By Patricia Tummons
For years, the Western Pacific Fishery Management Council has doled out millions of dollars to U.S.-flagged island territories from the Western Pacific Sustainable Fisheries Fund. But the way in which the funds have been distributed has always been a black box. Each territory has a Marine Conservation Plan, with lists of priority projects and objectives, that is to be used as a guide for the expenditure of SFF monies. Yet the decisions as to what and who gets the money are never discussed in a public forum or voted on at a public meeting.
It is hardly surprising, then, that when the Department of Commerce’s Office of Inspector General finally got around to auditing the council’s awards of SFF funds, it found that 40 percent of the more than $3 million in expenditures reviewed had been spent without supporting documentation, required approvals, or otherwise without compliance with the Department of Commerce’s financial guidance.
Altogether, since 2010, the council has received more than $7.4 million in SFF awards that it has then redistributed to the territories. Because of records-retention limits, the audit period was limited to awards made since the start of federal fiscal year 2015, during which time the council received about $4.5 million in SFF awards.
Of that $4.5 million, the audit found expenditures totaling $1,237,671 were questionable and it asks the director of NOAA’s Grants Management Division to determine how much of that should be repaid.
Here’s how those questioned expenses were broken down in the audit:
Undocumented Costs
Of those questionable expenditures, documentation was not available to the auditors for $181,023. That includes about $95,000 in claimed expenses for supplies, $13,000 for unspecified administrative costs, $4,000 for the council’s much-touted scholarship program, and $10,000 in sponsorship of a fishing festival. Also, the council directly paid $20,000 to a contractor on behalf of a grantee, even though the contract “did not include this expenditure” by the council. In a footnote providing further information on this last item, the audit notes that “although the council provided an invoice, at that time there was no basis for the invoice. The expenditure was not included in the subsequently signed contract and represents an unsupported overpayment.” What’s more, the audit says, the expense is unallowable since it occurred before the grant it was charged against had been made available to the council. As intriguing as this is, the audit does not name names or provide other details of the payment.
Unapproved Payments
About $320,000 in expenditures were identified as unapproved. “Approval is required for certain expenditures to be allowable,” the audit states, “such as payment for non-employee travel costs for conferences or training, payments made to another federal agency, pre-award costs, or deviations from the approved scope or objective of the projects.”
The non-employee travel expenses came to nearly $43,000. As for the payment to a federal agency, again, there is no identification provided in the audit, but the amount paid came to $119,357. More than $132,000 in payments were made before the start date of the award, and another $25,055 was spent on costs “outside the scope of the approved award budgets.”
Improper Charges
Charges amounting to more than half a million dollars in administrative costs — $522,235 — were identified as improper. These included $115,000 in year-end contributions to employee 401k plans, $108,341 for office rent, and $271,121 for council salaries.
“To be allowable, costs must be allocated to federal awards in relation to the relative benefits received from the purchased goods and services,” the audit states. These expenses “were not in the council’s approved WPSFF award budgets, and documentation was not provided establishing the benefit received to the WPSFF awards in relation to the proportion charged.”
Recipients’ Questioned Costs
When the council receives a grant from the Sustainable Fisheries Fund, it is to carry out a specific purpose, one that is to be in furtherance of the goals set in the Marine Conservation Plan of whichever territory is the ultimate beneficiary of the grant. The council then awards funds to the party — the subrecipient, in NOAA grant terminology — that is to carry out the tasks set forth in the grant.
Those subrecipients are supposed to follow the same practices that allow for accountability and fairness that the council itself is supposed to follow. Yet the audit determined that more than $181,000 of the expenditures made by just three subrecipients were questionable.
The Commonwealth of the Northern Mariana Islands’ Department of Land and Natural Resources claimed $109,751 in expenditures without documenting them. Other subrecipients received improper advances on their grants without the council having documentation of funds actually spent or reasons why the advance was necessary.
In addition, subrecipients were often slow in spending awarded funds, with one taking more than two years to do so. In the case of five awards to subrecipients, funds amounting to more than $151,000 were still unspent at the time of the audit. Of that, $76,379 was returned unspent, leaving $74,672 outstanding in unspent SFF funds awarded to subrecipients.
Inadequate Documentation
Finally, the audit notes that the council does not maintain required records showing that goods and services paid for by the council were actually received. The council, the audit states, “is required to maintain records identifying the application of federally funded activities and assets… [B]efore payment can be made to a vendor, the council must have written evidence that the purchased items were received.”
Yet “of the 31 contracts and expenditures for goods and services tested, we identified totaling $53,577 where the council was not able to provide documentation or evidence that the goods purchased were received,” the audit says, meaning that “federal award funds may have paid for deliverables which were not received or satisfactory.”
No Competitive Procurement
In addition to identifying questionable expenses, the audit faults the council for its procurement practices. “NOAA must approve contracts in excess of $100,000 awarded on a noncompetitive basis,” it states. “However, we found the council and subrecipients did not always establish that the procurement method and costs charged … were fair and reasonable.” Four contracts totaling more than $185,000 were awarded noncompetitively, the audit found.
Council Response
The OIG audit and appendices runs to 21 pages. The council’s comments on it come to nearly half that – nine pages. (It would be more if the council used a font size equal to that in the OIG report.)
In its defense, the council claims ignorance. The covering letter, signed by Simonds and council chair Archie Soliai, states that the council “recognizes that improvements in its record-keeping systems are appropriate, and the council remains committed to undertaking these improvements.”
The council disputes the audit’s determination that some costs are questionable because they were not approved in advance. Of non-staff travel costs, “it is reasonable to assume had we asked, it would have been approved,” the letter states. Of funds issued to a federal agency, again, the council says, “it is reasonable to assume that had we asked the reprogramming would have been approved.”
In other instances, it claims ignorance of the required record-keeping requirements and says it has requested NOAA’s grants division “to host grants training specifically for council and territorial agency staff.”
NOAA Oversight
Although the audit did not address NOAA oversight in the audit, it did state that this was a matter that the OIG looked into. In addition to conducting the Wespac expenditure of SFF grants, the audit states, “[w]e also determined whether NOAA provided adequate oversight and monitoring of this program, and will issue a separate memorandum to NOAA.”
Volume 32, Number 6 December 2021
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