Laws and Regulations
Article III, Section 12 of the CNMI Constitution and the Commonwealth Auditing Act (1 CMC, 2301, 7812 et. seq. of the Commonwealth Code) established the Office of the Public Auditor as an independent agency of the Commonwealth Government to audit the receipt, possession, and disbursement of public funds and to perform such other duties as required by law.
The Public Auditor
The Office of the Public Auditor (OPA) is headed by the Public Auditor, who is appointed by the Governor with the advice and consent of each house of the Legislature. No person may be appointed as Public Auditor unless that person is a certified public accountant and has a minimum of five years experience in accounting or government finance. (1 CMC, 2302(a))
The Public Auditor is appointed for a term of six years. However, no person may serve as Public Auditor for more than two consecutive full six-year terms or the balance of an unexpired term plus two full six-year terms. The Public Auditor may be removed only for cause and by affirmative vote of two-thirds of the members of each house of the Legislature. In the event of a vacancy, the Governor shall appoint a Temporary Public Auditor to serve until the vacancy is filled. (1 CMC, 2302 (b),(c),(d))
Primary Duties and Responsibilities
The primary duties and responsibilities of the Public Auditor are as follows (1 CMC, 2303):
- Not later than June 30 of each year, the Public Auditor shall transmit to the Governor and to the presiding officer of each house of the legislature the annual report for the previous fiscal year required by N.M.I. Const. art. III, § 12. The report shall consist of a financial audit of the General Fund, each trust fund, each other fund of any agency whether or not appropriated, each contract to which any agency is a party, and each grant made or received by any agency. The audit shall cover the receipt, possession, and disbursement of public funds including all liabilities, receivables, and accruals of any agency, all taxes, fees, receipts, and other revenues of any agency, all other financial transactions involving any agency, and any financial statement issued or prepared by any agency. Personal service contracts and prime contracts with employees of any agency shall be audited as part of the regular operations and activities of the agency.
- The Public Auditor shall from time to time make such other audits of Commonwealth agencies, activities, contracts, or grants as are possible within the budget provided to the Public Auditor and as the Public Auditor deems to be in the public interest and consistent with this chapter and with the Auditing Act.
- Upon request of a Commonwealth agency, the Public Auditor shall provide an opinion as to whether or not certain practices are in accord with generally accepted accounting principles.
- The Public Auditor shall promulgate procurement regulations substantially similar to Commonwealth procurement regulations and shall administer its own procurement function.
The Public Auditor also has special duties to prevent fraud, waste, and abuse of public funds (1 CMC, 2304).
- The office of the Public Auditor shall specially act to prevent and detect fraud, waste and abuse in the collection and expenditure of all public funds. The Public Auditor may audit any transaction involving the procurement of supplies or the procurement of any construction by agencies of the Commonwealth, and the procurement of any supplies and services in connection with such construction.
- The Public Auditor may conduct audits and investigations, when necessary, relating to programs and operations involving expenditure of public funds. The Public Auditor may review legislation and regulations relating to programs and operations involving expenditure of public funds and may make recommendations concerning the effect of the legislation or regulation on the prevention and detection of fraud, waste and abuse. The Public Auditor may recommend policies to assist in the prevention or detection of fraud, waste and abuse. The person in charge of, or the governing body of any Commonwealth agency, involved in the expenditure of public funds for the purpose of procurement of supplies or construction, and the services and supplies in connection therewith, may request the assistance of the office of Public Auditor with respect to implementation of any suggested policy.
To assist in carrying out his or her duties and responsibilities, the Public Auditor may obtain the services of independent certified public accountants, qualified management consultants, or other professional persons. These independent specialists may also be used for any audit conducted by the Public Auditor or if the Public Auditor has a conflict of interest in any agency under audit. (1 CMC, 2306 (a))
In instances when the Public Auditor cannot schedule or conduct an audit in time or as required by law, the agency concerned may, upon the approval of the Governor and Public Auditor, enter into a contract with any independent certified public accountant for the purpose of conducting an audit. ( 1 CMC, 2306 (b))
Additional Duties and Responsibilities
Certain laws and regulations specifically provide additional duties and responsibilities to the Public Auditor. The following additional duties and responsibilities, among others, are of importance:
- The Public Auditor shall monitor the expenditure, obligation, encumbrance, or other commitment of funds appropriated or allocated under the Planning and Budgeting Act of 1983 and shall report all violations. (1 CMC, 7710 (b))
- The Public Auditor shall handle all appeals of decisions made by the Chief of Procurement and Supply in connection with any protest in the solicitation and award of a contract (Article V, Section 5-102 of the CNMI Procurement Regulations).
- The Public Auditor shall enforce the Government Ethics Code Act of 1992, Public Law 8-11 (as amended by Public Law 8-28). Among others, the Public Auditor shall: a) oversee the submission of the statement of financial interests by reporting individuals, and b) initiate, receive, investigate and issue opinions on complaints of violations of the Ethics Code.
- The Public Auditor shall implement the filing and verification of Campaign Statement of Account of candidates during an election (1 CMC, 6424). The Public Auditor shall refer any candidate who fails to comply with the filing requirements to the Office of the Attorney General for prosecution (1 CMC, 6430).
- The Public Auditor shall audit the operations, books, and records of the Commonwealth Development Authority at least annually. If the Public Auditor does not complete an annual audit within three months of the close of the fiscal year, the Authority shall immediately engage a certified public accountant for that purpose. (4 CMC, 10413)
- The Public Auditor shall audit the operations, books, and records of the Commonwealth Utilities Corporation (CUC) (4 CMC, 8152). CUC may, upon the approval of the Governor and the Public Auditor, enter into a contract with any independent certified public accountant for the purpose of conducting the audit. (1 CMC, 2306 (b))
- The Public Auditor shall conduct quarterly post audit and shall have access and authority to examine any and all records of the CNMI Lottery Commission, its distributing agents, and its licenses. (1 CMC, 9320)
- The Public Auditor shall promulgate rules and regulations as he may determine necessary, to effectuate the "The Lobbying Disclosure Act." (1 CMC, 9417)
Special Powers and Authority
The Commonwealth Auditing Act of 1983 granted the Public Auditor the following powers and authority:
- The Public Auditor is authorized to accept funds for audits for Federal Agencies. The Public Auditor may enter into agreements or contracts for the purpose of conducting mutual financial audits of programs funded by the Federal Government and carried out by agencies of the Commonwealth Government. Amounts received by the Public Auditor on account of the audits shall be deposited in a special account in the General Fund and may be expended without further appropriation by the Public Auditor for the operation and activities of the Office of the Public Auditor. (1 CMC, 7832)
- The Public Auditor may receive and investigate complaints or information of any person concerning the possible existence of any activity constituting fraud, waste, and abuse in the collection and expenditure of public funds. (1 CMC, 7841)
- The Public Auditor shall have access to all records, reports, audits, reviews, papers, books, documents, recommendations, correspondence, and any other data and material that is maintained by or available to any agency which in any way relates to the activities to which the Public Auditor has duties and responsibilities. (1 CMC, 7842 (a))
- The Public Auditor may request the production, on a voluntary basis, of testimony or documents from any individual, firm, or non-governmental entity which relate to the Public Auditor's duties. (1 CMC, 7842 (b))
- The Public Auditor may require by summons, the production of records and the attendance and testimony under oath of a person relevant to any matter under audit or investigation. Upon the request of the Public Auditor, any judge of the Commonwealth Trial Court, may issue an order to compel the production of records and to compel the attendance of persons summoned as witnesses. (1 CMC. 7842 and 7846)
- The Public Auditor and his or her designees may audit and enforce a taxpayer's or debtor's compliance with Commonwealth Law in the same manner and with the same authority as the Secretary and employees of the Department of Finance have to audit and enforce a taxpayer's or debtor's compliance with Commonwealth law. The Public Auditor may conduct audit activities after written notice to the Secretary of Finance. (1 CMC, 7844 (b))
- The Public Auditor shall have access to contracts and grants information. All government contracts, except personal service or contract with an employee of an agency or any grant awarded by an agency, shall include a clause to the effect that the Public Auditor shall, until the expiration of three years after final payment, have access to and the right to examine and copy any records, data, or papers of any subcontractor of subgrantee, relevant to any contract or grant. (1 CMC, 7845)
Under Article III, Section 12 of the CNMI Constitution, the Public Auditor is guaranteed an annual budget of $500,000. The budgetary appropriation may not be reprogrammed for other purposes, and any unencumbered fund balance in a fiscal year shall be available for general appropriation.
Further, the Secretary of Finance is required to withhold one percent of all amounts appropriated by Commonwealth Law for all Government agencies' operations and activities as well as for all capital improvement project (except the Legislature), and in no event, no less than $1,000,000. The withheld amounts shall be deposited in a special account established by the Secretary of Finance separate from the General Fund and may be expended without further appropriation. (1 CMC, 7831 (a))
The Executive Directors of all public corporations or other autonomous agencies of the Commonwealth are also required to pay an amount not less than the greater of 1 percent of the agency's total operations budget from sources other than legislative appropriations or pursuant to any other formula upon which the Public Auditor and the agency may agree. (1 CMC, 7831 (b))
All funds paid into the special account shall not be reprogrammed for any other purpose to any other agency. (1 CMC, 7831 (c))
Exempt from the requirement of one percent contribution to the office of the Public Auditor are the Legislature (1 CMC, 7831 (d)) and the Public School System (1 CMC, 7831 (e)).
The Public Auditor shall advise the Interagency Audit Coordinating Advisory Group (consisting of the presiding officer and minority leader of each house of the Legislature, the Secretary of Finance, and the Special Assistant for Management and Budget) of his annual budget at least 30 days before the day specified by the Governor for transmittal of the budget to the Office of Management and Budget. After consideration of any comments of the Coordinating Group, the Public Auditor shall transmit the budget to the Governor. The Governor shall include the budget as transmitted in his annual budget. Unless additional appropriations are requested, the budget of the Public Auditor shall be included in the Governor's budget submission for informational purposes only. (1 CMC, 7833)
Auditing Standards and Procedures
The Office of the Public Auditor shall conduct or supervise all audits required for or sought by a Commonwealth agency. All audits shall be performed with the highest degree of professionalism and with strict avoidance of any degree of partisanship or bias. The Office of the Public Auditor shall follow the Standards for Audit of Government Operations, Programs, Activities, and Functions published from time to time by the United States General Accounting Office, including those standards issued by the American Institute of Certified Public Accountant. (1 CMC, 7821 & 7822)
At the conclusion of an audit, the Public Auditor or a designee shall discuss the audit with the officials whose agency, grant, contract, or activity is subject to audit and submit to them a list of proposed findings which may be included in the audit report. The preliminary audit and proposed findings shall not be made public. If the officials are not available for personal receipt of the list of audit findings, then delivery shall be deemed made when it is delivered to the agency. The agency shall submit to the Public Auditor within 30 days after receipt of the list of audit findings, its written statement of explanation or rebuttal concerning any of the adverse or critical audit findings, including any corrective action to be taken to preclude a recurrence of any adverse findings. The Public Auditor shall promptly notify the agency involved as well as the Coordinating Group in the event of an agency's failure to respond or the filing of unresponsive answers to the adverse or critical audit findings. The Public Auditor shall publish the substance of the agency's response in the audit report. (1 CMC, 7823 (a))
An audit report shall make special mention of: a) any violation of laws within the scope of the audit and (b) any improper expenditure, any improper accounting procedures, all failures to properly record financial transactions, and all other inaccuracies, irregularities, shortages, and defalcations, if any. (1 CMC, 7823 (b))
Specific allegations naming persons involved in improper or illegal acts found in connection with an audit shall be included in a separate confidential special report which shall be transmitted only to the Attorney General and Federal agencies when applicable. (1 CMC, 7823 (c))
The Public Auditor shall promptly make public in its entirety all final audit reports, recommendations, and other reports made. The audit report recommendations shall be implemented by the audited agency unless otherwise agreed on by the Public Auditor. (1 CMC, 7823 (d))
The reporting obligations of the Public Auditor are as follows:
- The Public Auditor shall report his or her activities and findings to the Legislature and the Governor at least once every calendar year, and this report shall be made public promptly. (1 CMC, 2308)
- The Public Auditor shall report no later than 3 months after the closing of each fiscal year, to the Governor and the Legislature in detail on the use of funds deposited in the special account established for the Office of the Public Auditor. (1 CMC, 7831 (a))
- The Public Auditor shall, in writing, report all violations noted in the audit of appropriated or allocated funds to the Governor, to the Chairman of the House Committee on Appropriations, to the Chairman of the Senate Committee on Fiscal Affairs, to the Presiding Officers of the Legislature, and to the Office of the Attorney General. (1 CMC, 7710 (b))
- The Public Auditor shall submit all audit reports to the Interagency Audit Coordinating Advisory Group. The Coordinating Group shall review the audit reports and the Public Auditor shall discuss the manner in which the Public Auditor's recommendation can be implemented with the assistance of the members of the Coordinating Group. The Coordinating Group shall recommend to the Governor and to the Legislature any changes in law or regulations which it finds necessary or desirable as a result of its work with the Public Auditor. (1 CMC, 2307)
- The Public Auditor shall report semi-annually to the Legislature on the audited agencies' compliance with the Public Auditor's recommendations. (1 CMC 7823 (e))
- The Public Auditor shall prepare and publish an annual report summarizing his activities (in implementing the Government Ethics Code Act) and to present such report to the Governor and the legislature. (1 CMC, 8561(i))
- The Public Auditor shall report to the Attorney General whenever the Public Auditor has reasonable grounds to believe that there has been violations of either Federal or Commonwealth criminal laws. The Attorney General may institute further proceedings. (1 CMC, 7847)
The Public Auditor may appoint and remove those employees as he or she deems necessary to perform the duties of the Office. These employees may include assistant public auditors, accountants, auditors, financial management analysts, investigators, attorneys, paralegals, secretaries, clerks and the like. All personnel employed by or contracted for by the Office of the Public Auditor shall be exempt from the application of the Commonwealth Civil Service Act. The Office of the Public Auditor shall set its own compensation, wage and salary scales. The wage and salary scales shall be commensurate with those paid by the Commonwealth requiring comparable education, training and experience. The Office of the Public Auditor may provide staff housing as part of its compensation package to its employees. The Office of the Public Auditor may administer a program of staff housing for its employees. ( 1 CMC, 2305 (a))
The Public Auditor may establish supplemental personnel regulations including a code of ethics for employees of the Office. No employee of the Office of the Public Auditor may hold, or be a candidate for, any elective public office while an employee, nor may the employee hold office in any political party or political committee, or participate in any political campaign of any candidates for public office while an employee. No employee may actively engage in any other business, profession, or governmental office. (1 CMC, 2305 (b))
The Public Auditor may, when in his or her judgement it is necessary, delegate any duties and powers to any employees employed by the Public Auditor. The employees shall report their findings for review by the Public Auditor. (1 CMC, 2305 (c))