CNMI audit flags $96.9M in questioned federal costs

The CNMI government’s fiscal year 2023 single audit has flagged nearly $97 million in questioned federal costs, while auditors said inadequate accounting records prevented them from determining the validity and accuracy of balances in significant government accounts.

The findings were highlighted in a Sept. 9, 2026 report compiled by the CNMI Single Audit Committee summarizing the FY 2023 audit conducted by independent auditor Ernst & Young.

The audit tested 14 major federal programs and reported $96.95 million in questioned costs because of inadequate supporting documentation, noncompliance with program requirements or grant conditions, and possible violations of statutes or regulations.

The largest amount listed in the committee’s table was $37.79 million involving Coronavirus State and Local Fiscal Recovery Funds under the American Rescue Plan Act.

The table also lists $28.45 million in questioned Medicaid costs, followed by $7.81 million for the Children’s Health Insurance Program, $7.66 million for disaster public assistance, $6.64 million for the Education Stabilization Fund, $3.70 million for Economic Adjustment Assistance, and $3.65 million for Economic, Social, and Political Development of the Territories.

The committee’s narrative separately states that ARPA and Medicaid accounted for $37.7 million and $36.2 million, respectively. The report does not explain the difference between the $36.2 million Medicaid figure in the narrative and the $28.45 million listed in its table.

A questioned cost does not by itself mean the money was stolen, missing, or improperly spent.

According to the report, auditors attributed the questioned costs largely to issues involving procurement, suspension and debarment, eligibility, allowable costs, subrecipient monitoring, and special tests and provisions.

The findings and questioned costs are reported to the respective federal grantor agencies, which will make the final determination on whether to accept corrective action plans or impose repercussions.

As of Sept. 30, 2023, the CNMI’s cumulative questioned costs totaled $349 million, according to the report.

The audit also raised significant concerns about the government’s underlying financial records.

Ernst & Young issued a disclaimer of opinion for government activities, the General Fund, Grants Assistance Governmental Fund, ARPA governmental funds, and the Department of Public Lands Governmental Fund.

A disclaimer means auditors could not obtain enough evidence to issue an opinion. It does not mean auditors determined that the financial statements were inaccurate.

The report said the CNMI could not provide “sufficient appropriate audit evidence” for balances and financial activities involving significant general ledger accounts because of inadequate accounting records. As a result, auditors could not determine the validity and accuracy of the account balances.

Auditors also issued an adverse opinion for aggregate discretely presented component units and aggregate remaining fund information. The committee explained that an adverse opinion means auditors reviewed the information and determined it did not fairly present the government’s true financial condition.

Among the other issues identified, the CNMI had not adopted Governmental Accounting Standards Board Statement No. 73, which requires full pension benefits to be recognized. The financial activities of the Department of Public Lands, a major governmental fund, also were not included in the report.

The component-unit figures did not include the financial activities of the Commonwealth Healthcare Corp. and Northern Marianas Housing Corp. The committee said CHCC’s FY 2021 and NMHC’s FY 2022 audits were still in progress.

Trust and pension-related fiduciary funds also were omitted from the totals, with the latest audit of the fiduciary component units dating back to FY 2020.

On government spending, the report said overall expenditures decreased by $172.9 million, primarily because of reduced federal relief activities as pandemic-related programs wound down. Spending on health, public safety and law enforcement, and education, however, increased.

The FY 2023 single audit itself arrived nearly three years after the fiscal year it covered and more than two years after the June 30, 2024 reporting deadline to the Federal Clearinghouse.

Federal oversight bodies, including the Office of Insular Affairs, have set expectations for the CNMI to catch up on its audit backlog, according to the committee.

The CNMI government has since established a formal plan to address its outstanding audit requirements. The committee projects completion of the FY 2024 audit in November 2026 and the FY 2025 audit in March 2027.

The FY 2023 audit reports were issued and released by Ernst & Young on July 17, 2026. The Single Audit Committee released its three-page highlights report on Sept. 9.