DPL audit raises red flags at House

The Marianas Public Lands Trust has raised concerns about the most recent audit of the Department of Public Lands covering fiscal years 2014 and 2015, saying they are again qualified “for basically the same findings as in previous years since 2010.” That means problems or discrepancies identified since 2010 remain on the books and have not been resolved.

A copy of a letter by Marianas Public Lands Trust chair Martin B. Ada to Department of Public Lands Secretary Marianne C. Teregeyo on the audit results has been tagged as Department and Agency Communication 20-2.

Rep. Joseph P. Deleon Guerrero (R-Saipan) has asked House Speaker Rafael S. Demapan (R-Saipan) to refer the letter to the Ways and Means Committee, headed by Rep. Angel A. Demapan (R-Saipan).

Copies of the letter were also given to the office of Gov. Ralph DLG Torres, Attorney General Edward Manibusan, House Speaker Demapan, Senate President Arnold I. Palacios (R-Saipan), CNMI Public Auditor Michael Pai, and the MPLT trustees.

In the letter, Ada said the MPLT trustees have already reviewed DPL’s fiscal years 2014 and 2015 financial statements and the independent auditors report as well as the independent auditors’ report on internal control.

DPL, in fiscal years 2014 and 2015, was at the time under former DPL secretary Pedro A. Tenorio.

“This year’s audit report is once again qualified for basically the same findings as in previous years since 2010. MPLT is deeply concerned about the continued qualified opinions for this audit and past audits,” said Ada.

The bases for the auditors’ qualified opinion are as follows:

a.) Unable to determine the propriety of the amount due to the CNMI in the amount of $1,752,420. The amount includes an accrual of $581,669 for reimbursement of land compensation payments, which is not an allowable “expenses of administration.” Such accrual is inappropriate and should have been reversed. This would reduce this liability and accordingly increase the amount due to and distributed to MPLT in 2009 or 2010.

The balance of this liability in the amount of $1,170,751 is unsubstantiated as the details are apparently unknown. This makes the recording of this liability questionable. This account should be reconciled and adjusted accordingly. Adjustment of any overstatement of this liability would increase the amount due to MPLT.

Between March 2009 and November 2010, DPL reimbursed the CNMI for land compensation payments in the amount of $1,395,459. This is an unauthorized payment and should be paid back to DPL. Since DPL made an improper payment, it should seek to have this amount returned to DPL by whatever means is available for distribution to MPLT.

b.) Unable to determine the propriety for the reservation of fund balance in the amount of $4,467,773.

Reservation of the fund balance is only allowed by an external commitment of the balance to future expenditures such as legal commitments, constitutional mandates, remaining unlapsed budget appropriations, etc.

DPL’s policy is to base its accrual of its annual distribution to MPLT on its “unreserved fund balance.”

Ada said the policy of fund balance reservation does not agree with the Constitution. “It clearly states that only fiscal year ‘expenses of administration and management, land surveying, homestead development, and any other expenses reasonably necessary for the accomplishment of it functions’ may be deducted from the [fiscal year] revenues and that the net amount should be distributed to MPLT after the end of the fiscal year.”

The MPLT chair also cited that in fiscal year 2010 DPL transferred $2.5 million to the CNMI due to a state of emergency. The payment, however, reduced the amount that should have been distributed to MPLT from previous years and is not in accordance with the Constitution.

“Since DPL made the improper payment, we believe they should seek reimbursement by whatever means is available, and subsequently transfer such funds to MPLT,” Ada said.

He added that DPL also directly disbursed $2,002,146 to the NMI Retirement Fund for the period of June 2010 and September 2014.

“This issue has been ongoing and not resolved and is a potential misuse of funds that should have been resolved. DPL should investigate this issue in order to determine if such funds may be due back to DPL for transfer to MPLT,” said Ada.

Some of the overview findings based on the auditors’ report on internal control and compliance found out that DPL has not maintained a separate general ledger system since fiscal year 2017.

Ada mentioned other findings on his letter and said it would be proper to discuss the issues with Teregeyo and DPL’s other key personnel.

“It would appear that collectively there could be errors and misstatements of revenues and expense that potentially may understate the amount due to MPLT. We appreciate an opportunity to discuss our comments and analyses with you.”

MPLT concerns

Rep. Joseph P. Deleon Guerrero (R-Saipan) said the letter identified some areas within DPL that could be addressed and is relevant to the House Ways and Means Committee. He added that all these could be addressed as they begin the budget process for fiscal year 2018.

“There are areas where funding was earmarked on the reimbursement of land compensation to distribute $581,000. Also, there was over a million dollars unsubstantiated. These details need to be addressed in the early budget process,” said Deleon Guerrero.

Deleon Guerrero said it may be a little late for MPLT to raise the issue since it is now 2017 but what the agency identified are serious. “These are serious issues regarding DPL. At that time, DPL had some funding…to pay for land compensation. But DPL did not pay it, so where did the money go? Another one is, there’s over a million dollars and they did not release it. They did not specify how it was used. It could have gone to MPLT. MPLT is just raising it to us.”

He said the Ways and Means Committee should be aware of the audit findings before they start with the budget deliberations. Rep. Angel Demapan and the other committee members could ask DPL about these issues during the budget hearings.

“They say we have this money for land compensation and they don’t pay land compensation. …I just want to give the Ways and Means some heads up that we will look into this issue in the budget hearings.

“The governor is set to submit the budget on April 1. We will address it in the budget hearing. The chair will be calling on all agencies to start with the hearings. These are very significant findings.”