Audit 371187

Finding No. 2022-010 Federal Agency: U.S. Department of Agriculture AL Program: 10.539 Nutrition Assistance Program Federal Award No.: 7NM4004NM, 7NM400NM7, 7NM500NM1 Area: Procurement and Suspension and Debarment Questioned Costs: Unknown Criteria: In accordance with 2 CFR Section 200.317, when conducting procurement transactions under a Federal award, a State must follow the same policies and procedures it uses for procurements with non-Federal funds. CNMI procurement regulation states the following: • § 70-30.3-220 Small Purchases: (a) Purchases that use Government-sourced funds (local funds), or any combination of both local and federal funds, may be made according to the small purchase procedures of this subsection: (1) 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. (b) Purchases that use only federal funds may be made according to the small purchase procedures of this subsection: (1) For purchases that exceed $10,000, but which are less than or equal to $250,000, a minimum of three vendors shall be solicited to submit written or electronic quotations. (2) A purchase order may be used to make purchases from the United States General Services Administration (GSA), including purchases that exceed $250,000. When purchasing from GSA, at least one quote shall be obtained. • § 70-30.3-760 Debarment and Suspension: (a) The official with expenditure authority may file a dispute with the Director against an existing contractor for any failures of performance related to a contract governed by this subchapter. In accordance with 2 CFR Section 180.300, entities that enter into covered transactions must verify that the person with whom they intend to do business is not excluded or disqualified by: (a) Checking SAM.gov Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person. Condition: 1. Inconsistencies were noted in procurement regulations over local and federal funded transactions. No questioned costs are presented as the extent of noncompliance could not be quantified. 2. CNMI does not verify whether a person or a vendor is excluded or disqualified pursuant to 2 CFR Section 180.300, prior to entering into a covered transaction for an amount equal to or exceeds $25,000. No questioned costs are presented as the extent of noncompliance could not be quantified. Cause: 1. CNMI does not use the same policies and procedures for procurements under a federal award as with procurements from its non-federal funds under the small purchases method. 2. CNMI’s procurement regulation is not in accordance with 2 CFR Sections 180.300 and 200.317 of the federal regulations. Effect: CNMI is in noncompliance with applicable procurement and suspension and debarment requirements. Questioned costs are unknown as the CNMI could not provide a listing of covered transactions that were procured during FY2022. Identification as a Repeat Finding: Finding No. 2021-013 Recommendation: 1. The CNMI should revisit its procurement regulations and consider updating applicable sections of the regulations to comply with federal regulations governing federal funds. 2. Responsible CNMI personnel should periodically monitor updates in federal regulations over procurement and suspension and debarment. 3. Establish and implement effective monitoring control over the verification of excluded or disqualified persons or vendors pursuant to CFR Section 180.300, prior to the CNMI entering into a covered transaction. Views of Responsible Officials: Condition 1 - The Procurement Services Division agrees with this finding on behalf of the CNMI Nutrition Assistance Program (NAP). The Division will revise CNMI’s procurement regulations to ensure alignment with federal procurement standards as outlined in 2 CFR Part 200, particularly the small purchase threshold requirements and competitive procurement procedures. Condition 2 - The CNMI NAP agrees with this audit finding and that vendors were not being vetted using SAMS.gov. CNMI NAP has created and implemented an internal Standard Operating Procedure (SOP) to address this issue to ensure compliance. The SOP went into effect August 2025. A copy of the SOP can be provided upon request. Refer to CNMI’s Corrective Action Plan for additional information.

Finding No. 2022-011 Federal Agency: U.S. Department of Agriculture AL Program: 10.542 Pandemic EBT Food Benefits (P-EBT) Federal Award No.: 7NM400NM2 Area: Activities Allowed or Unallowed Questioned Costs: $-0- Criteria: 1. In accordance with Section 1101(b)(f)(2) of the Families First Coronavirus Response Act, as amended, a State agency may develop and use simplifying assumptions (including a State or local public health ordinance developed in response to COVID-19) and the best feasibly available data to determine the status of a school or covered child care facility as opened, closed, or operating with a reduced number of days or hours, establish State or regionally-based benefits levels, identify eligible children, and establish eligibility periods for eligible children. 2. In accordance with the CNMI State Plan, the Nutrition Assistance Program (NAP) will receive data from the CNMI Department of Education, Child Nutrition Program, the agency which shall receive all school information from the public schools, the private schools, and childcare centers. 3. In accordance with the April 2022 Compliance Supplement, the state agency is to instruct schools and school districts appropriately in order to collect the data necessary to set benefit levels consistent with the terms of the state plan. In addition, use of funds made available for P-EBT must also comply with government accounting and record keeping requirements in 2 CFR 200.334, for which the recipient and subrecipient must retain all Federal award records for three years from the date of submission of their final financial report. For awards that are renewed quarterly or annually, the recipient and subrecipient must retain records for three years from the date of submission of their quarterly or annual financial report, respectively. Records to be retained include but are not limited to financial records, supporting documentation, and statistical records. Condition: Documentation of the instructions provided to schools and school districts in order for the CNMI NAP to appropriately collect the necessary data to set benefit levels consistent with the terms of the state plan, was not provided. Cause: The CNMI did not provide instructions appropriately to schools and school districts in order to collect the data necessary to set benefit levels consistent with the terms of the state plan. Effect: The CNMI is in noncompliance with applicable activities allowed or unallowed compliance requirements. Recommendation: The CNMI should implement and enforce monitoring over the required instructions that state agency is to provide to schools and school districts appropriately in order to collect the data necessary to set benefit levels consistent with the terms of the CNMI’s P-EBT State Plan. Views of Responsible Officials: CNMI NAP disagrees with this finding. The 2022 Compliance Supplement states that the LEA, in this instance, the CNMI Public School System (PSS), is responsible for verifying the current free and reduced-price eligibility of households, unless the LEA is exempt from the verification requirement. PSS is not exempt from the verification requirement and the CNMI NAP has never given instructions to PSS for data collection as it is the PSS’ responsibility to supply the data to CNMI NAP for P-EBT. CNMI NAP’s role is to distribute the benefits only. Similar to the SUN Bucks (S-EBT) program, PSS furnishes the student listing to CNMI NAP, after which CNMI NAP distributes the benefits according to the listing provided by PSS. Refer to CNMI’s Corrective Action Plan for additional information. Auditor Response: The 2022 Compliance Supplement being referenced by CNMI NAP pertains to ALN 10.551 Supplemental Nutrition Assistance Program (SNAP). CNMI NAP should refer to the April 2022 Compliance Supplement specifically for ALN 10.542 Pandemic EBT Food Benefits (P-EBT). In addition, documentation that CNMI NAP is not required to provide instructions to schools and school district were not provided.

Finding No. 2022-012 Federal Agency: U.S. Department of Agriculture AL Program: 10.542 Pandemic EBT Food Benefits (P-EBT) Federal Award No.: 7NM400NM2 Area: Eligibility Questioned Costs: $58,494 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. 3. Non-Federal entity’s records/database should include all individuals receiving benefits during the audit period. 4. Non-Federal entity must follow the eligibility process described in its approved State Plan. Condition: 1. Of sixty (or 100%) eligibility case files tested, aggregating $58,494 in total benefits paid of a total population of $5,980,039, documentation supporting eligibility were not provided. 2. We were not provided a complete listing of individuals that received benefits in FY2022. Cause: CNMI did not enforce compliance with applicable eligibility requirements and lacks monitoring control over the following: 1. Listing of validated eligibility roster data that were not uploaded into the Maven eligibility system due to data entry capacity limitation were not being maintained; and 2. Auditors’ access to selected case files for testing were not coordinated with the CNMI NAP eligibility workers and with the PSS-CNP office. Accordingly, CNMI NAP was unable to substantiate that selected case files were eligible to receive P-EBT benefits and that the eligibility process described in its approved State Plan were followed. Effect: The CNMI is in noncompliance with the applicable eligibility requirements and questioned costs of $58,494 result for Condition 1. Identification as a Repeat Finding: Finding No. 2021-015 Recommendation: We recommend the CNMI establish and implement monitoring internal control procedures over the following: 1. Maintain a listing of validated eligibility roster data case files that were not uploaded into the Maven system due to data entry capacity limitations; and 2. CNMI NAP personnel should coordinate with its eligibility workers and the PSS-CNP Office for auditors to access selected case files for testing. Views of Responsible Officials: Conditions 1 and 2 - CNMI NAP disagrees. CNMI NAP was informed that this finding had been cleared so we are perplexed as to the re-emergence of this audit finding. CNMI NAP contends that: 1. Eligibility for P-EBT benefits is not determined by CNMI NAP. P-EBT eligibility was determined by identifying children who qualified for free or reduced-price school meals and then correlating that with a reduction of in-person schooling due to COVID-19. Children in households receiving Supplement Nutrition Assistance Program (SNAP) and young children, under age six, were also eligible, provided their schools or childcare facilities closed or reduced hours for at least five consecutive days due to the pandemic. This data was provided by PSS, as well as the listing of eligible children that corresponded to this data set. 2. There are no “validated eligibility roster data case files” that were not uploaded into MAVEN due to data entry capacity limitations. All rosters provided by PSS were uploaded into MAVEN as this is the only way a case file can be generated in the system. 3. CNMI NAP has reconciled all benefits issued, including the P-EBT benefits for the audit year in question. This is a mandatory, non-negotiable process. Refer to CNMI’s Corrective Action Plan for additional information. Auditor Response: Condition 1 - We understand that eligibility determination is being performed by PSS-CNP, for which in the beginning of the audit and during our fieldwork, we had communicated with CNMI NAP’s personnel to coordinate audit request for eligibility testing with PSS-CNP. This was again communicated with CNMI NAP’s personnel on June 9, 2025. In addition, in response to our follow up on June 19, 2025 of the pending eligibility case files, we were informed that CNMI NAP has yet to reach out to the point of contact at PSS-CNP. Further, in regard to the SNAP case files being maintained by CNMI NAP office, we were informed that the listing has been forwarded to have CNMI NAP’s EW team to assist in gathering the case files. However, case files were not made available for our examination and there was also no communication on our part that finding had been cleared. Condition 2 - Based on discussion with CNMI NAP’s personnel related to the variance of $4,387,281 noted between the program’s project expenditures report amounting to $10,367,320 and the benefits eligibility listing amounting to $5,980,039, it is our understanding from the discussion that the variance is due to expenditures for distributed coupons are recorded when coupons are redeemed and that some benefits were not included in the benefits listing due to data entry capacity limitation of the Maven eligibility system. We acknowledge the process of when expenditures are being recorded; however, there was no communication on our part that finding had been cleared but rather, we requested for the FY2021 listing of issued benefits to verify if the variance is accounted for; but the listing was not provided. We also acknowledge CNMI NAP’s reconciliation process, wherein total amount of coupons redeemed were being reconciled to CNMI NAP’s records. However, CNMI NAP was not able to identify which case files are part of the $4,387,281 variance as reconciliation is not based on individual coupons but rather by total amount redeemed.

Finding No. 2022-013 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D21AP10104, D20AP00119, 1908220005, D20AP00135, D20AP00162, D19AP00109, D20AP00005, D20AP00036, 2611210017 Area: Allowable Costs/Cost Principles Questioned Costs: $1,828,733 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. In addition, based on individual grant agreements, grantee is required to obtain approval through an Authorization-to-Proceed (ATP) from the grantor, prior to incurring expenditures or use of funds of the grants. Condition: Of forty-nine nonpayroll expenditures tested, aggregating $3,506,063, of a total population of $7,424,462, the following were noted: 1. For ten (or 20%), journal vouchers, vendor invoices and contracts were not provided. 2. For seventeen (or 35%), CNMI did not obtain ATPs prior to incurring the following expenditures. Cause: CNMI lacks monitoring controls over adequate documentation and systematic filing of relevant documentation supporting program costs. In addition, CNMI failed to adhere to grant terms and conditions over the required prior grantor approval through an ATP before incurring program costs. Effect: CNMI is in noncompliance with applicable allowable costs/costs principles requirements and questioned cost of $1,828,733 result. Identification as a Repeat Finding: Finding No. 2021-017 Recommendation: CNMI should strengthen and enforce compliance with applicable allowable costs/cost principles requirements over the following: 1. Establish and maintain effective systematic filing of relevant documentation to support program costs and for easier retrieval; and 2. Implement more stringent policies and procedures to ensure that an ATP is secured from the grantor before incurring expenses on individual grants that require prior grantor approval. Views of Responsible Officials: The CNMI’s Corrective Action Plan states disagreement. Condition 1 - The Office of Grant Management (OGM) disagrees with this finding. Due to internal scheduling constraints and the compressed timeline required to complete the FY2022 audit, the requested documents were not submitted by the specified deadline, resulting in this finding. However, OGM maintains all relevant supporting documentation and is prepared to provide it upon request from the Grantor. Condition 2 - We disagree with this finding. Our CIP office has obtained an Authorization to Proceed (ATP) for all projects funded by the Office of Insular Affairs under the 702 CIP grants. It appears that supporting documents may not have been provided to the assigned auditor within the required timeframe; however, our office has maintained all ATPs associated with the projects listed in Condition 2. Refer to CNMI’s Corrective Action Plan for additional information. Auditor Response: Conditions 1 and 2 - CNMI states disagreement; however, CNMI also acknowledges that documentation supporting program costs were not provided.

Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D18AP00033, D18AP00026, D19AP00092, D20AP00020, D20AP00021, D20AP00022, D21AP10046, D22AP00248 Area: Cash Management Questioned Costs: $482,041 Criteria : In accordance with Section 6.3.2 of CNMI’s latest approved Cash Management Improvement Act (CMIA) Agreement, the average clearance pattern for ALN 15.875 is fifteen days. In addition, per Section 7.6, to determine the number of days each check was outstanding (clearance time), the issue date shall be subtracted from the date the check cleared the State’s account. Condition: 1. Of fifty-six drawdowns tested, aggregating $962,404 of a total population of $5,636,215, the following were noted: a. For twenty-five (or 45%) drawdowns tested, the average clearance date was beyond the allowed fifteen days average clearance pattern. b. For sixteen (or 29%), cash drawdowns support and cancelled checks were not provided. Cause: CNMI did not enforce compliance with applicable cash management requirements and lacks monitoring control over the following: 1. Timely renewal of its FY2021 CMIA, which resulted in the delay of renewing its FY2022 CMIA; and 2. Adherence to the program’s prescribed funding technique set forth in the CMIA. Effect: CNMI is in noncompliance with applicable cash management requirements and questioned costs of $482,041 result. Recommendation: CNMI should strengthen and enforce compliance with applicable cash management requirements, develop and implement effective monitoring controls over the following: 1. Responsible personnel should timely submit and renew the TSA; and 2. Timely disbursements of cash upon receipt of the federal funds. 3. Establish and maintain effective systematic filing of relevant documentations to support program costs and for easier retrieval. Views of Responsible Officials: Conditions 1a and 1b - CIP agrees with the finding. However, this timing is inherent in our established process. For CIP, once an expense is entered into Tyler Munis and posted, we request a drawdown for those expenses. The check clearing date will naturally occur after the drawdown request date because payment disbursement and check clearing are subsequent steps in the payment process. Refer to CNMI’s Corrective Action Plan for additional information.

Finding No. 2022-015 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award Nos.: D19AP00130, D20AP00037, D20AP00040, D20AP00126, D20AP00119, D21AP10003, D19AP00142, D20AP00135, D20AP00162, D18AP00130, D19AP00109, D21AP10218, D20AP00005, D21AX10059, D21AP10140 Area: Equipment and Real Property Management Questioned Costs: Unknown 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, in accordance with 2 CFR Section 200.313(d)(1), property records must be maintained that include a description of the property, a serial number or another identification number, the source of funding for the property (including the Federal award identification number), the title holder, the acquisition date, the cost of the property, the percentage of the Federal agency contribution towards the original purchase, the location, use and condition of the property, and any disposition data including the date of disposal and sale price of the property. Condition: The capital assets listing provided, comprised of various federal capital assets, for which the CNMI was not able to identify which capital assets were procured from what federal funding. In addition, the CNMI did not provide the program’s schedule of additions and disposals during the fiscal year. Total FY2022 federal capital assets charged to the program amounted to $1,068,187. No questioned costs are presented as we are not able to quantify the extent of noncompliance. Cause: 1. The CNMI did not provide sufficient and appropriate audit evidence to assist the auditors during the testing procedures for the equipment and real property management compliance requirement. 2. The CNMI lacks human resources and financial management system structure needed to effect compliance with applicable equipment and real property management requirements. Effect: The CNMI is in noncompliance with applicable equipment and real property management requirements. Questioned costs are unknown as the CNMI could not provide the program’s capital assets listing. See below for the cumulative dollar amount of property equipment acquired with program grant funds over the past five years. Identification as a Repeat Finding: Finding No. 2021-018 Recommendation: 1. CNMI should adhere to the requirement of 2 CFR Section 200.313(d)(1); 2. Responsible personnel should establish and implement effective monitoring controls to ensure property records are accurately segregated by federal funding source; and 3. 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: The Procurement Services Division agrees with this finding. The CNMI has recently implemented the MUNIS Financial Management System to improve recordkeeping and compliance processes. All equipment and real property records acquired with federal funds will now be entered, tracked, and maintained within MUNIS. Supporting documentation will also be filed in accordance with standardized retention procedures to ensure that accurate and sufficient audit evidence is readily available. Refer to CNMI’s Corrective Action Plan for additional information.

Finding No. 2022-016 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D20AP00005 and D20AP00037 Area: Period of Performance Questioned Costs: $494,836 Criteria: 1. A non-federal entity may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance and any costs incurred before the federal awarding agency or pass-through entity made the federal award that were authorized by the federal awarding agency or pass-through entity (2 CFR sections 200.308 200.309 and 200.403(h)). 2. A non-federal entity must liquidate all financial obligations incurred under the federal award not later than 120 calendar days after the end date of the period of performance as specified in the terms and conditions of the federal award (2 CFR section 200.344(b)). Condition: Of eight expenditures tested, aggregating $593,531 of a total population of $692,970, the following were noted: 1. For four (or 50%), CNMI was unable to provide supporting documents, such as purchase orders or contracts, to support that expenditures were incurred within the period of performance. 2. For one (or 13%), CNMI was unable to provide the cancelled check to support that the expenditure was liquidated within 120 days after the end date of the period of performance. Cause: The CNMI did not provide sufficient and appropriate audit evidence to substantiate the expenditures over compliance with applicable period of performance requirement. Effect: The CNMI is in noncompliance with applicable period of performance requirements and questioned cost of $494,836 result. Recommendation: CNMI should provide timely and consistent communication with the auditors to avoid future noncompliance due to lack of supporting evidence. Having the correct documentation is crucial in determining compliance to each requirement. Views of Responsible Officials: Condition 1 - The Office of Grant Management (OGM) disagrees with this finding. Due to internal scheduling constraints and the compressed timeline required to complete the FY2022 audit, the requested documents were not submitted by the specified deadline, resulting in this finding. However, OGM maintains all relevant supporting documentation and is prepared to provide it upon request from the Grantor. Based on our records, grant award D20AP00005 remains active with a period of performance extending through September 30, 2025, while grant award D20AP00037 was closed on September 30, 2024. Both grants remained operational well beyond the originally prescribed September 30, 2022 deadline. Given the extended period of performance authorized by the awarding agency, all associated questioned costs ($494,660.00) are supported by active grant activity and should be deemed allowable. Accordingly, OGM respectfully requests that these questioned costs be removed, as they reflect legitimate expenditures incurred within the approved grant periods. Condition 2 - CIP agrees with the finding. The responsible official will report progress on corrective actions to the CNMI leadership and maintain documentation of all implemented changes. Evidence of compliance (updated policies, training records, and self-audit reports) will be provided to the auditors upon request. Refer to CNMI’s Corrective Action Plan for additional information. Auditor Response: Condition 1 - CNMI states disagreement; however, CNMI also acknowledges that documentation supporting program costs were not provided. Questioned costs are retained, as costs at the time of the audit were not supported by adequate documentation.

Finding No. 2022-017 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: $770,427 Criteria: 1. In accordance with 2 CFR Section 200.317, when conducting procurement transactions under a Federal award, a State must follow the same policies and procedures it uses for procurements with non-Federal funds. CNMI procurement regulation states the following: • § 70-30.3-220 Small Purchases: (a) Purchases that use Government-sourced funds (local funds), or any combination of both local and federal funds, may be made according to the small purchase procedures of this subsection: (1) 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. (b) Purchases that use only federal funds may be made according to the small purchase procedures of this subsection: (1) For purchases that exceed $10,000, but which are less than or equal to $250,000, a minimum of three vendors shall be solicited to submit written or electronic quotations. (2) A purchase order may be used to make purchases from the United States General Services Administration (GSA), including purchases that exceed $250,000. When purchasing from GSA, at least one quote shall be obtained. • § 70-30.3-760 Debarment and Suspension: (a) The official with expenditure authority may file a dispute with the Director against an existing contractor for any failures of performance related to a contract governed by this subchapter. • § 70-30.3-201 Requirements for Competition: (a) Public notice should be provided for full and open competition procurements. 2. In accordance with 2 CFR Section 180.300, entities that enter into covered transactions must verify that the person with whom they intend to do business is not excluded or disqualified by: (a) Checking SAM.gov Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person. Condition: 1. Inconsistencies were noted in procurement regulations over local and federal funded transactions. No questioned costs are presented as the extent of noncompliance could not be quantified. 2. CNMI does not verify whether a person or a vendor is excluded or disqualified pursuant to 2 CFR Section 180.300, prior to entering into a covered transaction for an amount equal to or exceeds $25,000. No questioned costs are presented as the extent of noncompliance could not be quantified. 3. Of sixty expenditures tested, aggregating $921,295 of a total population of $7,093,422 in nonpayroll expenditures subject to procurement, the following were noted: a. For two (or 3%), CNMI did not obtain at least three price quotations from vendors. b. For three (or 5%), bid submissions and invitation-to-bid (ITB) publications were not provided. Cause: 1. CNMI does not use the same policies and procedures for procurements under a federal award as with procurements from its non-federal funds under the small purchases method. 2. CNMI’s procurement regulation is not in accordance with 2 CFR Sections 180.300 and 200.317 of the federal regulations. Effect: CNMI is in noncompliance with applicable procurement regulations and questioned costs of $770,427 result for Conditions 3a and 3b. Questioned costs are unknown for Conditions 1 and 2 as the CNMI could not provide a listing of transactions that were procured during FY2022. Identification as a Repeat Finding: Finding No. 2021-020 Recommendation: 1. CNMI should revisit its procurement regulations and consider updating applicable sections of the regulations to comply with federal regulations governing federal funds. 2. Responsible CNMI personnel should periodically monitor updates in federal regulations over procurement and suspension and debarment. 3. CNMI should establish policies and procedures for monitoring suspension and debarment status of each vendor of covered transactions. The guidance should be reflective of the provisions set by 2 CFR §180.300. 4. CNMI should provide timely and consistent communication with the auditors to avoid future noncompliance due to lack of supporting evidence. Views of responsible officials: Condition 1 - The Procurement Services Division agrees with this finding. The Division will revise CNMI’s procurement regulations to ensure alignment with federal procurement standards as outlined in 2 CFR Part 200, particularly the small purchase threshold requirements and competitive procurement procedures. Condition 2 - The Procurement Services Division agrees with this finding. To address the lack of consistent verification of vendor eligibility under federal debarment and suspension requirements (2 CFR §180.300), a policy will be implemented requiring all agencies to submit debarment verification documentation at the time of vendor selection. Condition 3a - The Office of Grant Management (OGM) disagrees with this finding. Due to internal scheduling constraints and the compressed timeline required to complete the FY2022 audit, the requested documents were not submitted by the specified deadline, resulting in this finding. However, OGM maintains all relevant supporting documentation and is prepared to provide it upon request from the Grantor. Condition 3b - The Capital Improvement Program agrees with this finding. CIP acknowledges the need to maintain sufficient and appropriate audit evidence demonstrating compliance with federal procurement standards. We recognize that our current recordkeeping for bid submissions and ITB publication can be improved to ensure that auditors can readily verify compliance. Refer to CNMI’s Corrective Action Plan for additional information. Auditor Response: Condition 3a - CNMI states disagreement; however, CNMI also acknowledges that documentation supporting program costs were not provided.

Finding No. 2022-018 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D21AP10046, D21AP10038-00, D19AP00090, D19AP00006 Area: Reporting Questioned Costs: -0- Criteria: In accordance with applicable reporting requirements, a performance report must be submitted semi-annually and supported by a Narrative Project Status Report. Condition: For three (or 14%) of twenty-two reports tested, underlying accounting records supporting the narrative project status reports were not provided. Cause: CNMI lacks monitoring control in ensuring data included in the reports are supported with underlying accounting records and the control in place is not suitably designed due to lack of segregation of duties. Effect: CNMI is in noncompliance with the applicable reporting requirements. Identification as a Repeat Finding: Finding No. 2021-021 Recommendation: 1. CNMI should strengthen and enforce compliance over applicable reporting requirements; and 2. Implement and establish systematic filing of relevant documentations for easy retrieval. Views of Responsible Officials: CIP agrees with this finding. A documentation checklist exists; however, it was not consistently fully extended to program administration records. Monitoring controls focused primarily on project completion, resulting in less attention to verifying that supporting documentation for administrative expenses was fully compiled and properly reconciled. Refer to CNMI’s Corrective Action Plan for additional information.

Finding No. 2022-019 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: D17AP00016, D18AP00016, D19AP00081 D21AP10043, D21AP000138, D19AP00090 Area: Subrecipient Monitoring Questioned Costs: $549,849 Criteria: 1. In accordance with 2 CFR § 200.332, pass-through entity (PTE) must: a. Verify that the subrecipient is not excluded or disqualified in accordance with § 180.300. Verification methods are provided in § 180.300, which include confirming in SAM.gov that a potential subrecipient is not suspended, debarred, or otherwise excluded from receiving Federal funds. b. Verify that a subrecipient is audited as required by subpart F. 2. In accordance with 2 CFR §200.1, a subrecipient is defined as an entity that receives a subaward from a PTE to carry out part of a Federal award. The term subrecipient does not include a beneficiary or participant. A subrecipient may also be a recipient of other Federal awards directly from a Federal agency. 3. Evaluate each subrecipient’s fraud risk and risk of noncompliance with a subaward to determine the appropriate subrecipient monitoring described in paragraph (f) of this section. When evaluating a subrecipient’s risk, a PTE should consider the following: (1) The subrecipient’s prior experience with the same or similar subawards; (2) The results of previous audits. This includes considering whether or not the subrecipient receives a Single Audit in accordance with subpart F and the extent to which the same or similar subawards have been audited as a major program; (3) Whether the subrecipient has new personnel or new or substantially changed systems; and (4) The extent and results of any Federal agency monitoring (for example, if the subrecipient also receives Federal awards directly from the Federal agency). Condition: Of nine subrecipients tested, aggregating $1,263,952 of a total population of $2,022,623, the following were noted: 1. For nine (or 100%), documentation of the risk assessments performed and verification as to whether the subrecipients are not suspended or debarred were not provided. No questioned costs for grant awards with no corresponding FY2022 expenditures. Of eight subrecipient monitoring procedure requirements tested, the following were noted: 2. For two (or 25%), the subrecipients’ performance reports did not include the required project narrative report that entails the current state or progress completion in accordance with the scope of work. 3. For eight (or 100%), no verification as to whether the subrecipients are subject to the audit requirements were provided. No questioned costs are presented as amounts are questioned at Condition 1 for grant award numbers D18AP00026, D21AP00138 and D21AP10043 while the other grant awards have no corresponding FY2022 expenditures. Cause: The CNMI does not have written subrecipient monitoring policies and procedures. In addition, the CNMI failed to enforce compliance with subrecipient monitoring requirements and lacks monitoring controls over the following: 1. Monitoring activities of a subrecipient to ensure that the subrecipient complies with Federal statutes, regulations, and the terms and conditions of the subaward; 2. Adequate documentation and systematic filing of relevant documentation supporting program costs. Effect: CNMI is in noncompliance with the applicable subrecipient monitoring requirements and questioned costs of $549,849 result for Condition 1. Identification as a Repeat Finding: Finding No. 2021-022 Recommendation: We recommend the CNMI establish an approved/adopted written subrecipient monitoring policies and procedures and implement monitoring internal control procedures over the following: 1. Verification that subrecipients are not excluded or disqualified in accordance with § 180.300, which includes confirming in SAM.gov that a potential subrecipient is not suspended, debarred, or otherwise excluded from receiving federal funds; 2. Verification that subrecipients are audited as required by subpart F; 3. Monitoring activities of a subrecipient to ensure that the subrecipient complies with Federal statutes, regulations, and the terms and conditions of the subaward; 4. Adequate documentation and systematic filing of relevant documentations to support program costs. Views of Responsible Officials: Condition 1 - CIP agrees with this finding. To address this finding, CIP will implement a standardized risk assessment checklist to be used for all subrecipients to confirm they are not suspended, debarred, or excluded under 2 CFR §180.300; all staff responsible for subrecipient monitoring will receive training on federal requirements for exclusion checks and proper documentation procedures; and conduct periodic reviews to ensure that SAM.gov checks are consistently performed and documented for all new and existing subrecipients. Condition 2 - CIP disagrees with this finding. The subrecipient was not required to submit the required project narrative report; instead, the report was prepared and submitted by the project manager responsible for managing the project as assigned by CIP. Condition 3 - We acknowledge the finding that documentation was not provided to verify whether eight subrecipients were subject to the audit requirements. CIP will strengthen its subrecipient monitoring procedures to ensure compliance with 2 CFR 200.331(f) and related audit requirements. Refer to CNMI’s Corrective Action Plan for additional information. Auditor Response: Condition 2 - As stated in the subaward agreements, subrecipients shall furnish to the CNMI, project documents certifying beneficiary occupancy and/or substantial completion. This is done through submission of a project narrative status report to the CNMI, which includes information such as scope of work, percentage of completion, status of the project and anticipated completion date. As subrecipients are required to submit certification of project status, report should be prepared by the subrecipients and should be consistently required for all subawards.

Finding No. 2022-020 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: $80,773 Criteria: 1. In accordance with 42 USC 1302b-7(d) and (e), aliens must show proof that they are authorized to work by the US Citizenship and Immigration Services (USCIS) in order to be eligible to receive a federal public benefit. 2. Non-Federal entity’s records/database should include all individuals receiving benefits during the audit period. Condition: 1. The CNMI did not provide an accurate population of program benefits for FY2022. The listing generated from the Hire Marianas (HM) portal resulted in a variance of $4,592,566 compared to the expenditures detail report, for which a reconciliation of the variance was not provided. No questioned costs are presented as we are unable to quantify the extent of noncompliance. 2. Of sixty claimants tested, aggregating $260,379 in total benefits paid, of a total population of approximately $47.6 million, for five (or 8%), 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. Cause: 1. The CNMI Department of Labor (DOL) failed to upload physically submitted applications and supporting eligibility determinations into the Hire Marianas portal and could not locate the physical documents. 2. 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 42 USC 1302b-7(d) and (e) and questioned costs of $80,773 result for Condition 2. Questioned costs is unknown for Condition 1 as we are unable to quantify the extent of noncompliance. Identification as a Repeat Finding: Finding No. 2021-024 Recommendation: The CNMI should strengthen monitoring controls over compliance with applicable eligibility requirements, establish and maintain effective systematic filing of relevant documentation to support program costs and for easier retrieval. Views of Responsible Officials: Condition 1 - The CNMI agrees that the expenditure listing from the Financial System is significantly lower than the listing generated from the HireMarianas Portal. This discrepancy is due to the fact that the expenditure listing reflects only disbursed payments, whereas the HireMarianas Portal listing includes transactions that were removed, cancelled, or rejected by the claimant’s financial institution. Additionally, the HireMarianas listing includes payments that were cancelled and subsequently reissued through the portal, which may result in what appear to be duplicate entries. Condition 2 - The CNMI partially agrees with this finding. While it is acknowledged that the identified users’ SAVE verification results were uploaded onto the HireMarianas Portal late, all claimants were of qualified alien status in accordance with the definition provided through the Immigration and Nationality Act (INA). Moreover, all SAVE responses are now on the respective applicants’ supporting documents tab on the HireMarianas Portal. The CNMI would like to clarify that the Questioned Costs for the identified users varies from the data provided on the Claimant Schedule submitted on the EY Portal on March 17, 2025. Refer to CNMI’s Corrective Action Plan for additional information. Auditor Response: Condition 2 - SAVE verifications for all five claimants were performed subsequent to FY2022. In addition, FY2022 benefits paid that are questioned agreed to the benefits payment schedule provided for the audit.

Finding No. 2022-021 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: $13,152 Criteria: In accordance with Unemployment Insurance Program Letter (UIPL) 02-12, Change 1, States are required to impose a monetary penalty (an amount not less than 15 percent of the erroneous payments) on claimants whose fraudulent acts resulted in overpayments. In accordance with UIPL 15-20 Changes 1, 2, 3, and any subsequent changes, and with UIPL 16-20 Changes 1, 2, 3, States that recover Federal Pandemic Unemployment Compensation (FPUC) and Pandemic Unemployment Assistance (PUA) overpayments must return the recovered overpayments to the source of such funds. Further, in accordance with the CNMI Department of Labor’s (DOL) Benefit Payment Control Unit’s Standard Operating Procedures (SOP) for PUA and FPUC Overpayments, overpayment cases that are flagged as fraudulent are required to be reported to the Office of the Inspector General’s (OIG) Integrity Data Hub Fraud Alert System. Condition: Of sixty claimant files tested, aggregating $210,051 of a total population of $1,833,948 in overpayments, for one (or 2%) fraudulent case (PUAOP004670), amounting to $13,152, the CNMI did not provide documentation of the notification of and the follow up to collect the 15 percent penalty in a failed appeal case and the documentation of the reported fraud case to the Office of the Inspector General, for which the amount is questioned. Cause: 1. The CNMI did not enforce compliance with the provisions of UIPL 02-12, UIPL 15-20, UIPL 16-20, and DOL’s Benefit Payment Control Unit’s SOP for PUA and FPUC overpayments; and 2. The CNMI failed to notify and follow-up to collect from the claimant, the 15 percent penalty imposed on fraudulent overpayments and also failed to report the fraudulent case to the Office of the Inspector General. Effect: The CNMI is in noncompliance with UIPL 02-12, UIPL 15-20, UIPL 16-20, and DOL’s Benefit Payment Control Unit’s SOP for PUA and FPUC overpayments and questioned costs of $13,152 result. Identification as a Repeat Finding: Finding No. 2021-025 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: The CNMI agrees with this finding as the CNMI DOL did not forward the case to the OIG and did not charge 15% against the overpayment amounts for the respective benefit types. The CNMI is currently in communication with its grantor to determine the appropriate course of action, considering the last action on this claim was in 2022. The CNMI has sought grantor clarification on how to proceed with this matter and is pending further guidance. Further corrective action items, along with a proposed completion date, will be prepared once clarification is received. Refer to CNMI’s Corrective Action Plan for additional information.

Finding No. 2022-022 Federal Agency: U.S. Department of the Treasury AL Program: 21.023 Emergency Rental Assistance Program Federal Award No.: COVID-19 Area: Allowable Costs/Cost Principles Questioned Costs: $65,865 Criteria: 1. 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; and 2. In accordance with the U.S. Department of the Treasury’s revised Frequently Asked Questions (FAQs), dated 08/25/21 and 07/27/22, the statutes establishing ERA1 and ERA2 permit the enrollment of households for only prospective benefits. ERA 2 funding does not allow for commitments for rental arrears. Condition: Of forty nonpayroll expenditures tested, aggregating $327,612 of a total population of $10,498,935, for twenty-nine (or 73%), ERA 2 financial assistance funding provided to households included rental arrears. Cause: CNMI lacks monitoring controls to ensure ERA 2 funding is not used for rental arrear payments. Effect: CNMI is in noncompliance with applicable allowable costs/cost principles requirements and questioned costs of $65,865 result. Recommendation: CNMI should strengthen and enforce compliance with applicable allowable costs/cost principles requirements and implement and enforce monitoring controls over the rental assistance program requirements for ERA 2 grants. Views of Responsible Officials: The Office of Grant Management (OGM) disagrees with this finding. In alignment with program intent and to ensure housing stability, rental arrears were prioritized and satisfied first. However, in cases where households faced imminent risk of eviction, OGM permitted the submission of concurrent prospective rent payments as an emergency stabilization measure. This approach was necessitated by the protracted processing timelines within the Division of Financial Services, which created a critical lag between approval and disbursement of funds. Without this intervention, households would have been exposed to heightened risk of eviction, undermining the program’s primary objective of preventing homelessness. Accordingly, the rental arrears totaling $65,864 should be deemed an allowable and reasonable program expenditure consistent with the overarching goals of housing retention and client stabilization. Refer to CNMI’s Corrective Action Plan for additional information. Auditor Response: Documentation that ERA 2 funding can be used to provide financial assistance for rental arrears was not provided.

Finding No. 2022-023 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: $331,985 Criteria: 15 U.S. Code § 9058c(f)(2) defines an eligible household as one or more individual who are obligated to pay rent on a residential dwelling to which the CNMI has determined the following: (A) One or more individuals within the household has: (i) Qualified for unemployment benefits; or (ii) Experienced a reduction in household income, incurred significant costs, or experienced other financial hardship during or due, directly or indirectly, to the coronavirus pandemic; (B) One or more individuals within the household can demonstrate a risk of experiencing homelessness or housing instability; and (C) The household is a low-income family (as such term is defined in section 1437a(b) of title 42.[2] Condition: Of sixty (or 100%) eligibility case files selected for testing, aggregating $331,986 in total benefits paid of a total population of $9,825,257, documentation supporting eligibility determinations were not provided. Cause: CNMI did not provide documentation supporting eligibility determinations. Effect: CNMI is in noncompliance with applicable eligibility requirements and questioned costs of $331,985 result. Identification as a Repeat Finding: Finding No. 2021-029 Recommendation: CNMI should strengthen and enforce compliance with applicable eligibility requirements and implement and establish systematic filing of relevant documentations for easy retrieval. Views of Responsible Officials: The Office of Grant Management (OGM) disagrees with this finding. The delay in document submission was attributable to internal scheduling constraints combined with the compressed timeline required to complete the FY2022 Single Audit. While the requested documentation was not provided by the auditor’s specified deadline, OGM maintains all relevant supporting records in accordance with federal grant retention requirements and remains prepared to furnish them upon request from the Grantor. Although the documentation was submitted several days beyond the deadline, the auditors informed OGM that reviewing the late submission would cause additional delays to the overall audit process. OGM disputes the questioned cost amount of $331,985, as complete and accurate records exist to substantiate the eligibility determinations of the CCERA clients in question. Given that the program concluded more than two years ago, additional time was necessary to retrieve and compile archived files. Accordingly, OGM asserts that these costs are allowable, allocable, and fully supported, and recommends that the auditors reconsider the finding in light of the shortened audit review window and the program’s recordkeeping context. Refer to CNMI’s Corrective Action Plan for additional information. Auditor Response: CNMI states disagreement; however, CNMI also acknowledges that documentation supporting program costs were not provided. In addition, the agreed submission deadlines were communicated by the Secretary of Finance’s Team to the program personnel with various reminders. These submission deadlines were in line with the CNMI’s goal to get caught up with the audits. Further, we recommended that OGM coordinate its submission extension request with the SOF; however, approval of the extension was not provided. Questioned costs are retained as costs at the time of the audit were not supported by adequate documentation.

Finding No. 2022-024 Federal Agency: U.S. Department of the Treasury AL Program: 21.023 Emergency Rental Assistance Program Federal Award No.: 20010001/000021 Area: Period of Performance Questioned Costs: $26,329 Criteria: 1. In accordance with 2 CFR 200.344(c), the recipient must liquidate all financial obligations incurred under the Federal award no later than 120 calendar days after the conclusion of the period of performance; 2. In accordance with the U.S. Department of Treasury closeout activities guidance dated 09/16/22, obligated funds may be expended by grantees for up to 120 calendar days after the end of the award period of performance for allowable administrative activities; and Condition: Of fifty ERA 1 expenditures tested, aggregating $90,179 of a total population of $191,896, the following were noted: 1. For twenty-seven (or 54%), costs were liquidated after the grant award’s end of the 120-day liquidation period of 01/30/23. 2. For one (or 2%), obligating and liquidation documentations were not provided. Accordingly, the CNMI was not able to substantiate that the cost was incurred/obligated and liquidated within the period of performance. Cause: CNMI did not enforce compliance with the applicable period of performance requirements and lacks monitoring control over the verification that costs charged to the program were incurred/obligated and liquidated within the period of performance. Effect: CNMI is in noncompliance with the applicable period of performance requirements and questioned costs of $26,329 result. Recommendation: CNMI should strengthen and enforce compliance with the applicable period of performance requirements and implement and enforce monitoring controls over program costs to ensure that costs charged to the program are within the specified period of performance and implement and establish systematic filing of relevant documentation for easy retrieval. Views of Responsible Officials: Condition 1 - The Office of Grant Management (OGM) disagrees with this finding. OGM recollects prior guidance and program discussions indicating that U.S. Territories administering ERA were afforded greater flexibility in the period of performance, in recognition of their geographic remoteness and the additional time required to receive technical assistance and implement compliant systems. This understanding informed OGM’s administration of ERA funds. Additionally, several disbursed checks were returned, which created reconciliation delays and made it difficult to ascertain the true unobligated balance of the grant until sufficient time had passed for all transactions to clear. To address compliance concerns, CNMI officials traveled to Washington, D.C. in February 2025 to meet with U.S. Treasury representatives and resolve outstanding ERA1 documentation issues. Following those meetings, OGM submitted the necessary reports and initiated the closeout process for ERA1 in accordance with federal requirements. The questioned cost of $26,329 reflects expenditures that were directed toward eligible households impacted by COVID-19. These expenditures were necessary, reasonable, and allocable under 2 CFR 200.403, and fully aligned with the statutory purpose of ERA to prevent housing instability. Disallowing these costs would effectively negate assistance that was properly delivered to beneficiaries and undermine the program’s objective. For these reasons, OGM respectfully requests that the questioned cost be removed. Condition 2 - The Office of Grant Management (OGM) disagrees with this finding. Due to internal scheduling constraints and the compressed timeline required to complete the FY2022 audit, the requested documents were not submitted by the specified deadline, resulting in this finding. However, OGM maintains all relevant supporting documentation and is prepared to provide it upon request from the Grantor. Refer to CNMI’s Corrective Action Plan for additional information. Auditor Response: Condition 1 - Documentation of the afforded flexibility over the period of performance requirements for the CNMI’s ERA grants was not provided. Questioned costs are retained, as costs at the time of the audit were not supported by adequate documentation. Condition 2 - CNMI states disagreement; however, CNMI acknowledges that documentation supporting program costs were not provided.

Finding No. 2022-025 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: 1. In accordance with the Emergency Rental Assistance (ERA) program reporting guidance v 1.0, all State, Local, and Territorial Recipients and all Tribe, TDHE, and the DHHL Recipients must submit the Federal Financial Report, Standard Form 425 (SF-425) and the ERA 1 and ERA 2 Special Reporting Reports (1505-0266), on a quarterly basis. Recipients must provide all required reports on each ERA1 and ERA2 award separately without commingling funds, data, or records. Treasury uses the financial report to compare the rate of the Recipient’s actual expenditures against performance data to verify that expenditure amounts align with project activities. 2. In addition, per the ERA program reporting guidance addendum, dated July 15, 2021, ERA1 and ERA2 State, Local and Tribal Recipients are required to submit full quarterly financial and programmatic reports, consistent with Treasury’s ERA Reporting Guidance v 1.0, beginning with the Q3 2021 reporting period. Recipients are required to submit their Q1, Q2 and Q3 reports by October 15, 2021, and future quarterly reports as required in the ERA Reporting Guidance v 1.0. Condition: CNMI was unable to provide evidence that the following quarterly federal financial reports (SF-425) and the special reporting reports (1505-0266) for ERA 1 and ERA 2 grants were submitted. Accordingly, we were unable to test the accuracy of any amounts reported. Cause: CNMI did not enforce compliance with applicable reporting requirements and lacks monitoring controls over adequate documentation and systematic filing of relevant documentation supporting the program’s reporting requirements. Effect: The CNMI is in noncompliance with applicable reporting requirements. Identification as a Repeat Finding: Finding No. 2021-030 Recommendation: CNMI should strengthen and enforce compliance with the applicable reporting requirements and implement and establish systematic filing of relevant documentations for easy retrieval. Views of Responsible Officials: The Office of Grants Management (OGM) admits that accurate and timely financial reporting was significantly challenged due to systemic and operational factors. The CNMI’s financial management system was transitioning from JD Edwards to Tyler-Munis, resulting in shifting expense allocations and fluctuating fund balances throughout the fiscal year. These system migrations inherently delayed reconciliation and reporting of final totals. ERA program checks were periodically cancelled or returned by landlords as tenants exercised relocation options to improve housing conditions. These returned or voided payments caused monthly variations in financial reporting figures. OGM communicated these variances and the corresponding fluctuations in the SF-425 reports to Ernst & Young (EY) during the reporting period. It was only several months after the fiscal year’s close that the expenses stabilized, reflecting accurate and reconciled program expenditures. OGM also submitted a narrative report for this reporting period to EY, consistent with federal reporting expectations. It is important to note that the Department of Finance retained primary responsibility for reporting program activities to the U.S. Treasury, and OGM did not have direct access to the Treasury ERA portal. This limitation further constrained OGM’s ability to provide real-time, system-generated reporting. Despite these challenges, OGM provided EY with a comprehensive listing of expenses that reconciled to the FMIS-generated ending fund balance for this business unit. Given these circumstances, OGM asserts that any variances observed in the SF-425 are the result of operational and systemic constraints, and the office should not be penalized for discrepancies arising under these extraordinary conditions. Subsequently, all ERA1 reporting were resolved in February 2025 with the U.S. Treasury. This action closed the grant officially. Refer to CNMI’s Corrective Action Plan for additional information. Auditor Response: While OGM provided an explanation of the variances on the SF-425 reports and the excel files of household participants data, the corresponding SF-425 and special reporting reports were not provided. Accordingly, we were unable to test the accuracy of any amounts and/or data reported.

Finding No. 2022-026 Federal Agency: U.S. Department of the Treasury AL Program: 21.026 Homeowner Assistance Fund Program Federal Award No.: HAF0205 Area: Reporting Questioned Costs: $-0- Criteria: In accordance with 2 CFR Part 170 and the Federal Funding Accountability and Transparency Act (FFATA), recipients (i.e., direct recipients) of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more in federal funds to the Federal Funding Accountability and Transparency Act (FFATA) Subaward Reporting System (FSRS). For subaward information, recipients are required to report no later than the end of the month following the month in which the subaward was issued. Condition: The program did not report first-tier subawards of $30,000 or more to FSRS. The table below summarizes our findings: Cause: The cause is the lack of adherence in reporting obligations established by the US Treasury regarding compliance with the reporting requirements. Effect: CNMI is in noncompliance with the Federal Funding Accountability and Transparency Act (FFATA) reporting requirement. Recommendation: CNMI should establish policies and procedures to verify that the required FFATA reports are prepared and submitted to the Subaward Reporting System. Views of Responsible Officials: The CNMI agrees with this finding. Department of Finance Program Manager previously responsible for overseeing this grant is no longer with the Department. DOF will work with NMHC to verify whether the required FFATA reports and any other required activities were prepared and submitted to the Subaward Reporting System. Refer to CNMI’s Corrective Action Plan for additional information.

Finding No. 2022-027 Federal Agency: U.S. Department of the Treasury AL Program: 21.026 Homeowner Assistance Fund Program Federal Award No.: HAF0205 Area: Subrecipient Monitoring Questioned Costs: $4,157,924 Criteria: In accordance with 2 CFR § 200.332, a 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: 1) The award as a subaward at the time of subaward by providing the information described in 2 CFR § 200.332(a)(1); 2) 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; and 3) Any additional requirements that the PTE imposes in order for the PTE to meet its own responsibility for the federal award. • Evaluating the impact of subrecipient activities on the PTE’s ability to comply with applicable federal regulations. Condition: 1. We are unable to obtain an understanding of the CNMI’s process to identify subawards, evaluate risk of noncompliance, and perform monitoring procedures based upon identified risks. 2. The CNMI did not provide a subrecipient agreement. Instead, a memorandum of agreement (MOA) was issued between the CNMI and the subrecipient for reimbursement of costs in the planning and administration of the program. The MOA did not have the following required information: • Subrecipient’s unique entity identifier; • Federal Award Identification Number (FAIN); • Federal award Date of award to the recipient by the Federal agency; • Subaward Period of Performance Start and End Date; • Subaward Budget Period Start and End Date; • Amount of Federal Funds Obligated by this action by CNMI; • Total Amount of Federal Funds Obligated to the subrecipient; • Total amount of the Federal award committed to the subrecipient by CNMI; • Federal award project description, as required to be responsive to the Federal Funding and Transparency Act (FFATA); • Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the CNMI; • Identification of whether the award is R&D; and • Indirect cost rate for the Federal award (including if the de minimis rate is charged) 3. Documentation was not provided to demonstrate monitoring procedures were performed on the subrecipient. Total FY2022 subrecipient expenditures amounted to $4,157,924, for which the amount is questioned. 4. There was no evidence of procedures used to monitor the subrecipient’s compliance with applicable laws, regulations, and provisions of contracts and grant agreements. Further, we are aware that the subrecipient is subjected to Single Audits; however, there was no evidence that the Single Audit report was used as a monitoring tool. Cause: 1. CNMI has no existing written subrecipient monitoring policies and procedures; and 2. CNMI failed to enforce compliance with subrecipient monitoring requirements. Effect: The CNMI is in noncompliance with applicable subrecipient monitoring requirements and questioned costs of $4,157,924 result for Condition 3. Recommendation: The CNMI should establish written policies and procedures over compliance with applicable subrecipient monitoring requirements and consider obtaining training in the area of subrecipient monitoring. Views of Responsible Officials: Conditions 1 to 4 - The Department of Finance agrees with this finding. The Department has recently adopted and approved (August 2025) a Subrecipient Monitoring Policy and Procedures which specifically focused on the implementation of 2 CFR 200.331. Refer to CNMI’s Corrective Action Plan for additional information.

Finding No. 2022-028 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: Activities Allowed or Unallowed Allowable Costs/Cost Principles Questioned Costs: $33,815,438 Criteria: 1. In accordance with the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) interim and final rules, recipients may use CSLFRF payments for any eligible expenses subject to the restrictions set forth in sections 602 and 603 of the Social Security Act as added by section 9901 of the American Rescue Plan Act of 2021 (codified as 42 USC 802 and 42 USC 803 respectively), Treasury’s Interim Final Rule and Final Rule at 31 CFR sections 35.7 and 35.8, and Frequently Asked Questions (FAQs). 2. CSLFRF is considered “other financial assistance” per 2 CFR section 200.1 and is administered as direct payments for specified use. The 2 CFR Part 200, Subpart E is applicable to expenditures under CSLFRF unless stated otherwise; and 3. 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 forty-seven nonpayroll expenditures tested, aggregating $91,046,132 of a total population of $192,051,799, the following were noted: 1. For sixteen (or 34%), transactions were only supported with journal entry reports and manual spreadsheets reflecting breakdown of charges, while Project Accounting Journal Number 13675 was only supported with a journal entry report and an inter-office memorandum. We were not provided with adequate documentation intended to substantiate transactions are for eligible use and for allowable costs in accordance with the restrictions set forth in sections 602 and 603 of the Social Security Act and 2 CFR section 200.1. In addition, the check/ACH payment for Project Accounting Journal Number 13675 was not provided. 2. For two (or 4%), either the purchase requisitions, purchase orders and/or contract agreements or equivalent documentation were not provided. 3. For three (or 6%), either the invoice or budget allotment requests, or equivalent documentations, were not provided. 4. For two (or 4%), receiving reports or equivalent documentation evidencing receipt of items or that services were rendered were not provided. No questioned costs are presented as amounts are questioned at Condition 3. 5. For three (or 6%), payment approvals for the following transactions were not evident. No questioned costs are presented as amounts are questioned at Condition 3 for Project Accounting Journal Numbers 5113 and 7440 and at Condition 1 for Project Accounting Journal Number 13675. Of thirteen payroll expenditures tested, aggregating $706,186 of a total population of $54,700,842, the following were noted: 6. For one (or 8%), the payroll distribution report or equivalent documentation was not provided. We were not provided adequate documentation intended to substantiate the transaction pertains to premium pay expenditures and are for eligible uses and for allowable costs in accordance with the restrictions set forth in sections 602 and 603 of the Social Security Act and 2 CFR section 200.1, for which the corresponding directly associated costs are also questioned. 7. For nine (or 69%), either the notice of personnel action forms (NOPA) and/or timesheets were not provided, for which the corresponding directly associated costs are also questioned. In addition, included in the gross pay for Employee Number 163508, was an adjustment to increase the gross pay by $165; however, documentation supporting the adjustment was also not provided. 8. Of sixty journal entries tested, aggregating $1,186,206 of a total population of $120,047,567, for fifty-one (or 85%), underlying accounting records for the original entries were not provided. For Project Accounting Journal Number 7310, documentation provided was not clear. No questioned costs are presented, as the extent of noncompliance, if any, could not be quantified. 9. FY2022 and FY2021 expenditures for the Municipality of Tinian, amounting to $1,015,815 and $394,397, respectively, were not tested; accordingly, we were not able to determine allowability. No questioned costs are presented as the extent of noncompliance, if any, could not be quantified. Cause: CNMI did not enforce compliance with applicable allowable costs/cost principles requirements and lacks monitoring controls over the following: 1. Adequate documentation and systematic filing of relevant documentation supporting program costs. 2. Municipality of Tinian’s expenditures were not recorded in the CNMI’s FY2022 and FY2021 financial statements and SEFA schedules. 3. Legal opinion as to whether the Municipality of Tinian is legally separated from the CNMI Central Government was not timely sought. Effect: CNMI is in noncompliance with applicable allowable costs/cost principles requirements and questioned costs of $33,815,438 result. Unknown questioned costs are presented for Conditions 8 and 9 as the extent of noncompliance, if any, could not be quantified. Identification as a Repeat Finding: Finding No. 2020-031 Recommendation: CNMI should strengthen and enforce compliance with applicable allowable costs/cost principles requirements, develop and implement effective monitoring controls over the following: 1. Establish and maintain effective systematic filing of relevant documentation to support program costs and for easier retrieval; 2. Effective monitoring controls over compliance with Sections 602 and 603 of the Social Security Act (the “Act”) requirements, 2 CFR section 200.1 and 2 CFR Part 200, Subpart E; and 3. The CNMI should timely seek clarification and guidance on matters affecting the CNMI’s financial reporting requirements and its federal programs requirements. Views of Responsible Officials: Conditions 1 and 6 - The Department of Finance agrees with this finding. It is important to note that the issue occurred during FY2022, a period marked by the transition from the legacy financial system (JDE) to the new Tyler Munis platform. During this time, processes for retaining and reconciling supporting documents had not been standardized, resulting in inconsistencies and a heightened risk of missing or improperly uploaded records. Conditions 2 to 5, 7 and 8 - The Department of Finance disagrees with this finding. Due to internal scheduling constraints and the compressed timeline required to complete the FY2022 audit, the requested documents were not submitted by the specified deadline, resulting in this finding. However, the office maintains all relevant supporting documentation and is prepared to provide it upon request from the Grantor. Condition 9 - The Department of Finance agrees with the findings. Following the legal opinion from the CNMI Attorney General’s Office in August 2025, we secured all necessary documentation from the Municipality of Tinian to ensure proper recording and reconciliation of transactions in our financial system. Refer to CNMI’s Corrective Action Plan for additional information. Auditor Response: Conditions 2 to 5, 7 and 8 - CNMI states disagreement; however, CNMI also acknowledges that documentation supporting program costs were not provided.

Finding No. 2022-029 Federal Agency: U.S. Department of 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: $12,244,415 Criteria: 1. In accordance with 2 CFR Section 200.317, when conducting procurement transactions under a Federal award, a State must follow the same policies and procedures it uses for procurements with non-Federal funds. CNMI procurement regulation states the following: • § 70-30.3-220 Small Purchases: (a) Purchases that use Government-sourced funds (local funds), or any combination of both local and federal funds, may be made according to the small purchase procedures of this subsection: (1) 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. (b) Purchases that use only federal funds may be made according to the small purchase procedures of this subsection: (1) For purchases that exceed $10,000, but which are less than or equal to $250,000, a minimum of three vendors shall be solicited to submit written or electronic quotations. (2) A purchase order may be used to make purchases from the United States General Services Administration (GSA), including purchases that exceed $250,000. When purchasing from GSA, at least one quote shall be obtained. • § 70-30.3-760 Debarment and Suspension: (a) The official with expenditure authority may file a dispute with the Director against an existing contractor for any failures of performance related to a contract governed by this subchapter. 2. In accordance with 31 CFR Section 19.300, prior to entering into subawards and contracts with award funds, recipients must verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded: (a) Checking the EPLS; or (b) Collecting a certification from that person if allowed by this rule; or (c) Adding a clause or condition to the covered transaction with that person. 3. In accordance with 2 CFR Section 200.321, when possible, the recipient or subrecipient should ensure that small businesses, minority businesses, women's business enterprises, veteran-owned businesses, and labor surplus area firms are considered as set forth below. Such consideration means: (1) These business types are included on solicitation lists; (2) These business types are solicited whenever they are deemed eligible as potential sources; (3) Dividing procurement transactions into separate procurements to permit maximum participation by these business types; (4) Establishing delivery schedules (for example, the percentage of an order to be delivered by a given date of each month) that encourage participation by these business types; (5) Utilizing organizations such as the Small Business Administration and the Minority Business Development Agency of the Department of Commerce; and (6) Requiring a contractor under a Federal award to apply this section to subcontracts. 4. In accordance with 2 CFR Section 200.327, States must also ensure that every contract includes the applicable required contract clauses described in Appendix II of this part. Condition: 1. Inconsistencies were noted in procurement regulations over local and federal funded transactions. No questioned costs are presented as the extent of noncompliance could not be quantified. 2. CNMI does not verify whether contractors are not suspended, debarred, or otherwise excluded pursuant to 31 CFR section 19.300, prior to entering into a covered transaction for an amount equal to or exceeds $25,000 with award funds. No questioned costs are presented as the extent of noncompliance could not be quantified. Of sixty expenditures tested, aggregating $12,867,972 of a total population of $35,131,391 in nonpayroll expenditures subject to procurement, the following were noted: 3. For five (or 8%), transaction amounts exceeded the $10,000 small purchase threshold; however, only one vendor quotation was obtained. 4. For thirty-six (or 60%), either the purchase orders, purchase requisitions, and/or contracts were not provided. 5. For two (or 3%), contracts did not include the required contract clauses pursuant to 2 CFR 200.237. No questioned costs are presented as the extent of noncompliance could not be quantified. 6. For sixty (or 100%) expenditures tested, no documentation was provided to indicate that minority businesses, women's business enterprises, veteran-owned businesses, and labor surplus area firms were considered during the solicitation or vendor selection process and/or whether procurement were divided or delivery schedules were established to encourage participation by these businesses, pursuant to 2 CFR 200.321. Further, documentation that organizations such as the Small Business Administration and the Minority Business Development Agency of the Department of Commerce were utilized and/or whether a contractor was required to apply this section to subcontracts, were also not provided. No questioned costs are presented as the extent of noncompliance could not be quantified. Cause: 1. CNMI does not use the same policies and procedures for procurements under a federal award as with procurements from its non-federal funds under the small purchases method. 2. The CNMI’s procurement regulations are not in accordance with 2 CFR Section 200.317 and 31 CFR Section 19.300 of the Code of Federal Regulations. 3. The CNMI did not meet the minimum requirement of three vendor quotations as required by § 70-30.3-220 Small Purchases for procurements that exceed $10,000, but which are less than or equal to $50,000. 4. Inadequate documentation and systematic filing of relevant documentation supporting program costs. 5. Lack of monitoring control procedures to ensure that minority businesses, women's business enterprises, veteran-owned businesses, and labor surplus area firms are considered during the vendor selection process as required by 2 CFR 200.321. 6. Lack of monitoring control procedures to ensure that the minimum contract provision requirements pursuant to 2 CFR 200.327 are included in all contracts. Effect: The CNMI is in noncompliance with applicable procurement and suspension and debarment regulations and questioned costs of $12,244,415 result for Conditions 3 and 4. Unknown questioned costs are presented for Conditions 1, 2, 5 and 6 as the extent of noncompliance, if any, could not be quantified. In addition, the CNMI could not provide a listing of transactions that were procured during FY2022. Identification as a Repeat Finding: Finding No. 2021-032 Recommendation: 1. The CNMI should revisit its procurement regulations and consider updating applicable sections of the regulations to comply with federal regulations governing federal funds. 2. Responsible CNMI personnel should periodically monitor updates in federal regulations over procurement and suspension and debarment. 3. Establish and implement effective monitoring controls over the verification of excluded or disqualified persons or vendors pursuant to 31 CFR Section 19.300, prior to the CNMI entering into a covered transaction. 4. Responsible CNMI personnel should ensure compliance with its procurement regulations, particularly to those pertaining to small purchases that exceed the $10,000 threshold. 5. Establish and maintain effective systematic filing of relevant documentation to support program costs and for easier retrieval. Views of Responsible Officials: Conditions 1 and 3 - The Procurement Services Division agrees with this finding. The Division will revise CNMI’s procurement regulations to ensure alignment with federal procurement standards as outlined in 2 CFR Part 200, particularly the small purchase threshold requirements and competitive procurement procedures. Conditions 2 and 5 - The Procurement Services Division agrees with this finding. To address the lack of consistent verification of vendor eligibility under federal debarment and suspension requirements (2 CFR §180.300), a policy will be implemented requiring all agencies to submit debarment verification documentation at the time of vendor selection. Acceptable documentation may include (1) a printout or screenshot from the SAM.gov Exclusions database, confirming that the vendor is not debarred or suspended, (2) a signed certification from the vendor attesting to their eligibility, or (3) a signed contract clause or provision that explicitly states the vendor is not excluded from federal transactions and complies with applicable debarment regulations. Conditions 4 and 6 - The Procurement Services Division disagrees with this finding. Due to internal scheduling constraints and the compressed timeline required to complete the FY2022 audit, the requested documents were not submitted by the specified deadline, resulting in this finding. However, the Division maintains all relevant supporting documentation and is prepared to provide it upon request from the Grantor. Refer to CNMI’s Corrective Action Plan for additional information. Auditor Response: Conditions 4 and 6 - CNMI states disagreement; however, CNMI also acknowledges that documentation supporting program costs were not provided.

Finding No. 2022-030 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: Reporting Questioned Costs: $-0- Criteria: In accordance with the U.S. Treasury Compliance and Reporting Guidance for State and Local Fiscal Recovery Funds and the April 2022 Compliance Supplement, States and U.S. territories are required to submit the following reports: 1. The initial quarterly Project and Expenditure Report covering three calendar quarters from March 3, 2021 to December 31, 2021 was required to be submitted to the U.S. Treasury by January 31, 2022. The subsequent quarterly reports covering one calendar quarter must be submitted to the U.S. Treasury by the last day of the month following the end of the period covered. 2. The Annual Recovery Plan Performance Reports covering a 12-month period are required to be submitted to the U.S. Treasury after the end of the 12-month period, by July 31 of each year. In addition, recipients must upload the uniform resource locator (URL) link to the publicly available Annual Recovery Plan Performance Report and provide required data within the U.S. Treasury’s reporting portal. Further, the public URL disclosure link must be prominently displayed on the main page or the main COVID response page of the recipient’s website. Condition: 1. The following Project and Expenditure reports that were due for submission during the CNMI’s fiscal year ended September 30, 2022, were not submitted: 2. 2022 Annual Recovery Plan Performance Report was submitted on August 9, 2022, which was after the July 31, 2022 due date. 3. The URL link for the 2022 Annual Recovery Plan Performance Report on CNMI’s website is not prominently displayed on the main page and the CNMI’s website also doesn’t have a main COVID response page. The URL link to the report is instead located within the “Forms” section of the main page. Cause: Management lacked new processes to extract the necessary data to submit the Project and Expenditure Report after its transition from its legacy JD Edwards financial system to the Tyler Munis Financial Management Information System (FMIS) effective October 1, 2021. In addition, the CNMI does not have a suitably designed internal control process in place to prevent or detect material noncompliance over reporting compliance requirements. Effect: The CNMI is in noncompliance with the Quarterly Project and Expenditure and the Annual Recovery Plan Performing reporting requirements. Recommendation: CNMI should establish and implement a suitably designed internal control processes to prevent or detect material noncompliance over reporting compliance requirements, which should include review, approval and monitoring internal control procedures. In addition, the CNMI should submit all required reports by the due dates. Further, the CNMI should prominently display the public URL disclosure link for the Annual Recovery Plan Performance Reports on its main website page or establish a main COVID response page, in accordance with the Public Disclosure Link requirement. Views of Responsible Officials: The Department of Finance agrees with this finding. It is important to note that the issue occurred during FY2022, a period marked by the transition from the legacy financial system (JDE) to the new Tyler Munis platform. During this time, processes for retaining and reconciling supporting documents had not been standardized, resulting in inconsistencies and a heightened risk of missing or improperly uploaded records. Refer to CNMI’s Corrective Action Plan for additional information.

Finding No. 2022-031 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: Subrecipient Monitoring Questioned Costs: $61,003,095 Criteria: Per the U.S. Treasury Interim and Final Rules, the U.S. Treasury is aligning the definition of subrecipient in the final rule with the definition of subrecipient in the Uniform Guidance, wherein, subrecipients are entities that receive a subaward from a recipient to carry out a program or project on behalf of the recipient with the recipient’s Federal award funding but does not include an individual that is a beneficiary of such award. The recipient remains responsible for monitoring and overseeing the subrecipient’s use of Fiscal Recovery Funds and other activities related to the award to ensure that the subrecipient complies with the statutory and regulatory requirements and the terms and conditions of the award. Recipients also remain responsible for reporting to Treasury on their subrecipients’ use of payments from the Fiscal Recovery Funds for the duration of the award. Accordingly, in accordance with 2 CFR § 200.332, pass-through entity (PTE) must: 1. Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the information provided below. A PTE must provide the best available information when some of the information below is unavailable. A PTE must provide the unavailable information when it is obtained. One of the required information includes: (1) Federal award identification: (i) Subrecipient’s unique entity identifier; (ii) Federal Award Identification Number (FAIN); (iii) Subaward Period of Performance Start and End Date; (iv) Subaward Budget Period Start and End Date; (v) Amount of Federal Funds Obligated in the subaward; (vi) Total Amount of Federal Funds Obligated to the subrecipient by the PTE, including the current financial obligation; (vii) Total Amount of Federal Funds Obligated to the subrecipient by the PTE, including the current financial obligation; and (viii) Assistance Listings title and number; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at the time of disbursement. (2) All requirements of the subaward, including requirements imposed by Federal statutes, regulations, and the terms and conditions of the Federal award; (3) Any additional requirements that the pass-through entity imposes on the subrecipient for the pass-through entity to meet its responsibilities under the Federal award. This includes information and certifications (see § 200.415) required for submitting financial and performance reports that the pass-through entity must provide to the Federal agency; (4) A requirement that the subrecipient permit the pass-through entity and auditors to access the subrecipient's records and financial statements for the pass-through entity to fulfill its monitoring requirements; and (5) Appropriate terms and conditions concerning the closeout of the subaward. 2. Evaluate each subrecipient’s fraud risk and risk of noncompliance with a subaward to determine the appropriate subrecipient monitoring described in paragraph (f) of this section. When evaluating a subrecipient’s risk, a PTE should consider the following: (1) The subrecipient’s prior experience with the same or similar subawards; (2) The results of previous audits. This includes considering whether or not the subrecipient receives a Single Audit in accordance with subpart F and the extent to which the same or similar subawards have been audited as a major program; (3) Whether the subrecipient has new personnel or new or substantially changed systems; and (4) The extent and results of any Federal agency monitoring (for example, if the subrecipient also receives Federal awards directly from the Federal agency). 3. Monitor the activities of a subrecipient as necessary to ensure that the subrecipient complies with Federal statutes, regulations, and the terms and conditions of the subaward. The PTE is responsible for monitoring the overall performance of a subrecipient to ensure that the goals and objectives of the subaward are achieved. In monitoring a subrecipient, a PTE must: (1) Review financial and performance reports. (2) Ensure that the subrecipient takes corrective action on all significant developments that negatively affect the subaward. Significant developments include Single Audit findings related to the subaward, other audit findings, site visits, and written notifications from a subrecipient of adverse conditions which will impact their ability to meet the milestones or the objectives of a subaward. When significant developments negatively impact the subaward, a subrecipient must provide the pass-through entity with information on their plan for corrective action and any assistance needed to resolve the situation. (3) Issue a management decision for audit findings pertaining only to the Federal award provided to the subrecipient from the PTE as required by §200.521. (4) Resolve audit findings specifically related to the subaward. However, the PTE is not responsible for resolving cross-cutting audit findings that apply to the subaward and other Federal awards or subawards. If a subrecipient has a current Single Audit report and has not been excluded from receiving Federal funding (meaning, has not been debarred or suspended), the PTE may rely on the subrecipient’s cognizant agency for audit or oversight agency for audit to perform audit follow-up and make management decisions related to cross-cutting audit findings in accordance with section § 200.513(a)(4)(viii). Such reliance does not eliminate the responsibility of the pass-through entity to issue subawards that conform to agency and award-specific requirements, to manage risk through ongoing subaward monitoring, and to monitor the status of the findings that are specifically related to the subaward. 4. Verify that a subrecipient is audited as required by subpart F. 5. Consider whether the results of a subrecipient's audit, site visits, or other monitoring necessitate adjustments to the pass-through entity's records. Further, in accordance with 31 CFR § 19.300, prior to entering into subawards with award funds, recipients must verify that such subrecipients are not suspended, debarred, or otherwise excluded from receiving federal funds. Condition: 1. Of seventeen subrecipients tested, aggregating $60,403,095 of a total population of $61,003,095, the following were noted: a. For seventeen (or 100%), documentations of the risk assessments performed and verification as to whether the subrecipients are not suspended or debarred were not provided. b. For two (or 12%), subrecipient agreements were not provided. No questioned costs are presented as amounts are questioned at Condition 1a. c. For two (or 12%), subrecipients’ unique entity identifiers, the federal award identification numbers (FAIN), amounts of federal funds obligated by this action by the PTE to the subrecipients, total amount of federal funds obligated to the subrecipients by the PTE, including the current financial obligations and the appropriate terms and conditions concerning the closeout of the subawards, were not included in the subrecipient agreements. No questioned costs are presented as amounts are questioned at Condition 1a. d. For ten (or 59%), subawards were supported with financial assistance request letters from the subrecipients and not with a subaward agreement that CNMI utilizes for other subawards. Accordingly, other than the date of request, amount requested and purpose of the financial assistance, all other required subaward information pursuant to 2 CFR § 200.332, were not indicated. No questioned costs as amounts are questioned at Condition 1a. e. For one (or 6%), no monitoring procedures were performed. No questioned cost is presented as the amount is questioned at Condition 1a. 2. Of sixteen subrecipient monitoring procedure requirements tested, aggregating $58,537,352 of a total population of $58,537,352, for sixteen (or 100%), documentation on monitoring procedures performed were not provided. In addition, documentation of preventive measures taken to mitigate risk from subrecipients that showed elevated risk factors or for identified unallowable activities were not documented and no verification as to whether the subrecipients are subject to the audit requirements. 3. Of sixty monitoring procedure requirements tested at the invoice/disbursement level, aggregating $58,438,922 of a total population of $61,003,095, the following were noted: a. For six (or 10%), review and approval of invoices and/or payments to ensure that subrecipients used the subaward for authorized purposes in compliance with Federal statutes, regulations, and the terms and conditions of the subawards, were not evident. No questioned costs are presented as expenditures pertain to subawards that were questioned at Condition 1a for Award Numbers CNMI22037 and COVID-19 Care Force Project. b. For twenty-four (or 40%), either the check payments and/or invoices or equivalent documentations were not provided; accordingly, the CNMI was not able to substantiate that monitoring procedures were performed to ensure that subrecipients used the subaward for authorized purposes in compliance with Federal statutes, regulations, and the terms and conditions of the subawards. No questioned costs are presented as expenditures pertain to subawards that were questioned at Condition 1a for Award Numbers NMPMG, CNMI 22037, CNMI22044 and COVID-19 Care Force Project and at Condition 2 for Award Reference Number 5302. Cause: The CNMI does not have approved/adopted written subrecipient monitoring policies and procedures. In addition, the CNMI failed to enforce compliance with subrecipient monitoring requirements and lacks monitoring controls over the following: 1. Monitoring activities of a subrecipient to ensure that the subrecipient complies with Federal statutes, regulations, and the terms and conditions of the subaward; 2. Adequate documentation and systematic filing of relevant documentation supporting program costs. In addition, for award number CNMI22044, the Entity’s management has determined that it should be classified as a contractor under the agreement as the Entity’s role is to promote the program within the CNMI, develop a marketing and promotional campaign and disburse the award to the recipients identified by the CNMI. The Entity was not involved in reviewing and deciding which grant applicant is eligible to receive the grant. CNMI’s role in the review of grant applications and eligibility determination may have caused confusion as to whether the Entity that received the funds is a subrecipient or a contractor. As of the auditor’s report date, the CNMI and the Entity have yet to conclude whether the Entity received the funds in the role of a subrecipient or a contractor. Effect: The CNMI is in noncompliance with applicable subrecipient monitoring requirements and questioned costs of $61,003,095 for Condition 1. Identification as a Repeat Finding: Finding No. 2021-033 Recommendation: We recommend the CNMI establish approved/adopted written subrecipient monitoring policies and procedures and an approved template that includes all required clauses needed for subrecipient agreements. In addition, CNMI should implement monitoring internal control procedures over the following: 1. Preventive measures taken to mitigate risk from subrecipients that showed elevated risk factors or for identified unallowable activities are adequately documented. Recommendation, continued: 2. Verification that subrecipients are audited as required by subpart F; 3. Monitoring activities of a subrecipient to ensure that the subrecipient complies with Federal statutes, regulations, and the terms and conditions of the subaward; 4. Provide subrecipients with training and technical assistance on program-related matters, including thorough explanation of their role as subrecipients; 5. Adequate documentation and systematic filing of relevant documentation to support program costs. Views of Responsible Officials: Conditions 1 to 3 - The Department of Finance agrees with this finding. The Department has recently adopted and approved (August 2025) a Subrecipient Monitoring Policy and Procedures which specifically focused on the implementation of 2 CFR 200.331. Refer to CNMI’s Corrective Action Plan for additional information.

Finding No. 2022-032 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award No.: COVID-19 G-1901MPCCDD/2001MPCCC3/2101MPCCDF/2101MPCCC5 Area: Eligibility Questioned Costs: $43,100 Criteria: In accordance with 45 CFR §98.21(a), the lead agency shall redetermine a child's eligibility for childcare services no sooner than 12 months following the initial determination or most recent redetermination. As stated in Section 3.1.8 of the FY 2022 State Plan, to be eligible for childcare services, applicants must meet the following requirements, among others: • Applicant’s identity (parent or guardian) should be verified using valid identification such as a current and valid photo ID (i.e., CNMI driver’s license, mayor’s ID, or passport); and • If the parent qualifies under work, as an approved activity the required documents include a current and valid CW work permit. Further, based on Section 4.3.1 of the FY 2022 State Plan, the calculation of the base payment rates applicable to each eligible child is based on their age, and the rates applied to the child depends on the age bracket they fall under. Condition: Of sixty applicants tested, the following were noted: 1. For five (or 8%), CNMI’s documentation for valid work permits for the following applicants who are non-U.S. citizens were expired prior to the beginning of their eligibility period. 2. For two (or 3%), CNMI’s documentation for valid work permits for the following applicants who are non-U.S. citizens before eligibility period would begin were not on file. 3. For two (or 3%), CNMI made inconsistent payments to the provider. Cause: The CNMI failed to adhere to the CCDF State Plan requirements of the required documents to support the applicant’s eligibility. In addition, the CNMI was inconsistent in applying the approved payment rates payable to the providers. Effect: The CNMI is in noncompliance with applicable eligibility requirements and questioned costs of $43,100. Identification as a Repeat Finding: 2021-034 Recommendation: The CNMI should strengthen and enforce compliance with applicable eligibility requirements. Responsible personnel should utilize the application checklist and review it against the applicant’s files to verify all required forms and information are completed, valid, and filed accordingly. Responsible personnel should also review and monitor the child’s birth date to verify that the payments are paid accordingly based on the child’s age. Views of Responsible Officials: Conditions 1 and 2 - CCDF agrees with this finding. To address this finding, effective October 2025, CCDF will not approve applicant(s) Certificate of Confirmation without a current and valid work permit. Condition 3 - CCDF agrees with this finding. For Case ID 3324B, total overpayment to provider was $300. CCDF will recoup the amount from the provider no later than December 2025. Refer to CNMI’s Corrective Action Plan for additional information.

Finding No. 2022-033 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.489/93.575/93.596 CCDF Cluster Federal Award No.: 2001MPCCDF/G-1802MPCCDF/ G-1901MPCCDD/2001MPCCC3/2101MPCCDF/2101MPCCC5 Area: Special Tests and Provisions - Health and Safety Requirements Questioned Costs: $1,757,352 Criteria: In accordance with the April 2022 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 childcare 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, as per the FY2022 CCDF State Plan, all CCDF providers are visited or monitored at least twice a year for one (1) unannounced and one (1) announced visits. Licensed providers are monitored by the Safety Inspector from the Child Care Licensing Program, and the License-exempt family, friend, or neighbor providers are monitored by a CCDF contractor. Follow-up visits for compliance are scheduled if needed. Condition: Of twelve providers tested, aggregating $1,757,352 of a total population of $8,563,055, the following were noted: 1. For eleven (or 92%), CNMI did not have adequate documentation that providers who received benefits were monitored through unannounced inspections during FY2022. 2. For seven (or 58%), CNMI did not provide documentation supporting the providers’ completion of the training requirements. Cause: 1. Of the multiple inspections performed, CNMI did not document as to whether any of those inspections were for unannounced inspection. 2. Lack of monitoring control procedures over provider training requirements. Effect: The CNMI is in noncompliance with applicable special tests and provisions for the health and safety requirements and questioned costs of $1,757,352. Identification as a Repeat Finding: 2021-035 Recommendation: CNMI should strengthen and enforce compliance with special tests and provisions for the health and safety requirements over the following: 1. Implement more stringent adherence to the provisions set forth in the State Plan to ensure proper monitoring of providers who are granted eligibility. Views of Responsible Officials: Condition 1 - CCDF disagrees with this finding. In the middle of the fiscal year, the CCDF Program transitioned to have the Quality Rating and Improvement System (QRIS) perform the announced and unannounced visits. To allow the complete transition of the CCDF Certification and monitoring system, as independent from the Child Care Licensing Program, CCDF extended all expiration dates of CCDF Providers for an additional two months. This extension was given to all CCDF providers renewing from April 2022 to December 31, 2022. With the transition, CCDF allowed for providers to meet provider requirements in a year and were only subjected to an announced visit. Any non-compliance was noted, but supported to compliance through coaching. Effective October 1, 2022, all CCDF Providers are now subjected to announced and unannounced visits. Views of Responsible Officials, continued: Condition 2 - CCDF disagrees with this finding. Based on our records, all providers met the annual training hours. Refer to CNMI’s Corrective Action Plan for additional information. Auditor Response: Condition 1 - In accordance with CCDF’s State Plan that was in effect in FY2022 and as also confirmed by the CCDF Director/Administrator, all providers are subject to a minimum of one unannounced visit in a year. Documentation of the flexibility of temporarily suspending the unannounced visit requirement, as set forth in the State Plan, was not provided. Condition 2 - Documentation substantiating that providers met the annual training hours were not provided.

Finding No. 2022-034 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.767 Children’s Health Insurance Program Federal Award No.: 7510515 & 7520515 Area: Activities Allowed or Unallowed Allowable Costs/Costs Principles Questioned Costs: $1,182,511 Criteria: Federal Financial Participation (FFP) funds can be used only for Children’s Health Insurance Program (CHIP) benefit payments (as specified in the state plan, federal regulations, or an approved waiver/demonstration). Payments may only be made to providers determined by the State Medicaid Agency (SMA) to be eligible to participate in the Medicaid program. To be allowable, costs for medical services must be (1) covered by the state plan or the Centers for Medicare and Medicaid Services (CMS) approved waivers/demonstrations; (2) reviewed by the state consistent with the state’s documented procedures and system for determining medical necessity of claims; (3) properly coded; and (4) paid at the rate allowed by the state plan. Further, costs must be net of beneficiary cost-sharing obligations and applicable credits (e.g., insurance, recoveries from other third parties who are responsible for covering the costs, and drug rebates), paid to eligible providers, and only provided on behalf of eligible individuals. Condition: Of forty expenditures tested, aggregating $5,561,709 of a total population of $8,738,788, the following were noted: 1. For thirteen (or 33%), billing rates were not provided: accordingly, the CNMI was not able to substantiate that the invoices were paid in correct amounts. 2. For three (or 8%), applicants are under the presumptive program; however, CHIP funding was used to pay for the applicants’ benefits. In addition, the child for Case Number PE-CHC-20-11749 was over 19 years old, which was over the age limit of 19 years old and below. 3. A variance of $598,102 between the benefits payment listing and the program’s expenditures detail report was noted. A reconciliation of the variance was not provided, for which the amount is questioned as amount charged to the program is in excess of the benefits payment listing. Cause: 1. CNMI did not provide sufficient and appropriate audit evidence to assist the auditors during the fieldwork. 2. Per the April 2022 Compliance Supplement, presumptive eligibility (PE) is a state option to facilitate enrollment and immediate access to services for children who are likely eligible for CHIP without having to wait for a full application to be processed. CNMI opted not to use its CHIP funding for recipients under the presumptive program. 3. The CNMI did not effectively monitor program costs to ensure CHIP funding is not used to cover benefits for those applicants under the presumptive program. 4. Lack of reconciliation between recorded program expenditures and the benefits payment listing. Effect: CNMI is in noncompliance with applicable allowable costs/cost principles requirements and questioned costs of $1,182,511 result. Recommendation: 1. CNMI should maintain adequate documentation supporting program expenditures over the CHIP Program. 2. CNMI should strengthen and enforce effective monitoring control procedures over program costs. 3. Establish and implement monitoring control procedures over the reconciliation of recorded program expenditures against the benefit payment listing. Views of Responsible Officials: Condition 1 - CNMI Medicaid Office disagrees with this finding. Due to internal scheduling constraints and the compressed timeline required to complete the FY2022 audit, the requested documents were not submitted by the specified deadline, resulting in this finding. However, the office maintains all relevant supporting documentation and is prepared to provide it upon request from the Grantor. Condition 2 - CNMI Medicaid Office cannot confirm to agree or disagree with the findings stated, as the information references case numbers without sufficient supporting detail. The office does not operate a Medicaid Management Information System (MMIS) and therefore cannot automatically retrieve data to link case numbers with the total benefits paid or questioned costs. Additionally, two of the three case numbers provided are associated with multiple individuals. Even if the case numbers were accurate and beneficiary names included, the office would still need to identify the provider(s) associated with the payments in question. Condition 3 - CNMI Medicaid Office disagrees with this finding. Due to internal scheduling constraints and the compressed timeline required to complete the FY2022 audit, the requested documents were not submitted by the specified deadline, resulting in this finding. However, the office maintains all relevant supporting documentation and is prepared to provide it upon request from the Grantor. Refer to CNMI’s Corrective Action Plan for additional information. Auditor Response: Condition 1 and 3 - CNMI states disagreement; however, CNMI also acknowledges that documentation supporting program costs were not provided. Condition 2 - For case number PE-CHC206822, the excel benefits payment detail listing provided for the audit, contained provider references with corresponding case numbers and benefits payment, which was forwarded to the program’s personnel on July 11, 2025. Similarly, the provider references with corresponding benefits payments for case numbers PE-CHC-20-11749 and PE-CHC-20-22401 can also be easily identified in the excel benefits payment detail listing being maintained by CNMI Medicaid.

Finding No. 2022-035 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.767 Children’s Health Insurance Program Federal Award No.: 7510515, 7520515 Area: Period of Performance Questioned Costs: $38,556 Criteria: 1. A non-federal entity may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance and any costs incurred before the federal awarding agency or pass-through entity made the federal award that were authorized by the federal awarding agency or pass-through entity (2 CFR sections 200.308 200.309 and 200.403(h)). 2. A non-federal entity must liquidate all financial obligations incurred under the federal award not later than 120 calendar days after the end date of the period of performance as specified in the terms and conditions of the federal award (2 CFR section 200.344(b)). Condition: CNMI was unable to provide supporting documents (i.e. invoices, contracts, etc.) to support compliance with period of performance requirements for two (or 25%) of eight expenditures tested totaling $2,105,155 of a total population of $2,163,439 . Cause: CNMI lacks monitoring control over adequate documentation and systematic filing of relevant documentations supporting program costs. Effect: CNMI is in noncompliance with applicable period of performance requirements and questioned cost of $38,556 result. Recommendation: CNMI should implement more stringent record-keeping mechanisms to ensure timely submission of audit documents upon request of the auditors used for the testing of compliance requirements. Views of Responsible Officials: The CNMI Medicaid Office disagrees with this finding. Due to internal scheduling constraints and the compressed timeline required to complete the FY2022 audit, the requested documents were not submitted by the specified deadline, resulting in this finding. However, the office maintains all relevant supporting documentation and is prepared to provide it upon request from the Grantor. Refer to CNMI’s Corrective Action Plan for additional information. Auditor Response: CNMI states disagreement; however, CNMI also acknowledges that documentation supporting program costs were not provided.

Finding No. 2022-036 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.767 Children’s Health Insurance Program Federal Award No.: 7510515, 7520515 Area: Reporting Questioned Costs: $-0- Criteria: The Program is required to submit quarterly Federal Financial Reports (SF-425) and quarterly Statement of Expenditures (CMS-64) that are accurately presented, comparable and reconcilable, no later than 30 calendar days after the reporting period. Condition: 1. Of two SF-425 reports tested, for one (or 50%), the total federal share of expenditures do not agree with the underlying accounting records, for which no supporting documentation was provided for the variance. 2. Of four CMS-64 reports tested, for one (or 25%), the total federal share of expenditures do not agree with the underlying accounting records, for which no supporting documentation was provided for the variance. Cause: CNMI did not effectively enforce compliance with applicable reporting requirements. Effect: The CNMI is in noncompliance with applicable reporting requirements. Recommendation: CNMI should strengthen and enforce compliance over the implementation of more stringent monitoring mechanisms to ensure reports are accurately presented and reconciled to the underlying accounting records. Views of Responsible Officials: Condition 1 - CNMI Medicaid Office disagrees with this finding. While CNMI Medicaid Office is not the designated entity for submitting SF-425 forms, we recognize the critical importance of these reports in the effective management of federal grant awards. To support overall compliance, the office will proactively coordinate with the submitting agency, the CNMI Department of Finance, by establishing stronger communication protocols. These will include scheduled reminders and regular check-ins with the assigned DOF representative to ensure SF-425 submissions are prioritized and completed ahead of quarterly reporting deadlines. Condition 2 - CNMI Medicaid Office respectfully disagrees with this finding. It is unclear where the auditors obtained their reported figures. Based on CMA’s records previously provided to the auditors, the CMS-64 reports and the accounting records agree, with only a $2 difference due to rounding. This alignment is based on the CMS-64 for FY2022 third quarter, as last revised on October 21, 2022. Refer to CNMI’s Corrective Action Plan for additional information. Auditor Response: Condition 1 - Reconciliation and/or underlying accounting records supporting the variances were not provided. Condition 2 - Variances were discussed and were acknowledged by the program personnel; however, the program personnel requires more time to reconcile the variances with the underlying accounting records.

Finding No. 2022-037 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.767 Children’s Health Insurance Program Federal Award No.: 7510515 & 7520515 Area: Special Tests and Provisions - Provider Eligibility (Screening and Enrollment) Questioned Costs: $7,932,110 Criteria: Providers who have been barred from participation by the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) exclusion list are not eligible to be enrolled in the CHIP program (42 CFR 457.990, 42 CFR 455 Subpart E). Accordingly, in accordance with 42 Section 455.436 of Subpart E, the State Medicaid agency must do the following: a. Confirm the identity and determine the exclusion status of providers and any person with an ownership or control interest or who is an agent or managing employee of the provider through routine checks of Federal databases; b. Check the Social Security Administration's Death Master File, the National Plan and Provider Enumeration System (NPPES), the List of Excluded Individuals/Entities (LEIE), the Excluded Parties List System (EPLS), and any such other databases as the Secretary may prescribe; c. Consult appropriate databases to confirm identity upon enrollment and reenrollment; and d. Check the LEIE and EPLS no less frequently than monthly. Condition: For sixteen (or 100%), service providers tested, no procedures were performed to verify whether the providers are on the OIG exclusion list. No questioned costs are presented for Provider Number IR-117 as there were no payments made to the provider during FY2022. Cause: CNMI was not aware of the HHS OIG exclusion verification requirement, including the availability of the HHS OIG exclusion listing within the CMS Portal until subsequent to FY2022. Effect: The CNMI is in noncompliance with the applicable Special Tests and Provisions - Provider Eligibility and questioned costs of $7,932,110 result. Recommendation: 1. CNMI should establish and implement monitoring control procedures to ensure service providers are verified against the HHS OIG exclusion listing, prior to entering into or renewing service provider agreements; and 2. Responsible CNMI personnel should periodically monitor updates in federal regulations affecting the program. Views of Responsible Officials: CNMI Medicaid Office disagrees with the finding. While the office did perform OIG exclusion list validation, screenshots were not captured for each individual check. It is important to note that the OIG Exclusion List portal’s search function is limited to on-screen viewing and does not provide a built-in option to print or export search results. Refer to CNMI’s Corrective Action Plan for additional information. Auditor Response: Per discussion with program personnel, verification of service providers from the OIG exclusion list were not performed during FY2022, as the CNMI Medicaid Office was not aware of the HHS OIG exclusion verification requirement until subsequently to FY2022, for which is when the authorized program personnel gained access to the HHS OIG exclusion list within the CMS Portal.

Finding No. 2022-038 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.778 Medical Assistance Program Federal Award No.: 2105CQTMAP Area: Activities Allowed or Unallowed Allowable Costs/Cost Principles Questioned Costs: $27,816,686 Criteria: Federal Financial Participation (FFP) funds can be used only for Medicaid benefit payments (as specified in the state plan, federal regulations, or an approved waiver/demonstration), expenditures for administration and training. Payments may only be made to providers determined by the State Medicaid Agency (SMA) to be eligible to participate in the Medicaid program. To be allowable, Medicaid costs for medical services must be (1) covered by the state plan or the Centers for Medicare and Medicaid Services (CMS) approved waivers/demonstrations; (2) reviewed by the state consistent with the state’s documented procedures and system for determining medical necessity of claims; (3) properly coded; and (4) paid at the rate allowed by the state plan. Furthermore, beneficiaries must be eligible (or presumptively eligible) at the time of service, whether covered under fee-for-service. Additionally, Medicaid costs must be net of beneficiary cost-sharing obligations and applicable credits (e.g., insurance, recoveries from other third parties who are responsible for covering the Medicaid costs, and drug rebates), paid to eligible providers, and only provided on behalf of eligible individuals. Condition: Of forty nonpayroll expenditures tested, aggregating $50,985,268, of a population of $68,704,587, the following were noted: 1. For three (or 8%), checks or wire transfer payments were not provided. Accordingly, we were unable to determine if payments were made in the correct amount or made to an ineligible party. 2. For twenty-six (or 65%), billing rates were not provided; accordingly, the CNMI was not able to substantiate that the invoices were paid at the rate allowed by the State Plan. 3. A variance of $5,753,903 between the benefits payment listing and the program’s expenditure detail report was noted. A reconciliation of the variance was not provided, for which the amount is questioned as amount charged to the program is in excess of the benefits payment listing. Cause: 1. CNMI did not provide sufficient and appropriate audit evidence to assist the auditors during the fieldwork. 2. Lack of reconciliation between recorded program expenditures and the benefits payment listing. Effect: The CNMI is in noncompliance with applicable allowable costs/cost principles requirement and questioned costs of $27,816,686 result. Recommendation: 1. The CNMI should maintain adequate documentation supporting program expenditures over the Medical Assistance Program. 2. CNMI should strengthen and enforce effective monitoring control procedures over program costs. 3. Establish and implement monitoring control procedures over the reconciliation of recorded program expenditures against the benefit payment listing. Views of Responsible Officials: Conditions 1 and 2 - The CNMI Medicaid Office disagrees with this finding. Due to internal scheduling constraints and the compressed timeline required to complete the FY2022 audit, the requested documents were not submitted by the specified deadline, resulting in this finding. However, the office maintains all relevant supporting documentation and is prepared to provide it upon request from the Grantor. Condition 3 - CNMI Medicaid Office disagrees with this finding. The agency currently does not have a Medicaid Management Information System (MMIS) in place to collect and accurately report comprehensive Benefits Paid data. All data processing is done manually, and information is maintained using Excel spreadsheets, which limits the ability to generate complete and reliable reports. Additionally, the "Benefits Paid" data provided to the auditor does not include services covered under the Certified Public Expenditures (CPE) payments made to CHCC. Therefore, these records should not be used as the sole basis for evaluating program eligibility, total expenditures, or compliance with eligibility requirements. However, CNMI Medicaid Office maintains all relevant supporting documentation and is prepared to provide it upon request from the Grantor. Refer to CNMI’s Corrective Action Plan for additional information. Auditor Response: Conditions 1 and 2 - CNMI states disagreement; however, CNMI also acknowledges that documentation supporting program costs were not provided. Condition 3 - The variance of $5,753,903 between the excel benefits payment listing and the program’s expenditure detail report, only pertains to benefit payments related to claims. CPE payments made to CHCC were not factored into the variance.

Finding No. 2022-039 Federal Agency: U.S. Department of Health and Human Services AL Program: 93.778 Medical Assistance Program Federal Award No.: 2105CQTMAP Area: Reporting Questioned Costs: $-0- Criteria: The Program is required to submit quarterly Statement of Expenditures Reports (CMS-64) that are accurately presented, comparable and reconcilable, no later than 30 calendar days after the reporting period. Condition: Of three CMS-64 reports tested, for two (or 67%), the total federal share of expenditures do not agree with the underlying accounting records, for which no supporting documentation was provided for the variance. Cause: CNMI did not effectively monitor the accuracy and completeness of the required reports based on underlying accounting records. Effect: The CNMI is in noncompliance with applicable reporting requirements. Recommendation: The responsible CNMI personnel should regularly monitor reports to verify that amounts reported are supported by underlying accounting records. Views of Responsible Officials: The CNMI Medicaid Office disagrees with this finding for several reasons, including but not limited to the fact that the auditor’s calculation includes a separate funding source that should not have been attributed to the actual total. Additionally, the stated variances were addressed through prior period adjustments, which are reflected in the succeeding quarter(s). However, the office maintains all relevant supporting documentation and is prepared to provide it upon request from the Grantor. Refer to CNMI’s Corrective Action Plan for additional information. Auditor Response: Variances were discussed and were acknowledged by the program personnel; however, the program personnel requires more time to reconcile the variances with the underlying accounting records.

Finding No. 2022-040 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 45 CFR section 95.621, 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 their biennial ADP system security reviews, together with pertinent supporting documentation, for HHS on-site reviews. Condition: The biennial review of the Program’s ADP system security was not performed. Cause: The CNMI lacks monitoring procedures 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. Identification as a Repeat Finding: Finding No. 2021-036 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 Medicaid Office disagrees with this finding. Due to internal scheduling constraints and the compressed timeline required to complete the FY2022 audit, the requested documents were not submitted by the specified deadline, resulting in this finding. However, the office maintains all relevant supporting documentation and is prepared to provide it upon request from the Grantor. Refer to CNMI’s Corrective Action Plan for additional information. Auditor Response: The CNMI states disagreement; however, CNMI also acknowledges that documentation of the biennial ADP system security review performed was not provided.

Finding No. 2022-041 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 - Provider Eligibility (Screening and Enrollment) Questioned Costs: $3,640,189 Criteria: Providers who have been barred from participation by the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) exclusion list are not eligible to be enrolled in the Medicaid program (42 CFR 455.436). Accordingly, in accordance with 42 CFR § 455.436 Federal database checks, the State Medicaid agency must do all of the following: a. Confirm the identity and determine the exclusion status of providers and any person with an ownership or control interest or who is an agent or managing employee of the provider through routine checks of Federal databases. b. Check the Social Security Administration's Death Master File, the National Plan and Provider Enumeration System (NPPES), the List of Excluded Individuals/Entities (LEIE), the Excluded Parties List System (EPLS), and any such other databases as the Secretary may prescribe. c. Consult appropriate databases to confirm identity upon enrollment and reenrollment; and d. Check the LEIE and EPLS no less frequently than monthly. Condition: Of nine (or 100%) service providers tested, aggregating $3,640,189 of a population of $29,196,458, supporting documentation was not provided to substantiate that the Service Providers are not under the Office of Inspector General (OIG) exclusion list. Cause: CNMI was not aware of the HHS OIG exclusion verification requirement, including the availability of the HHS OIG exclusion listing within the Centers for Medicare and Medicaid Services Portal until subsequent to FY2022. Effect: The CNMI is in noncompliance with the applicable special tests and provisions requirements and questioned costs of $3,640,189 result. Recommendation: 1. CNMI should establish and implement monitoring control procedures to ensure service providers are verified against the HHS OIG exclusion listing, prior to entering into or renewing service provider agreements; and 2. Responsible CNMI personnel should periodically monitor updates in federal regulations affecting the program. Views of Responsible Officials: CNMI Medicaid Office disagrees with the finding. While the office did perform OIG exclusion list validation, screenshots were not captured for each individual check. It is important to note that the OIG Exclusion List portal’s search function is limited to on-screen viewing and does not provide a built-in option to print or export search results. Refer to CNMI’s Corrective Action Plan for additional information. Auditor Response: Per discussion with program personnel, verification of service providers from the OIG exclusion list were not performed during FY2022, as the CNMI Medicaid Office was not aware of the HHS OIG exclusion verification requirement until subsequently to FY2022, for which is when the authorized program personnel gained access to the HHS OIG exclusion list within the CMS Portal.

Finding No. 2022-042 Federal Agency: U.S. Department of Homeland Security AL Program: 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) Federal Award No.: 4235DRMPP00000491; 4235DRMPP00000951; 4396DRMPP00000041; 4511DRMPP00000271; 4511DRMPP00000081 Area: Period of Performance Questioned Costs: $423,234 Criteria: In accordance with 2 CFR §200.344(c), the recipient must liquidate all financial obligations incurred under the Federal award not later than 120 calendar days after the conclusion of the period of performance. When justified, the Federal agency or pass-through entity may approve extensions for the recipient or subrecipient. Condition: Of twenty-nine nonpayroll expenditures tested, aggregating $2,973,162, of a total population of $2,973,162, the following were noted: 1. For four (or 14%), the liquidation occurred beyond the project worksheet’s liquidation date or 120 days from the project worksheet end date. Grant extension documentation was not provided. 2. For one (or 3%), the obligation occurred beyond the project worksheet end date of 06/30/2022. Grant extension documentation was not provided. Cause: The CNMI did not effectively monitor compliance with applicable period of performance requirements. Effect: The CNMI is in noncompliance with the period of performance requirements, and questioned costs of $423,234 result. Recommendation: Responsible personnel should monitor check payments to allow for timely liquidation. Grantor approval should be sought, as necessary. Views of Responsible Officials: Condition 1 - The Public Assistance Office agrees that the liquidation for DR4235MP (PW 95), was processed after the liquidation deadline; however, disagrees for DR4396MP (PW 4) as the liquidation was done prior to the closeout deadline of December 31, 2022 and liquidations for DR4511MP (PW 27) and DR4511MP (PW 8) were done prior to the closeout date of June 30, 2025. Condition 2 - The Public Assistance Office disagrees with this finding. The invoice was dated and recorded after the period of performance (June 30, 2022), but date of actual work completed as shown on the Megger Test was May 20, 2022. The Public Assistance Office acknowledges that the record of the Megger Test had not been submitted to the auditors when submitting documentation. Refer to CNMI’s Corrective Action Plan for additional information. Auditor Response: Condition 1 - Expenditures were liquidated after the liquidation period of performance end date. Condition 2 - The transaction was obligated in September 2022, which is after the period of performance end date of June 30, 2022.

Finding No. 2022-043 Federal Agency: U.S. Department of Labor AL Program: 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) Federal Award No.: B-4235DRMPP1SMR500, B-4396DRMPP1SMR500, B4404DRMPP1SMR500, B-4511DRMPP1SMR500 Area: Reporting Questioned Costs: $-0- Criteria: In accordance with 2 CFR Part 170 and the Federal Funding Accountability and Transparency Act (FFATA), recipients (i.e., direct recipients) of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more in federal funds to the FFATA Subaward Reporting System (SRS). For subaward information, recipients are required to report no later than the end of the month following the month in which the subaward was issued. Condition: CNMI did not report the subaward information for disasters 4235, 4396, 4404 and 4511 to the FFATA SRS in fiscal year 2022. Cause: The CNMI did not effectively monitor compliance with applicable reporting requirements. Effect: The CNMI is in noncompliance with applicable reporting requirements. Identification as a Repeat Finding: Finding No. 2021-039 Recommendation: CNMI should establish and implement a suitably designed internal control processes to prevent or detect material noncompliance over reporting compliance requirements, which should include review, approval and monitoring internal control procedures. In addition, the CNMI should establish policies and procedures to verify that the required FFATA reports are prepared and submitted to the SRS. Views of Responsible Officials: The Public Assistance Office agrees with this finding and is aware of the need to submit the Federal Funding Accountability and Transparency Act (“FFATA”) reports. Refer to CNMI’s Corrective Action Plan for additional information.

Finding No. 2022-044 Federal Agency: U.S. Department of the Homeland Security AL Program: 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) Federal Award No.: FEMA-4396-DR; FEMA-4234-DR, FEMA-4404-DR; FEMA-4511-DR Area: Subrecipient Monitoring Questioned Costs: $1,540,330 Criteria: In accordance with 2 CFR 200.332(e), a pass-through entity (PTE) must monitor the activities of a subrecipient as necessary to ensure that the subrecipient complies with Federal statutes, regulations, and the terms and conditions of the subaward. The PTE is responsible for monitoring the overall performance of a subrecipient to ensure that the goals and objectives of the subaward are achieved. In monitoring a subrecipient, a PTE must review financial and performance reports. Further, in accordance with 2 CFR 200.332(g), a PTE must verify that a subrecipient is audited as required by Subpart F when it is expected that the subrecipient’s Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in § 200.501. Condition: 1. Of eight subrecipients tested, aggregating $1,540,330, of a total population of $6,850,955, the following were noted: a. For eight (or 100%), evidence of CNMI’s review of financial and programmatic reports were not provided. b. For two or (25%) subrecipients, the CNMI did not perform appropriate review and follow up of the subrecipients’ audited financial statements for fiscal year 2022, dated April 30, 2024 and February 23, 2024. The subrecipients’ SEFA failed to include the federal awards it received from the CNMI. No questioned costs are presented as the amounts are questioned at Condition 1a. 2. No evidence was provided of procedures used to determine that subrecipients expending $750,000 or more in Federal awards have met the audit requirement of 2 CFR part 200, subpart F and that the required audits are completed within nine months of the end of the subrecipient’s audit period. In addition, we are aware that Project Strings 8812210010, 8812210015, and FG88120004 Single Audit Reports were due; however, the audits are still ongoing. 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 $1,540,330 result for Condition 1a. Recommendation: The CNMI should consider developing a tracking system to monitor compliance with applicable subrecipient monitoring requirements. Views of Responsible Officials: Conditions 1 and 2 - The Public Assistance Office agrees with this finding and acknowledges that, as the pass-through entity, we are responsible for monitoring subrecipients. Refer to CNMI’s Corrective Action Plan for additional information.

Finding No. 2022-045 Federal Agency: U.S. Department of Homeland Security AL Program: 97.039 Hazard Mitigation Grant Federal Award No.: DR-4235 Area: Allowable Costs/Cost Principles Questioned Costs: $99,924 Criteria: Grantees are required to ensure that payments made under the grant are not improper payments as defined under 2 CFR 200.1. Improper payments means a payment that should not have been made or that was made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements. The term improper payment includes: any payment to an ineligible recipient; any payment for an ineligible good or service; any duplicate payment; any payment for a good or service not received, except for those payments where authorized by law; any payment that is not authorized by law; and any payment that does not account for credit for applicable discounts. Condition: Of thirty-six nonpayroll expenditures tested, aggregating $3,932,053 of a total population of $4,097,083, one (or 3%) (under business unit M4235, object account no. 8812210002, contract no. 704583-OC, amounting to $99,924) was recorded twice in the general ledger and was requested for reimbursement twice under the Federal award on December 22, 2021 and on January 18, 2022, for which the amount is questioned. 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 $99,924 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: The Hazard Mitigation Grant Program (HMGP) agrees with this finding. During the audit submission process, HMGP provided the support documents for the journal entries and reversals associated with the $99,923 to the auditor, as requested. However, it was only upon receiving this audit finding, that the discrepancy of a duplicate audit drawdown was called into question. HMGP’s ledger for this project as well as the Munis drawdown history does not indicate a remaining balance of $99,923 and the project related to this finding has already been closed out. To address this audit finding that HMGP received this last week on September 17th, HMGP reached out to the Department of Finance to provide related documents for the drawdowns. Based on the documents provided by DOF, the questioned cost was not a direct result of the duplicate drawdown but as a result of the reverse journal entries made by Tyler Munis staff in an effort to correct the duplicate drawdown. HMGP is prepared to provide additional documentation upon request. Additionally, acknowledging that the second debit to construction in August of 2022 for $99,924 was recorded and was not corrected for this project. HMGP will work with DOF to correct the journal entry and return the funds to FEMA. Refer to CNMI’s Corrective Action Plan for additional information.

Finding No. 2022-046 Federal Agency: U.S. Department of Homeland Security AL Program: 97.039 Hazard Mitigation Grant Program Federal Award No.: DR-4404 / DR-4235 Area: Cash Management Questioned Costs: $2,687,277 Criteria: In accordance with the CNMI’s Hazard Mitigation Grant Program (HMGP) Administrative Plan, funds will be reimbursed to the CNMI after making eligible payments for approved HMGP projects. For advance drawdowns, a written justification for advancement will be submitted to the Federal Emergency Management Agency (FEMA) for approval. Condition: For thirty (or 75%) of forty drawdowns tested, aggregating $2,702,122 of a total population of $4,561,759, check clearing dates were after the drawdown request dates. Cause: CNMI did not enforce compliance with applicable cash management requirements and lacks monitoring control over the following: 1. Timely renewal of its FY2021 Treasury State Agreement (TSA), which resulted in the delay of renewing its FY2022 TSA. 2. Expenditures are incurred subsequent to the drawdown request dates. Effect: CNMI is in noncompliance with applicable cash management requirements and questioned costs of $2,687,277 result. Recommendation: CNMI should strengthen and enforce compliance with applicable cash management requirements, develop and implement effective monitoring controls over the following: 1. Responsible personnel should timely submit and renew the TSA; and 2. Expenditures are paid prior to the drawdown request dates. Views of Responsible Officials: HMGP disagrees with this finding. According to 31 CFR part 205, which is the default procedure if a Treasury-State Agreement (TSA) is not formally in effect, it is permissible and standard practice for a reimbursement check to clear after the disbursement request date, provided the subrecipient has submitted proof of prior payment with local funds. All checks in the samples tested are from local funds and all documents attached verified the expenses. Reimbursable funding is a recognized funding technique under 31 CFR 205.12(b)(e). This technique means that a Federal Program Agency transfers federal funds to a state after that state has already paid out the funds for Federal assistance program purposes and provided all necessary documentation. HMGP’s process operates under this reimbursement methodology. Subrecipients incur costs using local funds first, then submit required documentation to HMGP for reimbursement. Consequently, the timing of reimbursement payments clearing after the request date is an inherent and necessary characteristic of this system. The finding suggests a deficiency, HMGP’s procedures are standard and compliant practice when operating under a reimbursement system and the default procedure. Refer to CNMI’s Corrective Action Plan for additional information. Auditor Response: CNMI's interpretation of “paid out” as the issuance of a check is inconsistent with 31 CFR § 205.12, which defines payout as the actual debit from the State’s bank account. CNMI’s interpretation and practice does not comply with the reimbursable funding technique, which requires that Federal funds be transferred only after CNMI has paid out funds for program purposes.

Finding No. 2022-047 Federal Agency: U.S. Department of Homeland Security AL Program: 97.039 Hazard Mitigation Grant Federal Award No.: DR-4404 / DR-4235 Area: Reporting Questioned Costs: $-0- Criteria: In accordance with 2 CFR Part 170 and the Federal Funding Accountability and Transparency Act (FFATA), recipients (i.e., direct recipients) of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more in federal funds to the FFATA Subaward Reporting System (FSRS). For subaward information, recipients are required to report no later than the end of the month following the month in which the subaward was issued. Condition: CNMI did not report the subaward information for the following subawards with $30,000 or more in Federal funds to the FFATA SRS in fiscal year 2022: Cause: CNMI did not effectively monitor compliance with applicable reporting requirements. Effect: The CNMI is in noncompliance with applicable reporting requirements. Recommendation: CNMI should establish and implement a suitably designed internal control processes to prevent or detect material noncompliance over reporting compliance requirements, which should include review, approval and monitoring internal control procedures. Further, the CNMI should establish policies and procedures to verify that the required FFATA reports are prepared and submitted to the SRS. Views of Responsible Officials: HMGP agrees with this finding. HMGP acknowledges that this FFATA reporting condition was not addressed during the time period under review. However, HMGP became aware of the issue during a previous audit and have since been working to implement corrective measures. An action already taken for HMGP includes reaching out to the Public Assistance Office who had already begun the process of obtaining the necessary permissions on the FFATA Subaward Reporting System (FSRS) online submission portal to assign a designated administrator for our programs. Refer to CNMI’s Corrective Action Plan for additional information.