National Endowment of the Arts Paints a Poor Picture of CNMI's Grants Management

August 26, 2010

The Office of the Inspector General filed a "Limited Scope Audit Report" on the NEA Grants to the Commonwealth Council on Arts and Culture (CCAC) that revealed serious violations of federal law and misuse of federal funds.

The CCAC is headed by Angel S. Hocog and falls under the Department of Community and Cultural Affairs, which is headed by Secretary Melvin Faisao.

The audited stated that during the period under review, the Council had five NEA grants active with awards totaling $1,012,020, with 4 audited ones showing misuse of funds. The NEA grants are funded by U.S. tax dollars.

The audit reported:
Some of these conditions which may impact NEA’s funding were noncompliance with requirements regarding allowable costs/cost principles and activities, cash management, equipment management, prohibitions concerning awards to excluded parties, procurement and reporting requirements, and matching level of effort and eligibility requirements.
The audit cited mismanagement and potential conflict of interest stating:
Indicators of mismanagement and conflict of interest were identified in each of the grants we reviewed. The Council awarded grants to ineligible recipients and organizations such as former and current government and Council employees as well as Board members. We also found that grants were awarded to an employee who neither applied nor received award funds. Additionally, expenses were also charged for travel, per diems and stipends for ineligible recipients. 
...we noted several grants were awarded to an employee, in the amount of $18,350, charged to both the NEA grant and matching portions. However, the employee stated that they did not apply nor receive any of these awards, with the exception of a grant in the amount of $300.00 for teaching traditional coconut weaving. We also reviewed a copy of an award check made payable to the same employee, addressed to the employee at the Council’s P.O. Box, however it was picked up by someone other than the employee. Therefore, we are recommending that NEA disallow the following costs charged to the grants, reducing the total outlays reported by the indicated amounts for each grant:
Not suprisingly, the audit revealed that grants were improperly awarded to relatives and politically connected employees:
...we found the Council made several awards and payments to ineligible award recipients and companies such as former and current employees, employees of the CNMI Office of the Governor, relatives, Council Board members and companies owned by relatives.
The audit also revealed that the Council claimed unallowable costs including food, hotel expenses and the purchase of vehicles. Furthermore, the Council did not maintain employee personnel records and activity reports as required by the terms of the grants.

The audit report stated:
A telephone conference was also held with Council officials on August 16, 2010. They acknowledged and generally agreed with the findings and recommendations made to the Council, and indicated they were in agreement on implementing the recommendations.
The $574,707 spent on personnel activity was also questioned.

In January 2010, the Saipan Tribune reported that acting Arts Council Director stated the Council was suffering for money:
In an earlier interview with Arts Council acting executive director Vince Rabauliman, he had said the council is still reviewing plans to relocate the gallery to Garapan, where most tourists congregate. Rabalulimas said that due to the funding shortage, the council was unable to move the exhibit to another location last year.

“We want to move it around.but we're hampered by the funding shortage. We don't have enough money to pay for the rent. That's why we're seeking the community help by helping us with the space for our exhibits,” he added.
On Tuesday of this week, current CCAC Director Angel S. Hocog asked Saipan and Northern Islands Legislative Delegation chair Rep. Ray A. Tebuteb (R-Saipan) for $30,000 to pay for past bills from the Flame Tree Arts Festival and the upcoming Guam Micronesian Fair scheduled for October 2010. CCAC budget woes were also discussed in a July 2010 article:
Hocog said they are still waiting for funding from the National Endowment for the Arts.

He added that preparations for three of the biggest arts festival in the region have already been initiated as well.
It would not be wise to wait for any funding from the National Endowment of Arts. The audit report is suggesting that the CNMI could be forced to return misspent funds totaling $337,666.  I think U.S. taxpayers would appreciate the misspent funds being returned in lieu of budget woes.

The audit report recommended that NEA:
  •  Disallow the unallowable costs charged to the grants in the amount of $141,049, reducing the total outlays reported by the indicated amounts for each grant (For details see Appendices B and C).
  • Consider the Council a “high-risk” grant recipient in accordance with 45 C.F.R. § 1174.12, (2) deem the Council ineligible to apply for or receive NEA awards.
  • Terminate all funding, including any suspended awards, until such time as the Council (1) has implemented corrective actions to address the findings of this report, (2) provide NEA with evidence of improvements in its management of Federal grants, and (3) NEA reinstates the Council’s eligibility to apply for and receive awards.
  • Consider placing the Council on the Cost Reimbursement method of funding (as directed by the Grants and Contracts Office); if, in the future, NEA reinstates the Council’s eligibility to apply for and receive awards.


Anonymous said...

There is no "U.S. Inspector General." Rather, each executive branch department and major independent agency has its own.

Unfortunately, the fact that the National Endowment of the Arts Office of the Inspector General (NEA OIG) filed a "Limited Scope Audit Report" means that there is unlikely to be any USAO criminal indictment arising out of these facts.

Too bad.

This is similar to the OPA report on MPLA -- there was not enough there for the OAG to prosecute anyone, and AAG Mike Nisperos got tired of the political attacks by Harry Blalock and others demanding “action” and moved on to become the Guam Public Defender.

If the NEA cuts off CCAC funding, one can be sure it won't happen there again. As usual, the innocent beneficiaries suffer.

Wendy said...

Thanks I will fix that!

Yes, it's a shame about the funding, but on the other hand people are seriously sick of money being misspent. If there was competent personnel overseeing grants this may not have happened.

Anonymous said...

I hope the CCAC can get their act together, developing appropriate written procedures, so that the NEA does not terminate funding.

If the NEA does disallow the unallowable costs charged to the grants in the amount of $141,049 the CNMI government will have to suffer those costs unless the OAG goes after the recipients civilly for reimbursement.

Let's hope they do, so we can keep those grants coming. Time to pay back your ill-gotten gains!