In it audit, the Office of the Public Auditor (OPA) found that the Department of Labor (DOL) accepted applications for 2,293 nonresident workers for which the required fees were not collected by the DOF. This occurred due to inadequate internal controls at DOL. As a result, nonresident worker application fees totaling $512,410 were not collected during the period from October 18, 1999 to January 05, 2004.

The DOL had in place established procedures relating to the processing of nonresident worker permit applications. As described in the audit report, these procedures were intended to ensure that (1) the correct fees are collected by the DOF before applications are processed; and, (2) the Labor and Immigration Identification System (LIIDS) database will have an information trail to the records of payment.

To determine whether the correct fees were collected before applications were accepted, OPA analyzed and compared the common fields of reference contained in the DOF’s cash receipt collection database and the nonresident worker application submission database of LIIDS.

OPA discovered significant discrepancies initially amounting to $10,557,935 between the DOF cash receipt system and the LIIDS. Further analyses determined that these discrepancies were largely attributable to data input errors, a common example of which was the erroneous inputting of telephone numbers or Official Receipt (OR) numbers as payments for application fees. After eliminating these types of errors, the remaining unaccounted difference decreased to $878,975.

OPA further narrowed the analysis to ten employers for which the initial comparison showed discrepancies of over $2,000. Again, OPA found numerous data input errors. This further analysis eliminated eight employers, leaving OPA’s focus to two employers , referred to in the audit report as Companies A and B.

OPA’s analyses for Companies A and B covered 69 OR numbers involving a total of 2,293 applications submitted, but for which fees were not collected by the DOF. Of the total, 1,486 were submitted by Company A which included 1,469 one year applications and 17 extensions varying from 1 to 3 months. Company B submitted 807 applications for which fees were not collected by the DOF.

Based on OPA’s analysis, DOL had been receiving applications without ensuring that the correct amount of fees were collected. The following are examples of the types of discrepancies noted:

1. On 5/23/00 OR number 121485 was issued for the payment of an Alien Physical Exam Clearance for Company A. The amount collected was $20.00. However, OPA found that 39 applications were actually submitted using this single OR number. These applications alone amounted to $8,775 in uncollected fees.
2. On 4/16/01 OR number 305640 was issued to pay for the submission of a nonresident worker application for an employer unrelated to either Company A or B. The amount collected was $225. However, OPA found that 11 and 26 applications were submitted for Company A and Company B, respectively, using the same OR number as reference for payment. This resulted in a loss of $2,475 due from Company A and $5,850 due from Company B.
3. On 1/4/02 OR number 461675 was issued to pay for an Alien Registration Fee for Company A. The amount collected was $50.00. However, OPA found that 99 applications were actually submitted using the same OR number as reference for payment. This resulted in a loss of $22,275 for this OR number alone.

The discrepancies were not discovered previously because the DOL’s internal controls involving the process of receiving and entering nonresident worker applications into the LIIDS were inadequate. The DOL lacked control measures to ensure that the applications were paid prior to the entering of application information into the LIIDS. If the DOL had retained the required submission of proof of payment document(s), and if proper segregation of duties existed (see below), the data entry personnel of DOL would have been able to ensure that employers paid for the applications prior to entering the application information.

Because the DOL accepted applications without collecting the correct amount of fees, the CNMI did not collect revenues of $512,410. A total of $330,835 in labor fees was not collected from Company A while $181,575 was not collected from Company B. As illustrated in the chart below (Figure 1), the losses in revenue started in Fiscal Year 2000 and peaked in Fiscal Year 2002. Although discrepancies were noted in Fiscal Years 2003 and 2004, they were explainable and did not result in lost revenue.

Recommendations and Response

OPA recommended that: (1 )Enforce Section II B(3) of the DOL Alien Labor Rules and Regulations which requires the submission of proof of payment with other required documents; (2) Direct that managers and supervisors responsible for reviewing and approving do not also receive and input applications; (3) In collaboration with the DOF, establish controls for periodic comparison between the fees reflected on the DOL’s records and fees actually collected as shown on DOF’s records so that corrective actions can be taken if necessary; (4) Recover uncollected fees of $ 330,835 from Company A and $181,575 from Company B.

In its response letter dated May 31, 2005, DOL concurred with OPA’s findings and agreed to implement the recommendations set forth in the audit report. Accordingly, OPA considered Recommendations 1, 2, 3 and 4 resolved.

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