This report presents the results of our audit of the Commonwealth Utilities Corporation (CUC) travel of the Board of Directors, key management and other Commonwealth of the Northern Mariana Islands (CNMI) government travelers at CUC expense for the period October 1999 through March 2001. The objectives of this audit were to: (1) determine whether CUC adopted travel policies consistent with applicable laws, (2) determine whether management and its Board members complied with applicable travel policies, and (3) describe the purpose and nature of travel conducted by CUC. This audit was conducted in accordance with Government Auditing Standards issued by the Comptroller General of the United States.

CUC incurred total expenditures of $710,000 for travel conducted by CUC personnel, Board members, and by other CNMI officials for the 18-month period ending March 31, 2001:

Our audit shows that CUC did not comply with the statutory requirements that Board members adopt travel policies similar to those of the CNMI government. Further, management had not adopted a written and comprehensive travel policy manual to guide its Board members and personnel. As a result, inconsistency now exists in the application of CUC's in-house travel policies. The Executive Director stated that CUC is now standardizing its policies and procedures to conform with those adopted by the CNMI government. Our audit shows that Board members, key management personnel and other CNMI government officials did not always comply with the CNMI government policies on economy class air travel, granting and liquidating travel advances, or providing supporting documentation. Some instances of non-compliance occurred because CUC failed to formally adopt all CNMI government travel policies that it is required to follow. Others occurred because management did not rigidly enforce its policies and procedures on travel. As a result, travel funds were held longer than allowable, travel expenses were not recorded in the proper period because of delays in the liquidation of advances, and unneeded costs were incurred for first class or business class airline tickets as well as for per diem, car rental, and other travel costs which were not always supported with proper documentation.

Examples of management and Board non-compliance with applicable travel policies and procedures follow:

• Management and Board members were granted business and first class airline tickets costing $175,553 rather than economy class fares, resulting in excess payments of about $87,800.
• Management and Board members were given travel advances when they still had unliquidated travel advances of $53,485 outstanding.
• Board members were advanced 100 percent of allowable travel costs when only 80 percent was allowable, resulting in excess cash advances of $18,283.
• Of the 337 travel advances, 131 were not liquidated within the required number of days.
• For 75 trips, Board members did not prepare detailed trip reports as required.

Recommendations and Response

We recommended that: (1) the Board immediately adopt rules on travel and per diem rates that are the same as CNMI travel policies for all travel made by Board members; (2) the Chairman of the Board issue a directive to enforce CUC's policies on economy class air travel, the granting and liquidation of travel advances, and payment of per diem; (3) the Chairman of the Board issue a directive to ensure adherence to CNMI travel policies on the 80 percent ceiling for travel advances, immediate return of any outstanding travel advances for cancelled trips, and submission of detailed trip reports; (4) the Chairman of the Board and the Executive Director initiate recovery of any overpayments mentioned in this report; and (5) the Executive Director continue the effort to standardize CUC's travel policies and procedures.

In its letter response dated October 29, 2001, CUC agreed with most of our recommendations. Based on CUC's letter response, we consider Recommendations 1, 2, 3 and 5 resolved pending adoption of a new travel policy by the Board of Directors. Part of Recommendation 4 was closed. We commend the CUC Board and Executive Director for their prompt action in addressing our recommendations. The planned adoption of a new travel policy will be a significant achievement in improving control and accountability over travel performed by CUC Board members, key management, and employees.

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