Federal investigators have found $1.24 million in questionable expenses by the Western Pacific Regional Fishery Management Council after an 18-month audit of its secretive fisheries fund.

Wespac’s verification and documentation of certain deliverables was “inadequate,” the audit says, and management of the contract awards needs to improve because the council and its subrecipients did not follow competitive procurement requirements. 

The 46-page report, published Wednesday by the Commerce Department’s Office of the Inspector General, stems from a request by four congressmen following a Civil Beat investigation in 2019 into the Western Pacific Sustainable Fisheries Fund. The three-part series revealed potential conflicts of interest, political favoritism and a lack of accountability as officials used federal dollars to further commercial fishing interests.

In August 2019, U.S. Reps. Ed Case of Hawaii, Raul Grijalva of Arizona, Jared Huffman of California and Gregorio Sablan of the Northern Mariana Islands asked Inspector General Peggy Gustafson to conduct a comprehensive audit of the millions of dollars that have flowed through the fund. They said some of the contracts raised “red flags” because the council failed to disclose the contractors involved in providing the services. 

Wespac, which develops policies for fisheries in a 1.5 million-square-mile region, received $7.4 million from 2010 to 2019 in federal grants for the fund from the National Oceanic and Atmospheric Administration.

The Sustainable Fisheries Fund, created under the 1996 reauthorization of the Magnuson-Stevens Act, was initially seeded by millions of dollars in fines against foreign vessels fishing illegally in U.S. waters around remote Pacific islands. But in the absence of such penalties in recent years, the only source of funding has come from Hawaii’s longline fishermen through deals that let them fish for several thousand tons of additional tuna beyond their quota limits.

The Hawaii Longline Association, which represents most of the roughly 140-vessel fleet, has had agreements with U.S. Pacific island territories — Guam, American Samoa and the Commonwealth of the Northern Mariana Islands — to use half of their tuna quota in exchange for $250,000 payments into the fund. 

The money is intended to go to research and assessment, statistical estimation models, training, education, public outreach and infrastructure development in the territories, the audit says.

But investigators had a difficult time determining if the money was spent appropriately.

“The Council did not retain adequate support for claimed costs, obtain required approvals from the awarding agency, or properly allocate costs to the WPSFF awards,” the audit says. “The subrecipients did not provide adequate documentation to support certain claimed costs and did not spend all federal funds received.”

The auditors flagged one contract in particular between the CNMI Department of Lands and Natural Resources and a vendor for the lease of a fishing vessel and training services. They found that the justification for this sole source contract did not demonstrate that it met any of the four instances of allowable noncompetitive procurement. The auditors said the contract was not approved by NOAA, as required, and the council made two payments totaling $152,612 before the money from the fund was available.

“We determined that the Council did not always provide documentation supporting the receipt of goods and services paid for with WPSFF awards,” the audit says. “In addition, we identified key areas where the Council’s management of WPSFF awards needs improvement.”

Wespac did not return a request for comment Wednesday afternoon. 

In the council’s August response to investigators on the draft audit, Wespac Executive Director Kitty Simonds and Chair Archie Soliai underscore that “no instances of fraud, illegal acts, or abuse were identified during the audit by investigators.” 

They told the feds that the council would hire an independent auditor for one year to monitor the council’s administration of awards for compliance. And Wespac asked for additional training to improve its administration of the fund.

Simonds and Soliai said the “broad geographic range and cultural diversity under the Council’s jurisdiction raises challenges for administering programs, and insuring consistent record-keeping.” 

They added that many of the island communities under the council’s jurisdiction possess limited access to goods and services, and that the council “has historically played an important role in assisting these island communities in obtaining services needed to support the commercial fisheries.”

Case was unavailable for comment Wednesday.

Case and Huffman have introduced legislation in Congress that, among other things, would address mismanagement of the Sustainable Fisheries Fund.

The proposed update to the Magnuson-Stevens Act would remove Wespac’s authority to control the fund. It gives that power instead to the commerce secretary, who would be advised by a new four-person advisory panel composed of one member appointed by each governor of Hawaii and the three Pacific territories.

The panel would hold public meetings, post the minutes, provide annual updates on the projects to Congress and rank which fisheries’ development projects should receive funding. Wespac leaders, however, told Case and Huffman in a letter last month that this “may reduce transparency and limit input from the fishing community.”

Read the complete report below.