[Audit Report on Discretionary and Reprogrammed Funds, Office of the Governor, Commonwealth of the Northern Mariana Islands]
[From the U.S. Government Printing Office, www.gpo.gov]

Report No. 99-i-356

Title: Audit Report on Discretionary and Reprogrammed Funds, Office
       of the Governor, Commonwealth of the Northern Mariana Islands

Date:  March 26, 1999



                  **********DISCLAIMER**********

This file contains an ASCII representation of an OIG report.
No attempt has been made to display graphic images or
illustrations.
Some tables may be included, but may not resemble those in the
printed version.

A printed copy of this report may be obtained by referring to the
PDF
file or by calling the Office of Inspector General, Division of
Acquisition and Management Operations at (202) 208-4599.

                  ******************************



U.S. Department of the Interior
Office of Inspector General



AUDIT REPORT


DISCRETIONARY AND REPROGRAMMED FUNDS,
OFFICE OF THE GOVERNOR, COMMONWEALTH OF THE
NORTHERN MARIANA ISLANDS


REPORT NO. 99-I-356

MARCH 1999






MEMORANDUM


             TO:  The Secretary

           FROM:  Eljay B. Bowron
                  Inspector General

SUBJECT SUMMARY:  Final Audit Report - "Discretionary and
                  Reprogrammed Funds, Office of the Governor,
                  Commonwealth of the Northern
                  Mariana Islands" (No. 99-i-356)

Attached for your information is a copy of the subject final
audit report.  The objective of the audit was to determine
whether use of discretionary and reprogrammed funds by the former
Governor of the Commonwealth of the Northern Mariana Islands was
proper and in accordance with applicable laws and regulations.

We found that during fiscal years 1996, 1997, and 1998 (through
December 31, 1997), the Office of the Governor authorized the
expenditure of funds from the Governor's discretionary fund which
exceeded appropriated amounts and made expenditures from the
discretionary fund which were either not adequately supported or,
in our opinion, did not appear to have been made for a "public
purpose."   In addition, during fiscal years 1996 and 1997, the
Office of the Governor authorized the reprogramming of funds
between object classifications for appropriations that the
Legislature had specifically restricted from reprogramming
authority.

These deficiencies occurred because the former Governor and the
former Secretary of  Finance (who served as the certifying
officer) charged expenditures to the discretionary fund, although
the annual appropriations for the fund had been depleted.  In
addition, there were no written policies and procedures that
clearly identified the purposes for which the discretionary fund
could be used, and there was no requirement for the Governor's
Office to prepare and submit periodic reports on the status of
the discretionary fund to the Commonwealth Legislature for
oversight purposes.  Also, the Office of the Governor was not
preparing and submitting the required quarterly and annual
reports on reprogramming actions to the Legislature.  As a
result, expenditures from the discretionary fund exceeded
appropriations by $900,000 in fiscal year 1996, $3.8 million in
fiscal year 1997, and $1.8 million in fiscal year 1998.  In
addition, during fiscal years 1996 and 1997, appropriated funds
of $432,764 were not available for the purposes intended by the
Legislature.

Although we requested that the Governor, the President of the
Senate, and the Speaker of the House of Representatives respond
to the draft report, we did not receive any of the responses.
Therefore, the report's five recommendations are unresolved.

If you have any questions concerning this matter, please contact
me at (202) 208-5745 or Mr. Robert J. Williams, Assistant
Inspector General for Audits, at (202) 208-4252.

Attachment






N-IN-NMI-002-98




The Honorable Paul A. Manglona
President of the Senate
Commonwealth of the Northern Mariana Islands Legislature
P.O. Box 129
Saipan, MP 96950

Subject:  Audit Report on Discretionary and Reprogrammed Funds,
Office of the Governor, Commonwealth of the Northern Mariana
Islands (No. 99-i-356)


Dear President Manglona:

This report presents the results of our review of the Office of
the Governor's use of discretionary and reprogrammed funds of the
Commonwealth of the Northern Mariana Islands.  The objective of
the audit was to determine whether the former Governor's use of
discretionary and reprogrammed funds was proper and in accordance
with applicable laws and regulations. The scope of the audit
covered fiscal years 1996, 1997, and 1998 (through December 31,
1997).

We found that during the period under audit, the Office of the
Governor authorized the expenditure of funds from the Governor's
discretionary fund which exceeded appropriated amounts and made
expenditures from the discretionary fund which were either not
adequately supported or, in our opinion, did not appear to have
been made for a "public purpose."   In addition, we found that
during fiscal years 1996 and 1997, the Office of the Governor
authorized the reprogramming of funds between object
classifications for appropriations that the Legislature had
specifically restricted from reprogramming authority.

These deficiencies occurred because the former Governor and the
former Secretary of  Finance (who served as the certifying
officer) charged expenditures to the discretionary fund, although
the annual appropriations for the fund had been depleted.  In
addition, there were no written policies and procedures that
clearly identified the purposes for which the discretionary fund
could be used, and there was no requirement for the Governor's
Office to prepare and submit periodic reports on the status of
the discretionary fund to the Commonwealth Legislature for
oversight purposes.  Also, the Office of the Governor had not
assigned responsibility for preparing and submitting the required
quarterly and annual reports on reprogramming actions to the
Legislature.  As a result, expenditures from the discretionary
fund exceeded appropriations by $900,000 in fiscal year 1996,
$3.8 million in fiscal year 1997, and $1.8 million in fiscal year
1998.  In addition, during fiscal years 1996 and 1997,
appropriated funds totaling $432,764 were improperly
reprogrammed.

To correct these conditions, we recommended that the Governor
direct the Attorney General of the Commonwealth of the Northern
Mariana Islands to investigate the overexpenditures of the former
Governor's discretionary fund made during fiscal years 1996,
1997, and 1998 and the questionable reprogramming actions made
during fiscal years 1996 and 1997 and, if appropriate, take
action against those officials responsible for approving the
expenditure of funds in excess of annual appropriations and for
authorizing the improper reprogramming actions.   In addition, we
recommended that the Governor develop and implement written
policies and procedures which state the purposes for which the
discretionary funds can be used and assign responsibility for
ensuring that the required quarterly and annual reports on
reprogramming actions are prepared and submitted to the
Commonwealth Legislature.  We also recommended that the
Legislature of the Commonwealth of the Northern Mariana Islands
establish a requirement for the Office of the Governor to submit
periodic reports on the status of the discretionary funds to the
Legislature.

On December 28, 1998, we discussed the preliminary draft of this
report with the Special Assistant to the Governor for Finance and
Budget, the Secretary of Finance, and the Special Assistant to
the Secretary of Finance, all of whom expressed general agreement
with the findings and recommendations.

Although the Legislature and the Governor were requested to
provide written responses to the draft report by February 26,
1999, we had not received the responses as of March 9, 1999.
Therefore, since this report is being issued without the benefit
of your response, all of the recommendations are considered
unresolved (see Appendix 2).

The Inspector General Act, Public Law 95-452, Section 5(a)(3), as
amended, requires semiannual reporting to the U.S. Congress on
all audit reports issued, the monetary impact of audit findings
(Appendix 1), actions taken to implement audit recommendations,
and identification of each significant recommendation on which
corrective action has not been taken.

In view of the above, please provide a response, as required by
Public Law 97-357, to this report by April 30, 1999.  The
response should be addressed to our Pacific Office, 415 Chalan
San Antonio, Baltej Pavilion, Suite 306, Tamuning, Guam 96911.
The response should provide the information requested in Appendix
2.

We appreciate the assistance of officials at the Legislature
during the conduct of our audit.

                              Sincerely,



                              Eljay B. Bowron
                              Inspector General


                            CONTENTS


                                                        Page

INTRODUCTION............................................  1

    BACKGROUND..........................................  1
    OBJECTIVE AND SCOPE.................................. 2
    PRIOR AUDIT COVERAGE................................. 2

FINDINGS AND RECOMMENDATIONS............................. 3

    A.  EXPENDITURE CONTROL.............................. 3
    B.  REPROGRAMMING ACTIONS............................ 7

OTHER MATTERS............................................ 9

APPENDICES

    1.  CLASSIFICATION OF MONETARY AMOUNTS...............10
    2.  STATUS OF AUDIT REPORT RECOMMENDATIONS...........11


                          INTRODUCTION


BACKGROUND

During each of fiscal years 1996 through 1998, the Commonwealth
of the Northern Mariana Islands Legislature made annual
appropriations of $500,000 for the Governor's discretionary fund
and $100,000 for the Lieutenant Governor's discretionary fund.
Historically, these appropriations have been made without any
specific restrictions other than a constitutional restriction
that requires each appropriation to be used for a "public
purpose," which was based on the judgment of the Governor and
Lieutenant Governor with respect to expenditures charged to the
two funds.

Organizationally, the Office of the Governor comprises the
Governor's and the Lieutenant Governor's offices and other
entities, including the Office of Management and Budget, the
Office of Personnel Management, and the Emergency Management
Office.  In addition, the Secretary of the Department of Finance
is responsible for certifying the availability of funds prior to
approving any disbursement of funds.  Further, the Special
Assistant for the Office of Management and Budget[1] is
responsible for monitoring the Executive Branch's budget,
including any reprogramming actions.

The expenditure of discretionary funds, as well as other annual
appropriations, is governed by Title 1, Section 7401
("Expenditure of Appropriated Funds"), of the Commonwealth Code,
which limits expenditures to the amount of funds appropriated.
Further, Title 1, Section 7402(a)(1) ("Reprogramming Authority"),
of the Commonwealth Code states that "no obligation or contract
for the expenditure of Commonwealth funds shall be made for any
purposes other than public purposes for which the funds are
appropriated."   In addition to the restrictions set forth in
Section 7402(a)(1), each annual appropriation law may contain
reprogramming restrictions that apply to a specific fiscal year.
Finally, Section 7402(e) requires the Governor to report all
reprogramming actions to the Legislature within 30 days after the
end of each quarter and within 60 days after the end of each
fiscal year.

Title 1, Section 7701(a) ("Criminal Offenses"), of the
Commonwealth Code states, "No officer or employee of the
Commonwealth shall willfully and knowingly make or authorize any
expenditure from or create or authorize any obligation or
allotment under any appropriation or fund in excess of the amount
available therein."  In addition, Section 7701(b) states:

   No officer or employee of the Commonwealth shall willfully and
   knowingly involve the Commonwealth or any agency in any
   contract or other obligation for the payment of money for any
   purpose, or make or authorize any payment out of the
   Commonwealth Treasury, in advance of, or in the absence of,
   appropriations made for such purposes, unless such contract or
   obligation is authorized by law or joint resolution.

Further, Section 7702 ("Penalties for Violations") states, "Every
person who willfully and knowingly violates any provision of 1
CMC [Commonwealth Code] * 7701 is guilty of a crime, and upon
conviction thereof shall be fined not more than $2,000 or
imprisoned not more than two years, or both."

OBJECTIVE AND SCOPE

The objective of the audit  was to determine whether the former
Governor's use of discretionary and reprogrammed funds was proper
and in accordance with applicable laws and regulations.  To
accomplish our objective, we interviewed officials at the
Legislature, the Governor's Office, the Office of Management and
Budget, the Department of Finance, the Department of Lands and
Natural Resources, and the Office of the Public Auditor.  In
addition, we reviewed applicable financial and administrative
records maintained at the Office of Management and  Budget and
the Department of Finance.  Our review covered fiscal years 1996,
1997, and 1998 (through December 31, 1997).

The audit was made, as applicable, in accordance with the
"Government Auditing Standards," issued by the Comptroller
General of the United States.  Accordingly, we included such
tests of records and other auditing procedures that were
considered necessary under the circumstances.

As  part of the audit, we evaluated accounting and management
controls over appropriations, reprogramming actions, and
expenditures.  We found major internal control weaknesses in  all
of these areas, which are discussed in the Findings and
Recommendations section of this report.  Our recommendations, if
implemented, should improve the internal controls in these areas.

PRIOR AUDIT COVERAGE

During the past 5 years, neither the General Accounting Office
nor the Office of Inspector General has issued any audit reports
pertaining to the Office of the Governor's discretionary and
reprogrammed funds.  However, in December 1998, the Office of the
Public Auditor, Commonwealth of the Northern Mariana Islands,
issued the audit report "Audit of Misuse of Funds by the Former
Secretary of Finance - Fiscal Years 1995, 1996, and 1997," which
included a review of the Office of the Governor's discretionary
fund.  The report stated that the former Secretary of Finance did
not use public funds of $100,249 appropriately in that duplicate
payments were made for travel expenses ($30,000) and expenses for
questionable purchases were reimbursed.  In addition, at the time
of our review, the Office of the Public Auditor was performing an
audit of the professional services contracts of the
Commonwealth's Executive Branch from October 1995 to May 1998,
which will also include a review of the Office of the Governor's
discretionary fund.

**FOOTNOTES**

[1]:The Special Assistant is the most senior-level official of
the Commonwealth's Office of Management and Budget.
         FINDINGS AND RECOMMENDATIONS


A.   EXPENDITURE CONTROL

During fiscal years 1996, 1997, and 1998 (through December 31,
1997), the Office of the Governor authorized the expenditure of
funds from the Governor's discretionary fund that exceeded the
amounts appropriated and made expenditures from the Governor's
discretionary fund that were either not adequately supported or,
in our opinion, did not appear to have been made for a "public
purpose."  These deficiencies occurred because the former
Governor and the former Secretary of  Finance (who served as the
certifying officer) made expenditures after the discretionary
funds provided by the annual appropriations had been depleted.
In addition, there were no written policies and procedures that
clearly identified the purposes for which the discretionary fund
could be used, and there was no requirement for the Governor's
Office to prepare and submit periodic reports on the status of
the discretionary fund to the Commonwealth Legislature for
oversight purposes.  As a result, the discretionary expenditures
exceeded appropriations by $900,000 in fiscal year 1996, $3.8
million in fiscal year 1997, and $1.8 million in fiscal year 1998
(through December 31, 1997).

Appropriations and Expenditures

Based on our review of accounting records maintained by the
Commonwealth's Department of Finance, we determined that for
fiscal years 1996, 1997, and 1998 (through December 31, 1997),
expenditures made from the Lieutenant Governor's discretionary
fund did not exceed the appropriated amounts in any of the 3
fiscal years reviewed.  However, expenditures made from the
Governor's discretionary fund exceeded appropriated amounts in
all 3 fiscal years, as shown in Table 1.

Table 1. Discretionary Fund Appropriations and Expenditures

Appropriated*               Expended        Balance

Lieutenant Governor's Fund

Fiscal Year: 1996           $95,683             $33,914
          $61,769
          1997              193,489             186,9316,558
          1998              100,000               11,37688,624
          Subtotals         $389,172            $232,221$156,951

Governor's Fund

Fiscal Year:1996          $589,593         $1,485,673($896,080)
          1997             616,289          4,440,402(3,824,113)
          1998             498,000          2,254,817**(1,756,817
          Subtotals     $1,703,882
          $8,180,892($6,477,010)

   Totals              $2,093,054          $8,413,113($6,320,059)
     __________
*Although the amounts initially appropriated each year were
$500,000 for the Governor's discretionary fund and $100,000 for
the Lieutenant Governor's discretionary fund, both fund amounts
were subsequently adjusted as a result of reprogramming actions.
**This amount includes encumbrances of $220,399 that were
outstanding as of December 31, 1997.

Unsupported Expenditures

Of the expenditures of $8.4 million made from the Governor's and
the Lieutenant Governor's discretionary funds during fiscal years
1996, 1997, and 1998 (through December 31, 1997), we selected and
reviewed a sample of  285 expenditure transactions, totaling $5
million, to determine whether the funds were used in accordance
with applicable laws and regulations.  Based on our review of
these transactions, we determined that the expenditures made from
the former Lieutenant Governor's discretionary fund generally
appeared to have been proper.  However, we found that the former
Governor authorized the expenditure of funds from the
discretionary fund for (1) professional services, operating
expenditures, and land purchases, which we believe should have
been funded either through separate appropriations or from
operating accounts, and (2) purposes that were not adequately
supported or, in our opinion, did not appear to have been made
for a "public purpose."

Professional Services.  We found that beginning in fiscal year
1995,  the former Governor initiated a major lobbying effort to
stop legislation pending in the U.S. Congress that, if passed,
would have taken away the Commonwealth's control over its
immigration policies and required the Commonwealth to comply with
United States minimum wage laws. To assist in this lobbying
effort, the former Governor retained the services of at least
three consultants.  Based on our review of accounting records
maintained by the Department of Finance, we found that the
payments made from the discretionary fund to the three
consultants totaled $225,829 in fiscal year 1996,  $1,523,272 in
fiscal year 1997, and $833,511 in fiscal year 1998 (through
December 31, 1997).  In our opinion, because of the substantial
amount of funds involved, a request should have been submitted to
the Legislature to obtain separate appropriations for this
lobbying effort.

Operating Expenditures.   We identified expenditures totaling
$584,955 during fiscal years 1996, 1997, and 1998 (through
December 31, 1997) that,  in our opinion, were operational in
nature in that they related to the day-to-day operations of the
Commonwealth government and therefore should have been charged to
the operational accounts of the government.  The expenditures
were made for purposes such as leased vehicles, equipment rental
and purchase, janitorial and maintenance services, repairs and
renovation of government facilities, and printing and
photocopying.  Specific examples of operating expenditures
identified included lease payments for six pickup trucks and two
passenger cars ($8,892), cleaning services for the Governor's
office ($36,800), materials to construct a fence ($1,552), gas
and oil charges for a member of the Legislature ($4,146), and
printing charges for a government directory ($50,000).  These
expenditures were similar to expenditures made from regular
operating accounts of the Commonwealth government.

Land Purchases.   During fiscal year 1996, the former Governor
used the discretionary fund to settle two land claims totaling
$91,934.  As of March 29, 1996, the Division of Public Lands,
Department of Lands and Natural Resources, had 142 certified
"right of way" land claimants covering 45,509 square meters of
land obtained by the Commonwealth for road construction and other
public access rights of way, with the oldest claim having a
certification date of November 30, 1988.  According to the
Director of the Division of Public Lands, the large number of
unpaid claims was directly related to the lack of available funds
to pay all of the land claimants.  Using the claim certification
date on the Division of Public Lands listing of claimants to rank
the claims, we determined that the two land claims paid from the
discretionary fund held the 62nd ($10,260, certified April 22,
1993) and 129th ($81,674, certified October 27,1995) priority
positions on the list of 142 claimants.  In our opinion, the
claims that were certified earlier should have had a higher
priority and should have been paid prior to the two claims which
were paid from the Governor's discretionary fund.

Other Expenditures

We found that during fiscal years 1996, 1997, and 1998 (through
December 31, 1997), the former Governor authorized the
expenditure of $87,402 of discretionary funds for purposes that
were either inadequately supported or did not appear to have been
made for "public purposes."  The expenditure transactions
consisted of unsupported or inadequately supported travel
advances ($42,500) and charges for meals, liquor, tobacco
products, and entertainment ($35,814); canopy rentals for church
and private functions ($5,439); and a notebook computer that
could not be accounted for ($3,649).

Regarding the cause for the overexpenditure of appropriated funds
from the Governor's discretionary fund, the former Secretary of
Finance said that he continued to certify the availability of
funds after the appropriated funds had been depleted because "the
account had been historically overspent."  The former Secretary
also stated that, at the time, he was more concerned with
reducing the overall deficit of the government than with stopping
the discretionary fund appropriations from being overspent.  The
former Executive Assistant to the Governor said that the former
Governor told him that he (the former Governor) was "ultimately"
responsible for the discretionary fund and that he therefore
should not be questioned regarding this issue.

In our opinion, because of the potential risk for the improper
use of the discretionary funds, the Commonwealth Legislature
should more actively monitor the use of the discretionary funds.
In addition, the Legislature, when enacting future appropriations
for the discretionary funds, may want to consider placing
restrictions on the allowable uses of the funds, defining what
constitutes a "public purpose," and requiring the Office of the
Governor to submit reports on the use of the fund to the
Legislature for monitoring purposes.

Recommendations

We recommend that the Governor of the Commonwealth of the
Northern Mariana Islands:

   1.  Direct the Attorney General of the Commonwealth of the
   Northern Mariana Islands to review the overexpenditures of the
   former Governor's discretionary fund made during fiscal years
   1996, 1997, and 1998 and to take actions as appropriate.

   2.  Develop and implement written policies and procedures that
   clearly define the purposes for which the discretionary fund
   can be used.

We recommend that the Legislature of the Commonwealth of the
Northern Mariana Islands:

   3.  Establish a requirement for the Office of the Governor  to
   submit periodic reports on the status of the discretionary
   fund to the Legislature for monitoring purposes.

Commonwealth of the Northern Mariana Islands  Response and Office
of Inspector General Reply

The Governor, the President of the Senate, and the Speaker of the
House of Representatives were requested to provide their written
responses to the draft report by February 26, 1999.  However, as
of March 9, 1999, responses had not been provided.  Accordingly,
the three recommendations are unresolved (see Appendix 3).

B.   REPROGRAMMING ACTIONS

During fiscal years 1996 and 1997, the Office of the Governor's
Office of Management and Budget authorized the reprogramming of
funds totaling $432,764 between object classifications for
appropriations that the Legislature had specifically restricted
from reprogramming authority.  The reprogramming of funds
appropriated by the Commonwealth Legislature is governed by Title
1, Section 7402 (a)(1) ("Reprogramming Authority"), of the
Commonwealth Code and by specific restrictions contained within
each annual appropriation law.  However, the former Special
Assistant of the Office of Management and Budget said that he
approved the reprogramming of funds based on verbal instructions
from the former Governor.  In addition, we found that the
Legislature was not aware that the improper reprogramming actions
were occurring because the Office of the Governor was not
submitting the required quarterly and annual reports on
reprogramming actions to the Legislature.   As a result,
appropriated funds of $432,764 were not available for the
purposes intended by the Legislature.

Unauthorized Reprogramming

Under Title 1, Section 7402, of the Commonwealth Code, the
authority to reprogram appropriated funds is limited to only
those instances when it will serve a public purpose.  In
addition, the section prohibits the use of reprogramming actions
to create an appropriation where one does not exist and requires
the Governor's Office to report all reprogramming actions to the
Commonwealth Legislature on a quarterly and annual basis.
Finally, the appropriation laws for fiscal years 1996 and 1997
(Commonwealth Public Laws 9-66 and 10-41, respectively)
prohibited the reprogramming of funds between specific  object
classes, such as office equipment, office furniture, office rent,
building improvements, training, and vehicle purchases.

Based on our review of all 185 reprogramming actions, totaling
$3.3 million, that were made during fiscal years 1996 and 1997,
we found that 49 actions, totaling $432,764, were improperly
reprogrammed either from or into object classes which were
specifically restricted by appropriation laws.  For example, on
April 30, 1996, the former Special Assistant authorized the
reprogramming of funds totaling $92,000 from the Department of
Public Health and Environmental Services accounts for wages and
salaries ($69,828), personnel insurance ($3,680), and retirement
contributions ($18,492) to purchase vehicles for the
Commonwealth's Emergency Management Office.  Although these
expenditures may have been for legitimate public purposes, the
reprogramming of these funds to the Emergency Management Office
was not approved by the Legislature.

The former Special Assistant for the Commonwealth Office of
Management and Budget, who had approved the 49 reprogramming
actions, said that he approved these actions because the former
Governor instructed him to do so based on advice provided to the
former Governor by his legal counsel.  The Special Assistant said
that he was not provided any documents from the former Governor's
legal counsel to support the former Governor's statement.

We also found that the Office of the Governor had not assigned
responsibility for preparing and submitting the quarterly and
annual reports on reprogramming actions which were required by
the Commonwealth  Code.  The House of Representatives Vice
Chairman of the Committee on Ways and Means said that the
required quarterly and annual reports on reprogramming actions
were not submitted by the Office of the Governor to the
Legislature and that the Legislature did not have full-time
technical staff available to assist in legislative matters, such
as ensuring that the Office of the Governor complied with the
reporting requirements.  At the time of our review, the Vice
Chairman said that the Legislature was hiring a certified public
accountant and an economist to perform these functions.

Recommendations

We recommend that the Governor of the Commonwealth of the
Northern Mariana Islands:

   1.  Require the Attorney General of the Commonwealth of the
   Northern Mariana Islands to review the questionable
   reprogramming actions taken during fiscal years 1996 and 1997
   and take actions as appropriate.

   2.  Assign responsibility for preparing and submitting the
   required quarterly and annual reports on reprogramming actions
   to the Commonwealth Legislature.

Commonwealth of the Northern Mariana Islands  Response and Office
of Inspector General Reply

The Governor was requested to provide a written response to the
draft report by February 26, 1999.  However, as of March 9, 1999,
a response had not been provided.  Accordingly, the two
recommendations are unresolved (see Appendix 3).


                          OTHER MATTERS

During the audit, we also noted that the former Governor
authorized, without a legislative appropriation, a loan from the
Commonwealth's General Fund to the Tinian Casino Gaming Control
Commission[2] to provide funds for the operations of the
Commission during fiscal year 1997.  Commission Resolution No.
97-01 states that the Gaming Commission approved a Memorandum of
Agreement between the former Governor and the Gaming Commission's
Chairman which was purportedly executed on December 4, 1996.[3]
The Resolution stated that the agreement provided for the Office
of the Governor to "advance" funds to the Gaming Commission for
its operations during fiscal year 1997.  Consequently, during the
period  of December 6, 1996, through November 12, 1997, the
Department of Finance advanced a total of $3.4 million from the
Commonwealth's General Fund to the Gaming Commission.

Title 1, Section 7709 ("Construction of Appropriation Acts"), of
the Commonwealth Code states, "No Public Law shall be construed
to make an appropriation out of the Commonwealth General Fund,
Treasury, or to authorize the execution of a contract involving
the payment of money in excess of appropriations made by law, or
to authorize any borrowing by the Commonwealth or any agency,
unless the law shall in specific terms declare an appropriation
to be made, or that a contract may be executed, or that borrowing
is authorized."  We believe that the loan to the Gaming
Commission may not have been in accordance with the provisions of
Section 7709.

At the completion of our fieldwork, the Commonwealth's Office of
the Public Auditor was performing an audit of the Gaming
Commission's financial activities, including the loan made by the
former Governor to the Gaming Commission.   During testimony
before the Commonwealth Legislature, the Public Auditor stated,
"There is a question of the MOA's [Memorandum of Agreement]
legality in the absence of an appropriation authorizing the
advance of money from the General Fund to the Tinian Casino
Gaming Commission."  Accordingly, we believe that the Governor,
upon issuance of the Office of the Public Auditor's report on the
Gaming Commission, should act on the report's recommendations as
appropriate and, if necessary, require the Attorney General of
the Commonwealth of the Northern Mariana Islands to review the
circumstances regarding the loan and to take actions as
appropriate.

**FOOTNOTES**

[2]:The Tinian Casino Gaming Control Commission was established
by the Tinian Casino Gaming Control Act of 1989 to regulate
casino gambling on the island of Tinian.

[3]:Although the Resolution made reference to a December 4, 1996,
Memorandum of Agreement between the former Governor and the
Commission Chairman, Commonwealth officials were unable to
provide us a copy of the agreement during the audit.


                                                 APPENDIX 1

               CLASSIFICATION OF MONETARY AMOUNTS

 -------------------------------------------------------
                              Funds To Be
                       Finding    Put
 Areas                                       To Better
                                  Use*
 -------------------------------------------------------
           A.  Expenditure
 Control                          $6,477,010

           B.  Reprogramming
 Actions                          432,764

                   Totals
                                  $6,909,774
 -------------------------------------------------------
 -------------------------------------------------------


*Amounts represent local funds.


                                                      APPENDIX 2
                                                      Page 1 of 2

STATUS OF AUDIT REPORT RECOMMENDATIONS

-----------------------------------------------------
Finding/Recommendation
                                            Action
Reference             Status     Required

A.1          Unresolved.Provide a response to the
                        recommendation indicating
                        concurrence or
                        nonconcurrence.  If
                        concurrence is indicated,
                        provide an action plan that
                        identifies the target date
                        and the title of the
                        official responsible for
                        directing the Commonwealth's
                        Attorney General to review
                        the overexpenditures of the
A.2          Unresolved.former Governor's
                        discretionary fund.  If
                        nonconcurrence is indicated,
                        provide the reasons for the
                        nonconcurrence.

                        Provide a response to the
                        recommendation indicating
                        concurrence or
                        nonconcurrence.  If
                        concurrence is indicated,
                        provide an action plan that
                        identifies the target date
A.3          Unresolved.and the title of the
                        official responsible for
                        developing and implementing
                        written policies and
                        procedures which clearly
                        define the purposes for
                        which the discretionary fund
                        can be used.  If
                        nonconcurrence is indicated,
                        provide the reasons for the
                        nonconcurrence.

                        Provide a response to the
                        recommendation indicating
                        concurrence or
                        nonconcurrence.  If
                        concurrence is indicated,
                        provide an action plan that
                        identifies the target date
                        and the title of the
                        official responsible for
                        establishing a requirement
                        for the Office of the
                        Governor to submit periodic
                        reports on the status of the
                        discretionary fund to the
                        Legislature for monitoring
                        purposes.  If nonconcurrence
                        is indicated, provide the
                        reasons for the
                        nonconcurrence.
-----------------------------------------------------

                                                       APPENDIX 2
                                                      Page 2 of 2

 ---------------------------------------------------
Finding/Recommendation

Reference            Status     Action Required

B.1  Unresolved.Provide a response to
                     the recommendation
                     indicating concurrence
                     or nonconcurrence.  If
                     concurrence is
                     indicated, provide an
                     action plan that
                     identifies the target
                     date and the title of
                     the official responsible
                     for requiring the
                     Commonwealth's Attorney
B.2  Unresolved.General to review the
                     questionable
                     reprogramming actions
                     taken during fiscal
                     years 1996 and 1997.  If
                     nonconcurrence is
                     indicated, provide the
                     reasons for the
                     nonconcurrence.

                     Provide a response to
                     the recommendation
                     indicating concurrence
                     or nonconcurrence.  If
                     concurrence is
                     indicated, provide an
                     action plan that
                     identifies the target
                     date and the title of
                     the official responsible
                     for preparing and
                     submitting the required
                     reports on reprogramming
                     actions to the
                     Legislature.  If
                     nonconcurrence is
                     indicated, provide the
                     reasons for the
                     nonconcurrence.
---------------------------------------------------



                                                       APPENDIX 2
                                                      Page 1 of 2

STATUS OF AUDIT REPORT RECOMMENDATIONS




ILLEGAL OR WASTEFUL ACTIVITIES SHOULD BE REPORTED

TO THE OFFICE OF INSPECTOR GENERAL BY:

Sending written documents to:



Within the Continental United States

U.S. Department of the Interior
Office of Inspector General
1849 C Street,N.W.
Mail Stop 5341
Washington, D.C. 20240

Calling:

Our 24 hour
Telephone HOTLINE
1-800-424-5081 or
(202) 208-5300

TDD for hearing impaired
(202) 208-2420 or
1-800-354-0996



Outside the Continental United States


Caribbean Region

U.S. Department of the Interior
Office of Inspector General
Eastern Division- Investigations
1550 Wilson Boulevard
Suite 410
Arlington, Virginia 22209

Calling:
(703) 235-9221


North Pacific Region

U.S. Department of the Interior
Office of Inspector General
North Pacific Region
238 Archbishop F.C. F'lores Street
Suite 807, PDN Building
Agana, Guam 96910


Calling:
(700) 550-7428 or
COMM 9-011-671-472-7279