Leaked emails show CPA financially mismanaged; FAA concerned

Kimberlyn King-Hinds

Commonwealth Ports Authority chairwoman Kimberlyn King-Hinds and her boss, Gov. Ralph Torres, have been fond of assuring the public her agency is run well despite its fallout with Star Marianas and the temporary halt of air travel service among the islands of the NMI. But, a series of leaked emails and the last two audited financials of the CPA tell a completely different story.

Ms. Hinds’s agency was more than six months late in filing its passenger facility charge (PFC) program audit to the Federal Aviation Administration.

According to the FAA, “The Passenger Facility Charge (PFC) Program allows the collection of PFC fees up to $4.50 for every eligible passenger at commercial airports controlled by public agencies. PFCs are capped at $4.50 per flight segment with a maximum of two PFCs charged on a one-way trip or four PFCs on a round trip, for a maximum of $18 total. Airports use these fees to fund FAA-approved projects that enhance safety, security, or capacity; reduce noise; or increase air carrier competition.”

The CPA has instituted a PFC at the highest, or capped rate of $4.50 per flight segment for Rota and Tinian travelers, which is a significant portion of the plane ticket. Star Marianas late last year ceased air travel services among the islands for, among other reasons, CPA’s refusal to share financials with Star Marianas to determine whether the fees CPA are charging are appropriate.

In a January 14, 2022 letter to Mr. Torres, Ms. Hinds wrote, “[Star Marianas] believes that the Commonwealth Ports Authority (CPA) is without authority to assess fees for the current fiscal year. This is incorrect. The regulations regarding fees are in effect, and fees are being assessed in accordance with those regulations.”

Among the federal regulations governing the ability for CPA to charge the PFC is 14 CFE 158.67(c), which states, in part: “At least annually during the period the PFC is collected, held or used, each public agency shall provide for an audit of its PFC account. The audit shall be performed by an accredited independent public accountant and may be of limited scope.”

According to an April 21, 2021 email from Roger Lemons at FAA’s Honolulu office, that audit was due “no later than 9 months following the end of your fiscal year.” Fiscal Year 2020 ended September 30, 2020. Nine months later falls on June 30, 2021. The audit, conducted by independent auditor Deloitte, was not done until December 23, 2021.

In fact, the extremely late submission of the audit was cause for mounting concerns by the FAA in Honolulu and its headquarters in Washington, D.C., according to an email chain leaked to Kandit. Mr. Lemons on September 8, 2021 replied to CPA, sending a “friendly reminder about FY20 PFC Audits. According to my records, I have not received your audit as of yet.”

Hours later, CPA comptroller Skye Hofschneider wrote, “As per our auditors, they should be finishing up the field work for the single audit this week. The PFC audit work is completed but is pending completion and release of the single audit. The reports should be available in 3 weeks. I will keep you all updated of any changes.”

Her message was tantamount to an empty promise. More than a month later, on October 13, Carlos Salas from FAA Honolulu asked where the audits were. Ms. Hofschneider then gave a new update: “As per Deloitte, the reports should be ready by next week. They were delayed due to an issue with their report writer.”

The next week came and went, and then another. On October 29, Kevin Nishimura from the FAA asked for the audits. Ms Hofschneider waited until Halloween to respond, apologizing again for the delay and promising to get an update from the auditors.

The warning sirens became louder, when on November 9 Mr. Salas asked again for the audits and cautioned, “We need to address this outstanding item as it’s impacting CPA. Please LMK asap.”

“As per Deloitte,” Ms. Hofschneider responded, “the draft audit reports should be given to CPA this week and the final reports should be ready by next week.

Situation becomes urgent

Exactly one week later – and with no promised audits – Mr. Salas added the all caps “URGENT” to the title of the email chain, and warned of serious concern with non compliance and a reference to GPA’s federal grants: “Need your “big” push to have the PFC audit report sent to our office ASAP. CPA’s PFC program has become a serious Regional concern due to the lack of a timely audit. We understand Wendi is still away so need you do the last drawdown & concurrently submit close out documents on the GRO Master Plan grant.”

A month later, on December 17– and at the height of the controversy between CPA and Star Marianas –Mr. Salas had had enough. He appended a message from Washington showing the FAA headquarters had CPA on its radar because of its years of financial mismanagement.

David Duchow, the financial management analyst tracking CPA at the FAA’s headquarters, wrote to Salas, stating: “Any updates on CPA – Saipan? Just to refresh, there are two repeat findings from 2018 and 2019 that pertain to real property equipment and management. GPA has not uploaded their 2020 report into the Clearinghouse so I cannot determine if both findings have cleared. The 2020 report was due 6/30/21, but with the COVID extensions by 9/30/21. So they are late on that as well. This puts them in violation of 2 CFR Part § 200.512.”

And then the revelation from Ms. Hofschneider: “I apologize for the delay. We have received the final draft audit reports this week and are working on the Representation Letters to finalize the documents and upload to the Clearinghouse. Please note that the Equipment finding is still listed, as we did the majority of the reconciliation and write off of items in FY 2021. Additionally, there is a finding regarding the CARES Act as well (utility proration and plant rental services). The audit should be uploaded to the Clearinghouse by next week.”

Indeed, the audit was uploaded by the following week, two days before Christmas.

Once received, Mr. Salas wrote to Ms. Hinds and her staff: “Please let me know if we can discuss today CPA’s prior PFC audit findings and overdue FY2020 audit report.”

Why did it take CPA so long to get those audits to the FAA? We reviewed those audits, with all their material findings and qualifications. The numbers tell the story. We’ll bring you that story next in this series. Stay tuned.

Click here to view leaked email chain 1

Click here to view leaked email chain 2

Leave a Reply

Your email address will not be published. Required fields are marked *