In November 2021, the Department of Commerce Office of Inspector General determined that the Western Pacific Fishery Management Council had inappropriately spent about 28 percent — $1,237,671 of $4.5 million – of monies drawn from its Sustainable Fisheries Fund over the period from federal fiscal year 2015 to fiscal year 2019.
Of that $4.5 million, the audit tested roughly two-thirds of the expenses — $3,038,496 — in claimed costs, so that the actual percentage of inappropriate expenditures identified by the OIG came to 40 percent of the examined expenses.
Most of the money in the fund comes from fines and forfeitures levied against foreign vessels fishing in U.S. waters in the Pacific and annual fees paid by the Hawaiʻi-based longline fleet in return for receiving a portion of the bigeye tuna allocation assigned to the U.S. territorial governments in the Pacific.
Following release of the OIG audit, the council responded, taking exception to its findings. The National Oceanic and Atmospheric Administration’s Grants Management Division then reviewed both the audit’s findings and Wespac’s exceptions.
In February 2022, Arlene Simpson Porter, GMD director, informed Kitty Simonds, executive director of Wespac, that it agreed with the OIG audit and that the council would be required to repay the misspent funds. Simonds was invited to “enter into a repayment agreement” with NOAA. Alternatively, it could appeal.
“The appeal must contain a detailed explanation concerning the pertinent facts and the applicable legal authorities of your dispute with this Audit Resolution Determination,” Porter wrote. The appeal, she continued, “is your last opportunity to provide information to supplement a dispute of the debt. There are no other administrative appeals available within the Department of Commerce concerning this matter. WPRFMC would have to go to court to continue its dispute of the legal validity of the debt.”
Wespac sought several time extensions to, among other things, obtain legal representation. The final deadline for filing its appeal was eventually set at August 30.
On that date, Simonds submitted to the hearing officer, Jeffrey Thomas, the director of NOAA’s Acquisition and Grants Office, a 19-page “appeal and statement of mitigating factors.” In addition, to support its appeal, the council provided “numerous financial documents and records” via Dropbox to NOAA. “These documents and records contain confidential, personally identifiable information and should not be disclosed,” council chair Archie Soliai stated in a covering letter.
Last December, Thomas notified Wespac of NOAA’s “final determination” on the council’s appeal. Thomas accepted the council’s arguments for expenses of $400,315.41, leaving $837,355.59, which NOAA would seek to recover.
The council “will receive a revised bill in the amount of $837,355.59,” Thomas wrote, adding that the council would have “30 days from the receipt of this letter to make payment of the remaining principal balance, the accrued interest, penalties, and administrative charges or to establish a repayment schedule with NOAA Finance.”
The council’s “failure to pay the debt in full, to negotiate an installment payment plan or other arrangement acceptable in form and substance to NOAA may result in payments being withheld under any current [Department of Commerce] awards to it and to its subsidiaries and in the suspension or termination of such awards.”
As of mid-May, Wespac had not paid any portion of the amount due.
Politics and Polemics
It took nearly nine months following the appeal’s filing for Environment Hawaiʻi to obtain a copy. A Freedom of Information Act request for the document was filed in late June, anticipating the August 30 deadline. NOAA did not release the document until May 18.
The appeal relies on many of the exhibits provided to NOAA via Dropbox; none of these was released.
Fewer than five of the 19 pages address the disputed expenditures. The discussions and arguments in this section rely heavily on the Dropbox exhibits.
Most of the appeal is given over to efforts to contextualize the council’s behavior.
At the outset, Simonds launches into a long discussion of what she describes as “mitigating factors.”
First, she tries to throw responsibility back onto NOAA. The council “consistently sought advice from NOAA Grants Management staff in determining how best to administer federal grants,” she states, and “relied on this advice to comply with grant requirements.”
Second, she argues that the funding provided by NOAA grants “directly supports programs that benefit [Pacific Island] communities, and the lack of grant funding significantly impacts such communities, particularly now in view of rising food prices and fuel costs.”
A third mitigating factor can be briefly described as NOAA picking on Wespac:
“The council operates under the scrutiny of several federal oversight agencies, as well as public and political processes,” Simonds writes. “This fact is demonstrated by the number of audits the council has experienced over the past 45 years. None of these audits, including the latest audit associated with the [Audit Resolution] Determination, has ever identified any fraud or legal malfeasance on the part of individual council members or its staff. The facts suggest the [council] has been unfairly subjected to more audits of its financial practices than any other fishery management council, and possibly more than all other councils combined. This also suggests that the [council] has been singled out for audits for political reasons in order to frustrate [its] implementation of the [Magnuson-Stevens Act] to benefit affected island communities reliant on fishery resources.”
A footnote further expands on this argument. Simonds points out that the National Marine Fisheries Service, “directly involved in the grants at issue in this Determination,” has not been subjected to any proposed sanctions. “This raises fairness issues,” she writes, “and suggests the council has been unfairly singled out. A full inquiry into the basis for this audit and those involved in requesting it are warranted.” (The audit came on the heels of the publication of a series by Honolulu Civil Beat on the council’s expenditures from the sustainable fisheries fund.)
Then there is the “considerable time and financial resources” that the council spent in addressing the audit and the Determination. “Council staff have responded to each and every inquiry in writing and have provided thousands of pages of receipts, records, and other documents in an attempt to respond to this inquiry. … The emotional cost of this proceeding cannot be underestimated, and again points to unfair tactics designed to frustrate the purpose of the MSA,” Simonds says.
In any case, she continues, “Grant funds that were spent by grantees were used to further the goals of the MSA and its national policy objectives, providing the intended benefits of the grant. As a result, it is likely that no lawful remedy exists to recover grant money because the purpose of the grant award was accomplished, benefits were received, and any recovery would result in an unjust enrichment of the U.S. government.”
Standards of Review
Simonds then provides the appeals officer with a long list of the standards that he should use in reviewing the Grants Management Division’s findings.
Although in the normal course of events, the appeals officer, like an appellate judge, would restrict review to the documents before him or her, Simonds argues that it would be appropriate for Thomas to scrutinize the Grants Management Division’s Determination. “Given the appearance of undue political influence,” she writes, “the appeals official should undertake a de novo review of the Determination, meaning the Appeal Official should review GMD’s determination anew, as if GMD had not rendered a decision. Under this standard, the Appeals Official should give no deference to GMD’s conclusions.”
Also, Thomas should give weight to the reasonableness of the contested expenditures, she suggests. Here Simonds seems to argue that, whether or not regulations and guidelines were strictly observed, the expenditures themselves were reasonable.
She also reminds Thomas that “agency decisions must not be arbitrary or capricious, must be clearly explained, and must be based on information contained in the administrative record before the agency renders a decision.” Thomas should use the record supplied by the council “to determine if the claimed costs were necessary and reasonable,” she advised.
“In considering this appeal… it is also useful to consider U.S. Department of Justice enforcement policies that outline factors to consider in determining the exercise of prosecutorial discretion for purported violations,” Simonds continues. Those factors include the seriousness of the offense, the party’s “willingness to cooperate with investigators,” their “timely and voluntary disclosure of wrongdoing, and remedial actions taken by a party, including any efforts to implement an adequate and effective compliance program or to improve an existing one.”
Simonds goes on to suggest that the council has been handicapped by NOAA’s failure to disclose all of the records that were relied upon in the Inspector General’s audit and the Grants Management Division ruling. “[T]he council has repeatedly requested access to audit documentation … including emails and other communications that lead [sic] to the Determination,” she writes. “Notwithstanding these requests, such audit documentation has not been provided to council, nor has any legitimate basis been provided for withholding such documentation. … The lack of disclosure also raises Due Process considerations under the Constitution.”
She does own up to some past shortcomings on the council’s part and insists that “it is not the intent of the council to cast aspersions towards OIG or GMD officials. … [T]he council has acknowledged that certain documentation was not retained during the required 3-year records retention period, and that recordkeeping practices should be improved.” Nonetheless, she writes, the funds were “clearly used by grant recipients for legitimate activities that further the purposes of the MSA and provided benefits to grantees as intended by the federal government.”
Disputed Expenses
The Inspector General’s audit and the confirming Determination by the Grants Management Division disallowed more than half a million dollars drawn from the Sustainable Fishing Fund to pay for contributions to employee 401(k) plans, office rent, and employee salaries. Simonds defends these expenses as reasonable, based on “advice provided by a NOAA Grants Management Division employees [sic].” The employees who benefited worked on implementing and overseeing projects supported by the fund, and the office lease payments of $108,341 represented just 8.7 percent of the total lease amount over the period examined in the audit, she writes.
Other disputed expenses were associated with travel for which advance approval from NOAA was not obtained. “However,” Simonds writes, the Grants Management Division “provided post action approval thus allowing for the expenditure. In addition, the council also noted that it was acting consistently within grant requirements for reprogramming which did not require GMD approvals.”
In defending many of the questioned expenditures, Simonds refers to guidance she says came from NOAA allowing reallocation or “reprogramming” of up to 10 percent of funds allocated and approved for given projects. “This 10 percent threshold is a guideline previously communicated by GMD staff to council staff.” (The Inspector General audit disallows this reprogramming, noting, however, that “the council believed that moving funds between awards was allowable if less than 10 percent of the total award.” Later, the Grants Management Division, in its Determination, states: “the council understands that the 10 percent threshold applies to funds being transferred between funding classes within a single award. Future transfers between funding classes will follow this threshold.”)
Closing Argument
After setting forth her defenses to the challenged expenditures, Simonds provides what might be thought of as a closing argument.
The Grants Management Division, she writes, “lacks the authority to withhold grant funds.” Since the council has no source of funds other than the federal government, “in order to recover grant funds that have been spent, GMD would necessarily need to hold back future grant funding from the federal government that is earmarked by Congress for the Council’s obligations under the MSA.”
Then Simonds invokes the issue of mootness. Because there is “no reasonable expectation that the purported misuse of grant funds will occur again,” the appeals official should determine that the issue is moot.
In the absence of a finding of moot, the appeals official “should exercise discretion to find that the voluntary steps taken by the council address the alleged technical violations of agency regulations, and that ‘repayment’ of grant funds … is not necessary or appropriate.”
In a footnote, Simonds discloses that the council “is presently working with GMD and NOAA to change the way grant funds are provided to councils. That is, the council is advocating for ‘programmatic grants’ to be provided to the council that will enable fewer administrative burdens. The intent of such programmatic grants is to recognize the unique relationship of the council to NOAA that was created under the MSA and to increase the efficiency of grant funding to island communities and other parties dependent on grants for key functions.”
Final Decision
Thomas, the appeals officer, issued his finding in December. His letter to Simonds provides greater detail on the disputed expenses than were to be found in Simonds’ appeal itself.
While the OIG identified $181,023 in undocumented or poorly documented expenses, Thomas adjusted that amount downward by $31,750, of which $20,000 was accounted for by payments to Pacific Rim Concepts in support of a 2017 Puwalu conference.
Of the $552,235 in administrative costs that the OIG found to have been made without sufficient basis, Thomas adjusted that downward by $18,118.41, reflecting only Wespac’s purchases of office supplies.
The OIG determined $319,990 in Sustainable Fishing Funds were spent without necessary approvals from NOAA, including more than $65,000 in travel associated with the 2016 and 2017 Puwalu conferences. Thomas reversed this in part, allowing the Puwalu travel and around all but $132,612 in other expenses.
Thomas reversed the OIG on the matter of $109,751 spent on a parking lot in the Commonwealth of the Northern Mariana Islands, on the basis of documentation provided by the council following the OIG audit.
Finally, with respect to $74,672 that the OIG disallowed because it was unspent, the council obtained reimbursement of most of that from grant recipients. More than $21,000 remained disallowed.
Non-Financial Findings
“The council did not address the non-financial findings in its appeal response to NOAA,” Thomas found. “However, the council did provide a copy of its Financial Management System Protocols and Guidance, dated August 30, 2022, which outlines the council’s internal control policy and procedure processes for procurement, subrecipient, record retention, and disbursement of funds.”
Thomas noted that in its initial response to the OIG audit, the council said it would engage an independent auditor to monitor its Sustainable Fisheries Fund awards for compliance with federal regulations and NOAA award conditions. In the February Grants Management Division Determination, “NOAA pointed out that this function is already performed by the council’s annual single audit.”
“While an apportionment of the specific costs originally questioned in the audit have been reconsidered by NOAA, the associated review reveals [the council’s] pattern of failure to comply with the Department of Commerce Standard Terms and Conditions” and other federal regulations, he wrote.
Update
On May 10, four members of Congress – Raúl Grijalva of Arizona, ranking member of the House Committee on Natural Resources; Jared Huffman, ranking member of the Subcommittee on Water, Wildlife, and Fisheries; Gregorio Kilili Camacho Sablan, the Democratic delegate to Congress representing the CNMI; and Ed Case, Democrat, representing Hawaiʻi’s 1st Congressional District – wrote to NOAA administrator Richard Spinrad, inquiring about the status of Wespac’s compliance with the final NOAA findings and other issues.
“We write to express our continued, deep concern with the pattern of mismanagement of federal resources by [Wespac] and its staff as well as the lack of oversight and accountability by the National Oceanic and Atmospheric Administration,” they stated.
The letter goes on to note that the council had submitted two proposed actions for repayment of the misspent funds. “These are: 1) use additional federal funding to deliver on a repayment schedule, or 2) seek debt forgiveness through the Department of Justice,” it says. “These actions are wholly inadequate and would result in zero accountability for an egregious act of misspent taxpayer dollars.”
In addition, the congressmen draw Spinrad’s attention to what they describe as improper lobbying by the council and its staff in opposing the proposed Pacific Remote Islands Area national marine sanctuary. The council and staff “have worked to oppose marine protections and designations for years, engaging in behind-the-scenes assistance to opponents of such designations and organizing rallies in opposition. These and other actions amount to improper lobbying with federal funds.”
The congressmen ask Spinrad to address four questions by May 17:
- What courses of action are NOAA and the federal government considering to hold the council accountable for the misspent funds?
- What steps is NOAA taking to make sure Wespac “does not continue its gross pattern of failure and negligence in managing federal awards?”
- How will NOAA make sure that council spending is ethical, transparent to the general public, and consistent with statutes and regulations, “including grassroot lobbying prohibitions,” that govern the use of federal funds?
- “What legislative and regulatory policy considerations does NOAA recommend to ensure the Western Pacific Sustainable Fisheries Fund supports marine conservation and management using the best available science?”
According to a congressional staffer with the Water, Wildlife, and Fisheries Subcommittee, Spinrad had not responded to the letter as of May 20.
The Cost of Puwalu
In the mid-2000s, the Western Pacific Fishery Management Council began underwriting meetings, or puwalu, of Native Hawaiians in an effort to enlist their support of the council’s involvement in near-shore fishery management.
Environment Hawaiʻi reported on the early puwalu, which, even then, were funded in part by the council using grants that were intended by the National Oceanic and Atmospheric Administration to be used for other purposes.
Since 2012, the puwalu have been held under the auspices of the state ʻAhu Moku Advisory Council, but with ongoing substantial financial and administrative support of the council.
The most recent puwalu appears to have been held in 2017.
Expenses for two puwalu (2016 and 2017) were challenged in the OIG audit. According to the final ruling by Jeffrey Thomas, the NOAA appeals officer, Wespac spent about $86,500 in funds from the Sustainable Fisheries Fund over those two years. Some $65,500 of that was paid without NOAA approval, while Wespac could not provide substantiation for another $21,000.
While the OIG disallowed those expenses, Thomas reversed that determination, relying on additional documentation that Wespac provided.
(For more information on puwalu, see “FOIA Responses Shed Light on Council Support of Puwalu,” May 2009 Environment Hawaiʻi.)
— Patricia Tummons
Leave a Reply