Finding 1224439 — 2023-038

Finding No. 2023-038 Federal Agency: U.S. Department of Education AL Program: COVID-19 84.425H Education Stabilization Fund - Governors (Outlying Areas) (ESF-Governor) Federal Award No.: S425H210001 Area: Subrecipient Monitoring Questioned Costs: $6,641,757 Criteria: Per 2 CFR § 200.1, a subrecipient in the Uniform Guidance 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 U.S. Department of Education engages with non-Federal entities by awarding federal funds in the form of a subaward as an extension of its services. The recipient remains responsible for monitoring and overseeing the use of federal 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 the U.S. Department of Education on their subrecipients’ use of payments from the ESF-Governor funds for the duration of the award. Accordingly, in accordance with 2 CFR §200.332, a 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) 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) Federal Award Date; (iv) Subaward Period of Performance Start and End Date; (v) Total Amount of Federal Funds Obligated to the subrecipient by the PTE, including the current financial obligation; Finding No. 2023-038, continued Federal Agency: U.S. Department of Education AL Program: COVID-19 84.425H Education Stabilization Fund - Governors (Outlying Areas) (ESF-Governor) Federal Award No.: S425H210001 Area: Subrecipient Monitoring Questioned Costs: $6,641,757 Criteria, continued: (vi) Total Amount of the Federal Award committed to the subrecipient by the pass-through entity; (vii) Name of the Federal agency; and (viii) Assistance Listings title and number; the PTE 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 PTE imposes on the subrecipient for the PTE 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 PTE must provide to the Federal agency; (4) A requirement that the subrecipient permits the PTE and auditors to access the subrecipient's records and financial statements for the PTE to fulfill its monitoring requirements; and (5) Appropriate terms and conditions concerning the closeout of the subaward. (c) 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 Finding No. 2023-038, continued Federal Agency: U.S. Department of Education AL Program: COVID-19 84.425H Education Stabilization Fund - Governors (Outlying Areas) (ESF-Governor) Federal Award No.: S425H210001 Area: Subrecipient Monitoring Questioned Costs: $6,641,757 Criteria, continued: (4) The extent and results of any Federal agency monitoring (for example, if the subrecipient also receives Federal awards directly from the Federal agency). (d) If appropriate, consider implementing specific conditions in a subaward as described in §200.208 and notify the Federal agency of the specific conditions. (e) 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. Finding No. 2023-038, continued Federal Agency: U.S. Department of Education AL Program: COVID-19 84.425H Education Stabilization Fund - Governors (Outlying Areas) (ESF-Governor) Federal Award No.: S425H210001 Area: Subrecipient Monitoring Questioned Costs: $6,641,757 Criteria, continued: (f) Depending upon the pass-through entity's assessment of the risk posed by the subrecipient (as described in paragraph (c) of this section), the following monitoring tools may be useful for the pass-through entity to ensure proper accountability and compliance with program requirements and achievement of performance goals: (1) Providing subrecipients with training and technical assistance on program-related matters; (2) Performing site visits to review the subrecipient's program operations; and (3) Arranging for agreed-upon-procedures engagements as described in § 200.425. (g) Verify that a subrecipient is audited as required by subpart F of this part. (h) Consider whether the results of a subrecipient's audit, site visits, or other monitoring necessitate adjustments to the pass-through entity's records. (i) Consider taking enforcement action against noncompliant subrecipients as described in §200.339 and in program regulations. Condition: 1. For two (or 100%) new subawards made during FY2023, aggregating $6,641,757 of a total population of $6,641,757, there was no documentation of the risk assessments performed and verification as to whether the subrecipients are not suspended, debarred, or otherwise excluded from receiving Federal funds. Finding No. 2023-038, continued Federal Agency: U.S. Department of Education AL Program: COVID-19 84.425H Education Stabilization Fund - Governors (Outlying Areas) (ESF-Governor) Federal Award No.: S425H210001 Area: Subrecipient Monitoring Questioned Costs: $6,641,757 Condition, continued: Further, the subaward agreements did not include the following required information: (1) Subrecipients’ unique entity identifiers; and (2) Appropriate terms and conditions concerning the closeout of the subaward. 2. For two (or 100%) subrecipients subject to monitoring compliance requirements, aggregating $6,641,757 of a total population of $6,641,757, there was no documentation on monitoring procedures performed during FY2023, and no documentation of the verification as to whether the subrecipients are subject to the audit requirements. CNMI did not provide evidence of procedures used to determine that the subrecipients (which expended more than $750,000 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. No questioned costs are presented as amounts are questioned at Condition 1. Cause: 1. CNMI does not have an established subrecipient risk assessment policy and procedures prior to entering into the subaward agreement and to identify the type of monitoring procedures required to be performed for the subrecipient. 2. CNMI does not have an established policy or procedure that monitors whether a subrecipient that incurs expenditures above $750,000 during the year, has hired the services of a reputable auditor to conduct a single audit engagement and to ensure that follow-up corrective actions have been performed as regards to the deficiencies identified during the previous audits. 3. Inadequate documentation and systematic filing of relevant documentation supporting program costs. Finding No. 2023-038, continued Federal Agency: U.S. Department of Education AL Program: COVID-19 84.425H Education Stabilization Fund - Governors (Outlying Areas) (ESF-Governor) Federal Award No.: S425H210001 Area: Subrecipient Monitoring Questioned Costs: $6,641,757 Effect or Potential Effect: CNMI is in noncompliance with applicable subrecipient monitoring compliance requirements and questioned costs of $6,641,757 result for Condition 1. Identification as a Repeat Finding: This is not a repeat finding. Recommendation: We recommend 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 and enforce monitoring internal control procedures over the following: a. Evaluation over each subrecipient’s fraud risk and risk of noncompliance with a subaward to determine the appropriate subrecipient monitoring; b. Monitoring procedures to ensure that all subaward agreements include the required information in accordance with 2 CFR §200.332(b)(1); c. Monitoring activities of a subrecipient to ensure that the subrecipient complies with Federal statutes, regulations, and the terms and conditions of the subaward; d. Verification that subrecipients are audited as required by 2 CFR Part 200 Subpart F; and e. Adequate documentation and systematic filing of relevant documentation supporting program costs. Finding No. 2023-038, continued Federal Agency: U.S. Department of Education AL Program: COVID-19 84.425H Education Stabilization Fund - Governors (Outlying Areas) (ESF-Governor) Federal Award No.: S425H210001 Area: Subrecipient Monitoring Questioned Costs: $6,641,757 Views of Responsible Officials: Conditions 1 and 2 - CNMI Department of Finance agrees with this finding. CNMI submitted risk assessment and monitoring compliance documentation to the auditor on February 26, 2026, after the agreed February 19, 2026 deadline, resulting in evidence timing deficiency. CNMI established Standard Operating Procedures for subrecipient monitoring effective October 28, 2026. Management will implement standardized file labeling and retention procedures in accordance with the SOP so that each subrecipient file contains the subrecipient determination, required subaward clauses, the unique entity identifier, documented SAM.gov exclusion checks, and verification of audit requirements. In alignment with 2 CFR §200.332, CNMI will review financial and performance reports quarterly, conduct an annual performance assessment using a standardized checklist (updated annually or upon project completion), maintain documentation of all monitoring activities, and verify audit status for entities subject to the Single Audit Act. The risk assessment and monitoring compliance documentation for this grant is available to the auditor upon request. Refer to CNMI’s Corrective Action Plan for additional information.

Finding No.: 2023-038 AL Program: COVID-19 84.425H – Education Stabilization Fund – Governors (Outlying Areas) (ESF-Governor) Area: Subrecipient Monitoring Questioned Costs: $6,641,757 Contact Person(s): Tracy B. Norita, Secretary of Finance Corrective Action Plan: Condition 1-2: The CNMI Department of Finance agrees with this finding. CNMI submitted risk assessment and monitoring compliance documentation to the auditor on February 26, 2026, after the agreed February 19, 2026, deadline, resulting in evidence timing deficiency. CNMI established Standard Operating Procedures for subrecipient monitoring effective October 28, 2026. Management will implement standardized file labeling and retention procedures in accordance with the SOP so that each subrecipient file contains the subrecipient determination, required subaward clauses, the unique entity identifier, documented SAM.gov exclusion checks, and verification of audit requirements. In alignment with 2 CFR §200.332, CNMI will review financial and performance reports quarterly, conduct an annual performance assessment using a standardized checklist (updated annually or upon project completion), maintain documentation of all monitoring activities, and verify audit status for entities subject to the Single Audit Act. The risk assessment and monitoring compliance documentation for this grant is available to the auditor upon request. Proposed Completion Date: Completed

ALN	Program Name	Expenditures
21.027	CORONAVIRUS STATE AND LOCAL FISCAL RECOVERY FUNDS	$104.07M
93.778	GRANTS TO STATES FOR MEDICAID	$76.95M
97.036	DISASTER GRANTS - PUBLIC ASSISTANCE (PRESIDENTIALLY DECLARED DISASTERS)	$31.11M
10.539	CNMI NUTRITION ASSISTANCE	$16.44M
93.767	CHILDREN'S HEALTH INSURANCE PROGRAM	$14.01M
93.575	CHILD CARE AND DEVELOPMENT BLOCK GRANT	$10.33M
10.542	PANDEMIC EBT FOOD BENEFITS	$9.86M
20.205	HIGHWAY PLANNING AND CONSTRUCTION	$7.85M
84.425H	Education Stabilization Fund-Governors (Outlying Areas)	$6.68M
17.225	UNEMPLOYMENT INSURANCE	$5.91M
11.307	ECONOMIC ADJUSTMENT ASSISTANCE	$4.56M
21.023	EMERGENCY RENTAL ASSISTANCE PROGRAM	$3.57M
93.596	CHILD CARE MANDATORY AND MATCHING FUNDS OF THE CHILD CARE AND DEVELOPMENT FUND	$3.54M
20.526	BUSES AND BUS FACILITIES FORMULA, COMPETITIVE, AND LOW OR NO EMISSIONS PROGRAMS	$2.85M
66.600	Environmental Protection Consolidated Grants for the Insular Areas - Program Support	$2.46M
66.801	HAZARDOUS WASTE MANAGEMENT STATE PROGRAM SUPPORT	$2.18M
97.039	HAZARD MITIGATION GRANT	$2.05M
93.667	SOCIAL SERVICES BLOCK GRANT	$1.52M
15.611	WILDLIFE RESTORATION AND BASIC HUNTER EDUCATION AND SAFETY	$1.45M
12.617	ECONOMIC ADJUSTMENT ASSISTANCE FOR STATE GOVERNMENTS	$1.43M
15.875	ECONOMIC, SOCIAL, AND POLITICAL DEVELOPMENT OF THE TERRITORIES	$1.39M
11.419	COASTAL ZONE MANAGEMENT ADMINISTRATION AWARDS	$1.06M
15.605	SPORT FISH RESTORATION	$1.03M
20.600	State and Community Highway Safety	$1.02M
84.126A	Rehabilitation Services Vocational Rehabilitation Grants to States	$722,785
17.277	WIOA NATIONAL DISLOCATED WORKER GRANTS / WIA NATIONAL EMERGENCY GRANTS	$642,983
97.067	HOMELAND SECURITY GRANT PROGRAM	$586,122
11.482	CORAL REEF CONSERVATION PROGRAM	$485,806
16.575	CRIME VICTIM ASSISTANCE	$480,848
93.045	SPECIAL PROGRAMS FOR THE AGING, TITLE III, PART C, NUTRITION SERVICES	$465,958
16.588	VIOLENCE AGAINST WOMEN FORMULA GRANTS	$463,780
10.649	PANDEMIC EBT ADMINISTRATIVE COSTS	$459,938
16.710	Public Safety Partnership and Community Policing Grants	$439,489
97.012	BOATING SAFETY FINANCIAL ASSISTANCE	$400,545
93.044	SPECIAL PROGRAMS FOR THE AGING, TITLE III, PART B, GRANTS FOR SUPPORTIVE SERVICES AND SENIOR CENTERS	$392,210
17.278	WIOA DISLOCATED WORKER FORMULA GRANTS	$374,455
15.615	COOPERATIVE ENDANGERED SPECIES CONSERVATION FUND	$368,265
16.738	EDWARD BYRNE MEMORIAL JUSTICE ASSISTANCE GRANT PROGRAM	$341,575
97.047	BRIC: BUILDING RESILIENT INFRASTRUCTURE AND COMMUNITIES	$319,766
17.259	WIOA YOUTH ACTIVITIES	$307,211
16.750	Support for Adam Walsh Act Implementation Program	$273,641
81.041	STATE ENERGY PROGRAM	$265,459
17.504	CONSULTATION AGREEMENTS	$264,451
20.218	MOTOR CARRIER SAFETY ASSISTANCE	$252,525
45.025	PROMOTION OF THE ARTS PARTNERSHIP AGREEMENTS	$239,433
17.258	WIOA ADULT PROGRAM	$229,634
17.235	SENIOR COMMUNITY SERVICE EMPLOYMENT PROGRAM	$224,606
81.042	WEATHERIZATION ASSISTANCE FOR LOW-INCOME PERSONS	$212,348
15.634	STATE WILDLIFE GRANTS	$201,740
16.034	CORONAVIRUS EMERGENCY SUPPLEMENTAL FUNDING PROGRAM	$197,962
10.766	COMMUNITY FACILITIES LOANS AND GRANTS	$195,515
15.904	HISTORIC PRESERVATION FUND GRANTS-IN-AID	$186,515
11.472	COOPERATIVE RESEARCH PROGRAM	$168,303
93.464	ACL ASSISTIVE TECHNOLOGY	$128,419
93.747	ELDER ABUSE PREVENTION INTERVENTIONS PROGRAM	$123,018
17.285	REGISTERED APPRENTICESHIP	$116,929
11.437	FISHERIES DATA PROGRAM	$112,596
11.467	METEOROLOGIC AND HYDROLOGIC MODERNIZATION DEVELOPMENT	$104,532
10.664	COOPERATIVE FORESTRY ASSISTANCE	$103,272
15.663	NFWF-USFWS CONSERVATION PARTNERSHIP	$91,690
11.035	BROADBAND EQUITY, ACCESS, AND DEPLOYMENT PROGRAM	$87,681
97.062	SCIENTIFIC LEADERSHIP AWARDS	$86,357
93.048	SPECIAL PROGRAMS FOR THE AGING, TITLE IV, AND TITLE II, DISCRETIONARY PROJECTS	$85,373
93.127	EMERGENCY MEDICAL SERVICES FOR CHILDREN	$84,663
15.957	EMERGENCY SUPPLEMENTAL HISTORIC PRESERVATION FUND	$73,515
17.273	TEMPORARY LABOR CERTIFICATION FOR FOREIGN WORKERS	$68,059
97.042	EMERGENCY MANAGEMENT PERFORMANCE GRANTS	$67,796
12.300	Basic and Applied Scientific Research	$65,974
20.509	FORMULA GRANTS FOR RURAL AREAS AND TRIBAL TRANSIT PROGRAM	$64,714
93.645	STEPHANIE TUBBS JONES CHILD WELFARE SERVICES PROGRAM	$61,124
10.680	Forest Health Protection	$60,114
10.179	MICRO-GRANTS FOR FOOD SECURITY PROGRAM	$58,129
16.017	SEXUAL ASSAULT SERVICES FORMULA PROGRAM	$58,045
10.170	Specialty Crop Block Grant Program - Farm Bill	$52,296
93.053	NUTRITION SERVICES INCENTIVE PROGRAM	$50,933
93.556	MARYLEE ALLEN PROMOTING SAFE AND STABLE FAMILIES PROGRAM	$49,361
59.061	STATE TRADE EXPANSION	$41,693
93.569	COMMUNITY SERVICES BLOCK GRANT	$39,897
11.407	INTERJURISDICTIONAL FISHERIES ACT OF 1986	$36,146
45.310	Grants to States	$32,929
12.022	DOD MENTOR-PROTEGE PROGRAM	$31,470
93.369	ACL INDEPENDENT LIVING STATE GRANTS	$31,188
21.029	CORONAVIRUS CAPITAL PROJECTS FUND	$30,034
93.450	Ebola Healthcare Preparedness and Response for Select Cities with Enhanced Airport Entrance Screenings from Affected Countries in West Africa	$27,956
12.600	Community Investment	$25,881
66.442	WATER INFRASTRUCTURE IMPROVEMENTS FOR THE NATION SMALL AND UNDERSERVED COMMUNITIES EMERGING CONTAMINANTS GRANT PROGRAM	$22,460
16.585	TREATMENT COURT DISCRETIONARY GRANT PROGRAM	$18,807
93.052	NATIONAL FAMILY CAREGIVER SUPPORT, TITLE III, PART E	$16,169
93.590	Community - Based Child Abuse Prevention Grants	$15,683
10.698	STATE & PRIVATE FORESTRY COOPERATIVE FIRE ASSISTANCE	$14,514
93.043	SPECIAL PROGRAMS FOR THE AGING, TITLE III, PART D, DISEASE PREVENTION AND HEALTH PROMOTION SERVICES	$14,287
16.540	Juvenile Justice and Delinquency Prevention	$13,470
84.177B	Rehabilitation Services Independent Living Services for Older Individuals Who are Blind	$13,468
17.600	Mine Health and Safety Grants	$13,189
15.631	PARTNERS FOR FISH AND WILDLIFE	$9,540
20.703	INTERAGENCY HAZARDOUS MATERIALS PUBLIC SECTOR TRAINING AND PLANNING GRANTS	$9,151
45.129	PROMOTION OF THE HUMANITIES FEDERAL/STATE PARTNERSHIP	$8,543
66.040	Diesel Emissions Reduction Act (DERA) State Grants	$8,314
93.671	FAMILY VIOLENCE PREVENTION AND SERVICES/DOMESTIC VIOLENCE SHELTER AND SUPPORTIVE SERVICES	$8,215
93.042	SPECIAL PROGRAMS FOR THE AGING, TITLE VII, CHAPTER 2, LONG TERM CARE OMBUDSMAN SERVICES FOR OLDER INDIVIDUALS	$5,973
16.753	CONGRESSIONALLY RECOMMENDED AWARDS	$5,484
11.032	STATE DIGITAL EQUITY PLANNING AND CAPACITY GRANT	$4,673
15.657	ENDANGERED SPECIES RECOVERY IMPLEMENTATION	$4,508
93.558	TEMPORARY ASSISTANCE FOR NEEDY FAMILIES	$4,200
11.U01	2010 Census	$2,255
93.630	Developmental Disabilities Basic Support and Advocacy Grants	$1,917
11.016	STATISTICAL, RESEARCH, AND METHODOLOGY ASSISTANCE	$1,265
10.950	Agricultural Statistics Report	$1,113
12.113	STATE MEMORANDUM OF AGREEMENT PROGRAM FOR THE REIMBURSEMENT OF TECHNICAL SERVICES	$1,029
93.568	LOW-INCOME HOME ENERGY ASSISTANCE	$854
20.500	Federal Transit Capital Investment Grants	$761
93.041	SPECIAL PROGRAMS FOR THE AGING, TITLE VII, CHAPTER 3, PROGRAMS FOR PREVENTION OF ELDER ABUSE, NEGLECT, AND EXPLOITATION	$525
20.513	ENHANCED MOBILITY OF SENIORS AND INDIVIDUALS WITH DISABILITIES	$318
11.473	OFFICE FOR COASTAL MANAGEMENT	$169

Finding 1224439 (2023-038)

AI Summary

Finding Text

Corrective Action Plan

Categories

Other Findings in this Audit

Programs in Audit