncompliance. c. One item (or 7%) was improperly included on the fixed asset listing (asset number 000004). This asset was the original Crash, Fire, and Rescue (CFR) building constructed in 1970. The CFR building was demolished upon the construction of the Aircraft Rescue and Fire Fighting (ARFF) building in 1996. As such, this asset should have been noted as a disposal for FY2023. We present $0 questioned costs as no net book value was noted. Finding No.: 2023-003, continued Federal Agency: U.S. Department of Transportation AL Program: 20.106 Airport Improvement Program Federal Award Nos.: All AIP Grants Area: Equipment and Real Property Management Questioned Costs: $-0- Condition, continued: d. One item (or 7%) was improperly capitalized and included in the fixed asset listing (asset number 001504). This asset is the Master Plan Update for the Rota Airport. As this is a document pertaining to project deliverables and survey on airport assets, the Master Plan Update is not considered to be an actual fixed asset. We present $0 questioned costs for this asset as this is a matter of improper capitalization, and not an instance of an unallowable activity in the context of compliance. Cause: CPA lacks oversight responsibility and monitoring controls over compliance with equipment and real property management requirements. Effect: CPA is in noncompliance with applicable equipment and real property management requirements. No questioned costs are presented as we are unable to quantify the extent of noncompliance. Identification as a Repeat Finding: Finding 2022-003. Finding No.: 2023-003, continued Federal Agency: U.S. Department of Transportation AL Program: 20.106 Airport Improvement Program Federal Award Nos.: All AIP Grants Area: Equipment and Real Property Management Questioned Costs: $-0- Recommendation: CPA should reconcile the results of the annual physical inventory of the program’s assets to the property records and ascertain that the costs of the individual assets also agree to the records of accounting in terms of assets identified as additions or disposals for the year. Additionally, CPA should retain maintenance logs or equivalent documentation to show evidence of maintenance done on fixed assets and equipment. Lastly, CPA should implement and enforce proper procedures and criteria for capitalization of assets, based on the capitalization policy set by management to prevent improper capitalization. Views of Responsible Officials: Management states agreement with the finding. Refer to separate Corrective Action Plan.
Finding 2023-003
Federal Agency: U.S. Department of Transportation AL Program: 20.106 Airport Improvement Program Federal Award Nos.: All AIP Grants 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 by the State in accordance with State laws and procedures. SOP 216.1 and 216.6: • A physical inventory of the property must be taken and the results reconciled with the property records annually. SOP 215.1 and 215.2: • Adequate maintenance procedures must be developed to keep the property in good condition. Condition: Tests of equipment and real property noted the following: 1. CPA performed a capital assets inventory during fiscal year 2023. Based on controls testing, the worksheet of the count was approved by the Comptroller; however, it was not dated. 2. A reconciliation was not performed for FAA only assets which should be compared with accounting records. As such, the completeness and accuracy of program assets could not be determined. Total fixed asset additions capitalized and related to CPA’s major program, is as follows: Finding No.: 2023-003, continued Federal Agency: U.S. Department of Transportation AL Program: 20.106 Airport Improvement Program Federal Award Nos.: All AIP Grants Area: Equipment and Real Property Management Questioned Costs: $-0- Condition, continued: 3. Of fifteen items (or 17%) tested of a total population of eighty-eight FAA-funded capital assets, we noted deficiencies, as follows: a. One item (or 7%) has been unidentified, and management was not able to substantiate the existence of the actual fixed asset. This asset was cited in the prior year as a finding but was not corrected. As such, it is a repeat finding for FY2023. b. Seven items (or 47%) did not have any record or log of maintenance conducted during FY2023. No questioned costs are noted as we are unable to quantify the extent of the noncompliance. c. One item (or 7%) was improperly included on the fixed asset listing (asset number 000004). This asset was the original Crash, Fire, and Rescue (CFR) building constructed in 1970. The CFR building was demolished upon the construction of the Aircraft Rescue and Fire Fighting (ARFF) building in 1996. As such, this asset should have been noted as a disposal for FY2023. We present $0 questioned costs as no net book value was noted. Finding No.: 2023-003, continued Federal Agency: U.S. Department of Transportation AL Program: 20.106 Airport Improvement Program Federal Award Nos.: All AIP Grants Area: Equipment and Real Property Management Questioned Costs: $-0- Condition, continued: d. One item (or 7%) was improperly capitalized and included in the fixed asset listing (asset number 001504). This asset is the Master Plan Update for the Rota Airport. As this is a document pertaining to project deliverables and survey on airport assets, the Master Plan Update is not considered to be an actual fixed asset. We present $0 questioned costs for this asset as this is a matter of improper capitalization, and not an instance of an unallowable activity in the context of compliance. Cause: CPA lacks oversight responsibility and monitoring controls over compliance with equipment and real property management requirements. Effect: CPA is in noncompliance with applicable equipment and real property management requirements. No questioned costs are presented as we are unable to quantify the extent of noncompliance. Identification as a Repeat Finding: Finding 2022-003. Finding No.: 2023-003, continued Federal Agency: U.S. Department of Transportation AL Program: 20.106 Airport Improvement Program Federal Award Nos.: All AIP Grants Area: Equipment and Real Property Management Questioned Costs: $-0- Recommendation: CPA should reconcile the results of the annual physical inventory of the program’s assets to the property records and ascertain that the costs of the individual assets also agree to the records of accounting in terms of assets identified as additions or disposals for the year. Additionally, CPA should retain maintenance logs or equivalent documentation to show evidence of maintenance done on fixed assets and equipment. Lastly, CPA should implement and enforce proper procedures and criteria for capitalization of assets, based on the capitalization policy set by management to prevent improper capitalization. Views of Responsible Officials: Management states agreement with the finding. Refer to separate Corrective Action Plan.
Finding 2023-004
Finding No.: 2023-004 Federal Agency: U.S. Department of Transportation Assistance Listing Program: 20.106 Airport Improvement Program Award Numbers: All AIP Grants Area: Special Tests and Provisions – Revenue Diversion Questioned Costs: $-0- Criteria: In accordance with 64 FR 7696, all revenues generated by a public airport must be expended for the capital or operating costs of the airport, the local airport system, or other local facilities that are owned or operated by the owner or operator of the airport and are directly and substantially related to the actual air transportation of passengers or property. Condition: 1. CPA has two divisions – airport and seaport. Certain costs are shared by both the airport and the seaport. The shared costs include management fees, salaries, legal fees, advertising, and administrative expenses. The airport pays for shared cost attributed to the cost of the seaport operations. The airport records the seaport’s allocation of the shared cost as ‘Due from seaport division’ and conversely, the seaport records ‘Due to airport division’. The seaport division normally settles amounts due to the airport division within 90 days. We observed that: • The airport division paid $789,887 of the seaports shared costs during fiscal year ended September 30, 2023. • As of September 30, 2023, receivables due from the seaport division totaled $198,055. CPA management asserts that use of airport revenues to pay operating costs of the seaport division is acceptable as the seaport division normally reimbursed the airport division within 90 days. As such, CPA management believes this does not constitute a diversion of airport revenues. CPA did not provide documentation from the grantor agency to acknowledge that the grantor agency has approved the use of airport revenues to pay for the costs of the seaport operations. Finding No.: 2023-004, continued Federal Agency: U.S. Department of Transportation Assistance Listing Program: 20.106 Airport Improvement Program Award Numbers: All AIP Grants Area: Special Tests and Provisions – Revenue Diversion Questioned Costs: $-0- Condition, continued: 2. For one (or 4%) of twenty-five cash journal entries tested, aggregating $789,887 of a total population of $63,692,682, airport funds were expended for the costs of a holiday event celebration. The costs included venue and meals which do not appear to be directly related to the airport operations. Details are as follows: Cause: CPA did not effectively seek grantor guidance over compliance with Special Tests and Provisions on revenue division on shared costs between its airport and seaport divisions. Moreover, CPA did not obtain grantor approval for the expenditure referred to whether it is duly permitted by the Federal Aviation Administration regulation. Effect: CPA is in noncompliance with Special Tests and Provisions – Revenue Diversion. Recommendation: CPA should seek approval from the grantor agency regarding use of the airport revenues: • to pay for operating cost of its seaport division, and • to pay for expenditures, such as cost of holiday events, that do not appear to be directly related to airport operations. Views of Responsible Officials: Management disagrees with the finding. Refer to separate Corrective Action Plan. Auditor Response: Condition 1: Although costs incurred by the Seaport division are fully reimbursed, it does not appear to meet the standards of compliance of using airport revenue for airport purposes only. Condition remains. Finding No.: 2023-004, continued Federal Agency: U.S. Department of Transportation Assistance Listing Program: 20.106 Airport Improvement Program Award Numbers: All AIP Grants Area: Special Tests and Provisions – Revenue Diversion Questioned Costs: $-0- Auditor Response, continued: Condition 2: The costs of the event appear to be entertainment expenses not part of the airport’s business purposes and not directly related to generating revenue for the airport. Condition remains.
Finding 2023-004
Finding No.: 2023-004 Federal Agency: U.S. Department of Transportation Assistance Listing Program: 20.106 Airport Improvement Program Award Numbers: All AIP Grants Area: Special Tests and Provisions – Revenue Diversion Questioned Costs: $-0- Criteria: In accordance with 64 FR 7696, all revenues generated by a public airport must be expended for the capital or operating costs of the airport, the local airport system, or other local facilities that are owned or operated by the owner or operator of the airport and are directly and substantially related to the actual air transportation of passengers or property. Condition: 1. CPA has two divisions – airport and seaport. Certain costs are shared by both the airport and the seaport. The shared costs include management fees, salaries, legal fees, advertising, and administrative expenses. The airport pays for shared cost attributed to the cost of the seaport operations. The airport records the seaport’s allocation of the shared cost as ‘Due from seaport division’ and conversely, the seaport records ‘Due to airport division’. The seaport division normally settles amounts due to the airport division within 90 days. We observed that: • The airport division paid $789,887 of the seaports shared costs during fiscal year ended September 30, 2023. • As of September 30, 2023, receivables due from the seaport division totaled $198,055. CPA management asserts that use of airport revenues to pay operating costs of the seaport division is acceptable as the seaport division normally reimbursed the airport division within 90 days. As such, CPA management believes this does not constitute a diversion of airport revenues. CPA did not provide documentation from the grantor agency to acknowledge that the grantor agency has approved the use of airport revenues to pay for the costs of the seaport operations. Finding No.: 2023-004, continued Federal Agency: U.S. Department of Transportation Assistance Listing Program: 20.106 Airport Improvement Program Award Numbers: All AIP Grants Area: Special Tests and Provisions – Revenue Diversion Questioned Costs: $-0- Condition, continued: 2. For one (or 4%) of twenty-five cash journal entries tested, aggregating $789,887 of a total population of $63,692,682, airport funds were expended for the costs of a holiday event celebration. The costs included venue and meals which do not appear to be directly related to the airport operations. Details are as follows: Cause: CPA did not effectively seek grantor guidance over compliance with Special Tests and Provisions on revenue division on shared costs between its airport and seaport divisions. Moreover, CPA did not obtain grantor approval for the expenditure referred to whether it is duly permitted by the Federal Aviation Administration regulation. Effect: CPA is in noncompliance with Special Tests and Provisions – Revenue Diversion. Recommendation: CPA should seek approval from the grantor agency regarding use of the airport revenues: • to pay for operating cost of its seaport division, and • to pay for expenditures, such as cost of holiday events, that do not appear to be directly related to airport operations. Views of Responsible Officials: Management disagrees with the finding. Refer to separate Corrective Action Plan. Auditor Response: Condition 1: Although costs incurred by the Seaport division are fully reimbursed, it does not appear to meet the standards of compliance of using airport revenue for airport purposes only. Condition remains. Finding No.: 2023-004, continued Federal Agency: U.S. Department of Transportation Assistance Listing Program: 20.106 Airport Improvement Program Award Numbers: All AIP Grants Area: Special Tests and Provisions – Revenue Diversion Questioned Costs: $-0- Auditor Response, continued: Condition 2: The costs of the event appear to be entertainment expenses not part of the airport’s business purposes and not directly related to generating revenue for the airport. Condition remains.
Finding 2023-005
Finding No.: 2023-005 Federal Agency: U.S. Department of the Treasury Pass-Through Entity: CNMI Government AL Program: 21.027 Coronavirus State and Local Fiscal Recovery Funds Federal Award No. and year: CNMI22028 2021-2023 Area: Reporting Questioned Costs: $-0- Criteria: In accordance with the grant award CNMI22028, CPA will submit quarterly reports to the Department of Finance Office of the Secretary that are accurately prepared and supported. Condition: For one (or 33%) of three reports examined, the quarter ending 9/30/2023 cumulative amount reported as federal share of $2,009,788 did not agree with expected cumulative federal share per audit expectation of $2,041,923, resulting in a variance of $32,135. Cause: CPA did not effectively monitor the accuracy and completeness of the financial report based on underlying accounting records. Effect: CPA is in noncompliance with the applicable reporting requirements. No questioned cost is reported as we are unable to quantify the extent of noncompliance. Recommendation: Responsible personnel should regularly monitor reports to verify that amounts reported are supported by underlying accounting records. Views of Responsible Officials: Management states agreement with the finding. Refer to separate Corrective Action Plan.
Finding 2023-003
Federal Agency: U.S. Department of Transportation AL Program: 20.106 Airport Improvement Program Federal Award Nos.: All AIP Grants 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 by the State in accordance with State laws and procedures. SOP 216.1 and 216.6: • A physical inventory of the property must be taken and the results reconciled with the property records annually. SOP 215.1 and 215.2: • Adequate maintenance procedures must be developed to keep the property in good condition. Condition: Tests of equipment and real property noted the following: 1. CPA performed a capital assets inventory during fiscal year 2023. Based on controls testing, the worksheet of the count was approved by the Comptroller; however, it was not dated. 2. A reconciliation was not performed for FAA only assets which should be compared with accounting records. As such, the completeness and accuracy of program assets could not be determined. Total fixed asset additions capitalized and related to CPA’s major program, is as follows: Finding No.: 2023-003, continued Federal Agency: U.S. Department of Transportation AL Program: 20.106 Airport Improvement Program Federal Award Nos.: All AIP Grants Area: Equipment and Real Property Management Questioned Costs: $-0- Condition, continued: 3. Of fifteen items (or 17%) tested of a total population of eighty-eight FAA-funded capital assets, we noted deficiencies, as follows: a. One item (or 7%) has been unidentified, and management was not able to substantiate the existence of the actual fixed asset. This asset was cited in the prior year as a finding but was not corrected. As such, it is a repeat finding for FY2023. b. Seven items (or 47%) did not have any record or log of maintenance conducted during FY2023. No questioned costs are noted as we are unable to quantify the extent of the noncompliance. c. One item (or 7%) was improperly included on the fixed asset listing (asset number 000004). This asset was the original Crash, Fire, and Rescue (CFR) building constructed in 1970. The CFR building was demolished upon the construction of the Aircraft Rescue and Fire Fighting (ARFF) building in 1996. As such, this asset should have been noted as a disposal for FY2023. We present $0 questioned costs as no net book value was noted. Finding No.: 2023-003, continued Federal Agency: U.S. Department of Transportation AL Program: 20.106 Airport Improvement Program Federal Award Nos.: All AIP Grants Area: Equipment and Real Property Management Questioned Costs: $-0- Condition, continued: d. One item (or 7%) was improperly capitalized and included in the fixed asset listing (asset number 001504). This asset is the Master Plan Update for the Rota Airport. As this is a document pertaining to project deliverables and survey on airport assets, the Master Plan Update is not considered to be an actual fixed asset. We present $0 questioned costs for this asset as this is a matter of improper capitalization, and not an instance of an unallowable activity in the context of compliance. Cause: CPA lacks oversight responsibility and monitoring controls over compliance with equipment and real property management requirements. Effect: CPA is in noncompliance with applicable equipment and real property management requirements. No questioned costs are presented as we are unable to quantify the extent of noncompliance. Identification as a Repeat Finding: Finding 2022-003. Finding No.: 2023-003, continued Federal Agency: U.S. Department of Transportation AL Program: 20.106 Airport Improvement Program Federal Award Nos.: All AIP Grants Area: Equipment and Real Property Management Questioned Costs: $-0- Recommendation: CPA should reconcile the results of the annual physical inventory of the program’s assets to the property records and ascertain that the costs of the individual assets also agree to the records of accounting in terms of assets identified as additions or disposals for the year. Additionally, CPA should retain maintenance logs or equivalent documentation to show evidence of maintenance done on fixed assets and equipment. Lastly, CPA should implement and enforce proper procedures and criteria for capitalization of assets, based on the capitalization policy set by management to prevent improper capitalization. Views of Responsible Officials: Management states agreement with the finding. Refer to separate Corrective Action Plan.
Finding 2023-003
Federal Agency: U.S. Department of Transportation AL Program: 20.106 Airport Improvement Program Federal Award Nos.: All AIP Grants 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 by the State in accordance with State laws and procedures. SOP 216.1 and 216.6: • A physical inventory of the property must be taken and the results reconciled with the property records annually. SOP 215.1 and 215.2: • Adequate maintenance procedures must be developed to keep the property in good condition. Condition: Tests of equipment and real property noted the following: 1. CPA performed a capital assets inventory during fiscal year 2023. Based on controls testing, the worksheet of the count was approved by the Comptroller; however, it was not dated. 2. A reconciliation was not performed for FAA only assets which should be compared with accounting records. As such, the completeness and accuracy of program assets could not be determined. Total fixed asset additions capitalized and related to CPA’s major program, is as follows: Finding No.: 2023-003, continued Federal Agency: U.S. Department of Transportation AL Program: 20.106 Airport Improvement Program Federal Award Nos.: All AIP Grants Area: Equipment and Real Property Management Questioned Costs: $-0- Condition, continued: 3. Of fifteen items (or 17%) tested of a total population of eighty-eight FAA-funded capital assets, we noted deficiencies, as follows: a. One item (or 7%) has been unidentified, and management was not able to substantiate the existence of the actual fixed asset. This asset was cited in the prior year as a finding but was not corrected. As such, it is a repeat finding for FY2023. b. Seven items (or 47%) did not have any record or log of maintenance conducted during FY2023. No questioned costs are noted as we are unable to quantify the extent of the noncompliance. c. One item (or 7%) was improperly included on the fixed asset listing (asset number 000004). This asset was the original Crash, Fire, and Rescue (CFR) building constructed in 1970. The CFR building was demolished upon the construction of the Aircraft Rescue and Fire Fighting (ARFF) building in 1996. As such, this asset should have been noted as a disposal for FY2023. We present $0 questioned costs as no net book value was noted. Finding No.: 2023-003, continued Federal Agency: U.S. Department of Transportation AL Program: 20.106 Airport Improvement Program Federal Award Nos.: All AIP Grants Area: Equipment and Real Property Management Questioned Costs: $-0- Condition, continued: d. One item (or 7%) was improperly capitalized and included in the fixed asset listing (asset number 001504). This asset is the Master Plan Update for the Rota Airport. As this is a document pertaining to project deliverables and survey on airport assets, the Master Plan Update is not considered to be an actual fixed asset. We present $0 questioned costs for this asset as this is a matter of improper capitalization, and not an instance of an unallowable activity in the context of compliance. Cause: CPA lacks oversight responsibility and monitoring controls over compliance with equipment and real property management requirements. Effect: CPA is in noncompliance with applicable equipment and real property management requirements. No questioned costs are presented as we are unable to quantify the extent of noncompliance. Identification as a Repeat Finding: Finding 2022-003. Finding No.: 2023-003, continued Federal Agency: U.S. Department of Transportation AL Program: 20.106 Airport Improvement Program Federal Award Nos.: All AIP Grants Area: Equipment and Real Property Management Questioned Costs: $-0- Recommendation: CPA should reconcile the results of the annual physical inventory of the program’s assets to the property records and ascertain that the costs of the individual assets also agree to the records of accounting in terms of assets identified as additions or disposals for the year. Additionally, CPA should retain maintenance logs or equivalent documentation to show evidence of maintenance done on fixed assets and equipment. Lastly, CPA should implement and enforce proper procedures and criteria for capitalization of assets, based on the capitalization policy set by management to prevent improper capitalization. Views of Responsible Officials: Management states agreement with the finding. Refer to separate Corrective Action Plan.
Finding 2023-004
Finding No.: 2023-004 Federal Agency: U.S. Department of Transportation Assistance Listing Program: 20.106 Airport Improvement Program Award Numbers: All AIP Grants Area: Special Tests and Provisions – Revenue Diversion Questioned Costs: $-0- Criteria: In accordance with 64 FR 7696, all revenues generated by a public airport must be expended for the capital or operating costs of the airport, the local airport system, or other local facilities that are owned or operated by the owner or operator of the airport and are directly and substantially related to the actual air transportation of passengers or property. Condition: 1. CPA has two divisions – airport and seaport. Certain costs are shared by both the airport and the seaport. The shared costs include management fees, salaries, legal fees, advertising, and administrative expenses. The airport pays for shared cost attributed to the cost of the seaport operations. The airport records the seaport’s allocation of the shared cost as ‘Due from seaport division’ and conversely, the seaport records ‘Due to airport division’. The seaport division normally settles amounts due to the airport division within 90 days. We observed that: • The airport division paid $789,887 of the seaports shared costs during fiscal year ended September 30, 2023. • As of September 30, 2023, receivables due from the seaport division totaled $198,055. CPA management asserts that use of airport revenues to pay operating costs of the seaport division is acceptable as the seaport division normally reimbursed the airport division within 90 days. As such, CPA management believes this does not constitute a diversion of airport revenues. CPA did not provide documentation from the grantor agency to acknowledge that the grantor agency has approved the use of airport revenues to pay for the costs of the seaport operations. Finding No.: 2023-004, continued Federal Agency: U.S. Department of Transportation Assistance Listing Program: 20.106 Airport Improvement Program Award Numbers: All AIP Grants Area: Special Tests and Provisions – Revenue Diversion Questioned Costs: $-0- Condition, continued: 2. For one (or 4%) of twenty-five cash journal entries tested, aggregating $789,887 of a total population of $63,692,682, airport funds were expended for the costs of a holiday event celebration. The costs included venue and meals which do not appear to be directly related to the airport operations. Details are as follows: Cause: CPA did not effectively seek grantor guidance over compliance with Special Tests and Provisions on revenue division on shared costs between its airport and seaport divisions. Moreover, CPA did not obtain grantor approval for the expenditure referred to whether it is duly permitted by the Federal Aviation Administration regulation. Effect: CPA is in noncompliance with Special Tests and Provisions – Revenue Diversion. Recommendation: CPA should seek approval from the grantor agency regarding use of the airport revenues: • to pay for operating cost of its seaport division, and • to pay for expenditures, such as cost of holiday events, that do not appear to be directly related to airport operations. Views of Responsible Officials: Management disagrees with the finding. Refer to separate Corrective Action Plan. Auditor Response: Condition 1: Although costs incurred by the Seaport division are fully reimbursed, it does not appear to meet the standards of compliance of using airport revenue for airport purposes only. Condition remains. Finding No.: 2023-004, continued Federal Agency: U.S. Department of Transportation Assistance Listing Program: 20.106 Airport Improvement Program Award Numbers: All AIP Grants Area: Special Tests and Provisions – Revenue Diversion Questioned Costs: $-0- Auditor Response, continued: Condition 2: The costs of the event appear to be entertainment expenses not part of the airport’s business purposes and not directly related to generating revenue for the airport. Condition remains.
Finding 2023-004
Finding No.: 2023-004 Federal Agency: U.S. Department of Transportation Assistance Listing Program: 20.106 Airport Improvement Program Award Numbers: All AIP Grants Area: Special Tests and Provisions – Revenue Diversion Questioned Costs: $-0- Criteria: In accordance with 64 FR 7696, all revenues generated by a public airport must be expended for the capital or operating costs of the airport, the local airport system, or other local facilities that are owned or operated by the owner or operator of the airport and are directly and substantially related to the actual air transportation of passengers or property. Condition: 1. CPA has two divisions – airport and seaport. Certain costs are shared by both the airport and the seaport. The shared costs include management fees, salaries, legal fees, advertising, and administrative expenses. The airport pays for shared cost attributed to the cost of the seaport operations. The airport records the seaport’s allocation of the shared cost as ‘Due from seaport division’ and conversely, the seaport records ‘Due to airport division’. The seaport division normally settles amounts due to the airport division within 90 days. We observed that: • The airport division paid $789,887 of the seaports shared costs during fiscal year ended September 30, 2023. • As of September 30, 2023, receivables due from the seaport division totaled $198,055. CPA management asserts that use of airport revenues to pay operating costs of the seaport division is acceptable as the seaport division normally reimbursed the airport division within 90 days. As such, CPA management believes this does not constitute a diversion of airport revenues. CPA did not provide documentation from the grantor agency to acknowledge that the grantor agency has approved the use of airport revenues to pay for the costs of the seaport operations. Finding No.: 2023-004, continued Federal Agency: U.S. Department of Transportation Assistance Listing Program: 20.106 Airport Improvement Program Award Numbers: All AIP Grants Area: Special Tests and Provisions – Revenue Diversion Questioned Costs: $-0- Condition, continued: 2. For one (or 4%) of twenty-five cash journal entries tested, aggregating $789,887 of a total population of $63,692,682, airport funds were expended for the costs of a holiday event celebration. The costs included venue and meals which do not appear to be directly related to the airport operations. Details are as follows: Cause: CPA did not effectively seek grantor guidance over compliance with Special Tests and Provisions on revenue division on shared costs between its airport and seaport divisions. Moreover, CPA did not obtain grantor approval for the expenditure referred to whether it is duly permitted by the Federal Aviation Administration regulation. Effect: CPA is in noncompliance with Special Tests and Provisions – Revenue Diversion. Recommendation: CPA should seek approval from the grantor agency regarding use of the airport revenues: • to pay for operating cost of its seaport division, and • to pay for expenditures, such as cost of holiday events, that do not appear to be directly related to airport operations. Views of Responsible Officials: Management disagrees with the finding. Refer to separate Corrective Action Plan. Auditor Response: Condition 1: Although costs incurred by the Seaport division are fully reimbursed, it does not appear to meet the standards of compliance of using airport revenue for airport purposes only. Condition remains. Finding No.: 2023-004, continued Federal Agency: U.S. Department of Transportation Assistance Listing Program: 20.106 Airport Improvement Program Award Numbers: All AIP Grants Area: Special Tests and Provisions – Revenue Diversion Questioned Costs: $-0- Auditor Response, continued: Condition 2: The costs of the event appear to be entertainment expenses not part of the airport’s business purposes and not directly related to generating revenue for the airport. Condition remains.
Finding 2023-005
Finding No.: 2023-005 Federal Agency: U.S. Department of the Treasury Pass-Through Entity: CNMI Government AL Program: 21.027 Coronavirus State and Local Fiscal Recovery Funds Federal Award No. and year: CNMI22028 2021-2023 Area: Reporting Questioned Costs: $-0- Criteria: In accordance with the grant award CNMI22028, CPA will submit quarterly reports to the Department of Finance Office of the Secretary that are accurately prepared and supported. Condition: For one (or 33%) of three reports examined, the quarter ending 9/30/2023 cumulative amount reported as federal share of $2,009,788 did not agree with expected cumulative federal share per audit expectation of $2,041,923, resulting in a variance of $32,135. Cause: CPA did not effectively monitor the accuracy and completeness of the financial report based on underlying accounting records. Effect: CPA is in noncompliance with the applicable reporting requirements. No questioned cost is reported as we are unable to quantify the extent of noncompliance. Recommendation: Responsible personnel should regularly monitor reports to verify that amounts reported are supported by underlying accounting records. Views of Responsible Officials: Management states agreement with the finding. Refer to separate Corrective Action Plan.