OPA: Finance lacks oversight over fuel purchases

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THE Department of Finance lacks oversight over its fuel contract and is unable to ensure that controls are present to detect and prevent unauthorized fuel purchases, the Office of the Public Auditor said in a 22-page report.

OPA noted an improper use of fleet card for government vehicles. In its review of the Department of Fire and Emergency Medical Services billing statements, OPA “found that a fleet card assigned to a vehicle was used to fuel a watercraft instead.”

In his Jan. 20, 2020 response to OPA, Finance Secretary David Atalig, who assumed his position last year, said his department “will continue work to address all findings.”

In 2016, OPA said, Finance issued an invitation-to-bid to procure fuel products through a fleet card system for government vehicles. There was only one responsive bidder. A one-year contract was executed and took effect on Feb. 1, 2017. The contract included a provision that would allow a contract extension. Finance exercised this provision, subsequently extending the contract for another year.

An OPA audit disclosed that the department’s Division of Procurement and Supply “has not exercised oversight of its fuel contract with its third-party contractor.”

Specifically, OPA said, Finance:

• Did not regulate the issuance, renewal, and cancellation of fuel cards;

• Was unable to implement controls on corporate cards due to the inherent nature of corporate cards; and

• Did not review third-party contractor billings for completeness and compliance with the fuel contract.

“As such, the CNMI risks noncompliance with the fuel contract terms and conditions and improper or unauthorized purchases of fuel at the government’s expense,” OPA said.

OPA said, it sampled 12 government agencies — nine within the executive branch, the Office of the Attorney General, and the Saipan and Northern Islands mayor’s offices — to examine their respective fuel expenditures in the last three months of fiscal year 2018. The fuel expenditures of these agencies consisted about 5,400 fuel transactions with a combined total of $257,300 billed to the CNMI government.

Based on interviews with government agencies and the contractor, OPA said government vehicle users confirmed that they did not always go through Finance to apply for a fuel card. The contractor also said that agencies with an existing account could request for additional or renew existing fuel cards without Finance’s involvement, because the department had approved its initial request.

As such, OPA said, Finance “is left unaware of any additional fuel cards obtained by agencies.”

In addition, the cancellation of fuel cards was left at the discretion of individual agencies and was not communicated to Finance. Further, Finance did not have policies on cancellation of cards.

Moreover, Finance did not keep a list of all active fuel cards, OPA said.

OPA recommended that Finance adopt, implement, and communicate policies and procedures for the issuance, renewal, and cancellation of fuel cards; and maintain a list of all fuel cards.

In his response to OPA, the Finance secretary agreed with the findings and vowed to inform agency heads periodically of the process to obtain fuel cards.

Additionally, the department will have ongoing discussions with vendors on issuance of valid fuel cards to ensure that agencies are not circumventing Finance.

Also, Atalig said, the department’s procurement systems and processes are currently undergoing a major review to ensure that fuel purchases and mechanisms are updated and controlled.

In the near future, Finance plans to implement a P-card program that will allow the department more control over expenditures and make more responsible individual agencies and cardholders, Atalig said.

OPA also found that there are no controls over corporate card usage.

OPA recommends that Finance replace all corporate cards with fleet cards until the department develops and implements controls, including monitoring controls, over the government’s use of corporate cards.

In its response, Atalig agrees with the findings. A memorandum, he said, has been issued to remind agency heads that all corporate cards must be approved by the Finance secretary “to ensure that operations operate efficiently with proper management of receipts from fuel purchases.”

To read the OPA report, go to http://www.opacnmi.com/resources/files/reports/audit/OPA%20Report%20No_%2020-02%20Audit%20of%20the%20CNMI%20Govt%20Fuel%20Contract.pdf.

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